As filed with the Securities and Exchange Commission on May 16, 2008
Registration Statement No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F
ORM
F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Safe Bulkers, Inc.
(Exact name of registrant as specified in its charter)
|
|
|
|
|
Republic of the Marshall Islands |
4412 |
N/A |
||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
32 Avenue Karamanli
P.O. Box 70837
16605 Voula
Athens, Greece
011-30-210-895-7070
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
CT Corporation System
111 Eighth Avenue
New York, New York 10011
(212) 590-9338
(Name and address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
|
|
|
William P. Rogers, Jr., Esq.
|
Stephen P. Farrell, Esq.
|
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the Securities Act), check the following box. £
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £
CALCULATION OF REGISTRATION FEE
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
||||||||||||||||||||||||||||
Title of Each Class of
|
Amount to be
|
Proposed
|
Proposed
|
Amount of
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Common Stock, par value $0.001 per share |
|
11,500,000 |
|
$ |
|
22.00 |
|
$ |
|
253,000,000 |
|
$ |
|
9,942.90 |
||||||||||||||
|
||||||||||||||||||||||||||||
Preferred Stock Purchase Rights(3) |
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
(1) |
|
Includes shares to be sold upon exercise of the underwriters overallotment option. |
||||||||||||||||||
|
||||||||||||||||||||
(2) |
|
Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(o). |
||||||||||||||||||
|
||||||||||||||||||||
(3) |
|
The preferred stock purchase rights are initially attached to and trade with the shares of our common stock registered hereby. Value attributed to such rights, if any, is reflected in the market price of our common stock.
|
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated May 16, 2008
PROSPECTUS
10,000,000 Shares
Safe Bulkers, Inc.
Common Stock
This is the initial public offering of our common stock. All of the shares of common stock being sold in this offering are being sold by Vorini Holdings Inc., our sole stockholder.
We will not receive any proceeds from the sale of shares of our common stock by the selling stockholder.
We expect the initial public offering price to be between $20.00 and $22.00 per share. Currently, no public market exists for the shares. Our common stock has been approved for listing on the New York Stock Exchange under the symbol SB.
Investing in our common stock involves risks that are described in the section entitled Risk Factors beginning on page 17 of this prospectus.
|
|
|
|
|
||||||||||
|
Per Share |
Total |
||||||||||||
Public offering price |
|
$ |
|
$ |
||||||||||
Underwriting discounts and commissions |
|
$ |
|
$ |
||||||||||
Proceeds to selling stockholder |
|
$ |
|
$ |
The underwriters may also purchase up to an additional 1,500,000 shares of our common stock from the selling stockholder at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover overallotments.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Each share of our common stock includes one purchase right that, under certain circumstances, entitles the holder to purchase from us a unit consisting of one-one thousandth of a share of preferred stock at a purchase price of $25.00 per unit, subject to specified adjustments.
The shares of common stock will be ready for delivery on or about , 2008.
|
|
|
Merrill Lynch & Co. |
Credit Suisse |
|
|
|
|
|
Jefferies & Company |
Dahlman Rose & Company |
Poten Capital Services LLC |
||
DnB NOR Markets |
The date of this prospectus is , 2008.
VASSOS
STALO
TABLE OF CONTENTS
Page
1
17
40
41
41
43
45
49
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
55
85
98
120
125
127
130
133
142
148
150
154
161
162
167
167
167
168
168
169
F-1
You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with additional or different information. If
any person provides you with different or inconsistent information, you should not rely upon it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer
or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of
operations and prospects may have changed since that date. Information contained on our website does not constitute part of this prospectus.
i
This summary highlights information contained elsewhere in this prospectus. You should carefully read this entire prospectus, including the historical financial statements and the notes to those financial
statements. You should pay special attention to the Risk Factors section beginning on page 17 of this prospectus to determine whether an investment in our common stock is appropriate for you.
Unless otherwise indicated, all references to currency amounts in this prospectus are to U.S. dollars and all information in this prospectus assumes that the underwriters overallotment option is not
exercised. Unless otherwise indicated, all data regarding our fleet and our charters is as of December 31, 2007 and assumes delivery of vessels to us on the scheduled dates. Unless otherwise indicated: Swiss
franc, or CHF, amounts translated into U.S. dollars have been translated at a rate of CHF1.1267:$1.00, and Japanese yen, or ¥, amounts translated to U.S. dollars have been translated at a rate of ¥112.35:$1.00,
the exchange rates in effect as of December 31, 2007. Unless otherwise indicated, references in this prospectus to Safe Bulkers, the Company, we, our, us or similar terms when used in a historical
context refer to Safe Bulkers, Inc. or any one or more of the entities that are being transferred or contributed to Safe Bulkers, Inc. in connection with this offering (each such entity, a Subsidiary) as well as
additional entities, which were under common control with the Subsidiaries but which will not be transferred or contributed to Safe Bulkers, Inc. in connection with this offering (each such additional entity, an
Additional Company), or to such entities collectively. When used in the present tense or prospectively, those terms refer, depending on the context, to Safe Bulkers, Inc., any one or more of its subsidiaries
(including each Subsidiary), or to such entities collectively. We use the term period time charter to refer to the hire of a vessel for a period of more than three months. We use the term spot charter to refer
to the hire of a vessel for a period of three months or less. For the definitions of other shipping terms used in this prospectus, including newbuild, Panamax, Kamsarmax, Post-Panamax and Capesize,
see the Glossary of Shipping Terms beginning on page 169 of this prospectus.
Business Overview
We are an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly grain, iron ore and coal, along worldwide shipping routes for some of the worlds largest
consumers of marine drybulk transportation services. Our current fleet of 11 Japanese-built drybulk vessels, with an aggregate carrying capacity of 887,900 deadweight tons (dwt) and an average age of 2.6 years
as of December 31, 2007, is one of the worlds youngest fleets of Panamax, Kamsarmax and Post-Panamax class vessels. Our fleet is expected to almost double
(on a dwt basis) by mid-2010 as the result of the
delivery of eight drybulk newbuilds, comprised of two Kamsarmax, four Post-Panamax and two Capesize class vessels. Upon delivery of the last of our eight contracted newbuilds in May 2010, our fleet will be
comprised of 19 vessels, having an aggregate carrying capacity of 1,759,900
dwt and an average age of 3.2
years.
We employ our vessels on both period time charters and spot charters with some of the worlds largest consumers of marine drybulk transportation services, including Bunge Limited (Bunge), Cargill
International S.A. (Cargill) and Daiichi Chuo Kisen Kaisha (Daiichi) or their affiliates, which together accounted for 69.2% of our revenues for the year ended December 31, 2007. Bunge, Cargill and Daiichi
accounted for 29.9%, 21.1% and 18.2%, respectively, of our revenues during that period. We believe our customers, some of which have been chartering our vessels or vessels of our affiliates for over 20 years,
enter into period time and spot charters with us because of the quality of our young and modern vessels and our record of safe and efficient operations. We intend to deploy our vessels on a mix of period time
and spot charters according to our assessment of market conditions, adjusting the mix of these charters to take advantage of the relatively stable cash flow and high utilization rates associated with period time
charters or to profit from attractive spot charter rates during periods of strong charter market conditions. We have recently entered into five-year period time charters, which are scheduled to commence in late
2008, 2009 and 2010, for six vessels in our current fleet and two of our newbuilds, and have entered into a 20-year period time charter commencing in 2011 for one of our newbuilds. By chartering these vessels
in advance, we have been able to take advantage of the recent strong market conditions, while at the same time, reducing our exposure to charter rate fluctuations in late 2008, 2009 and 2010 when all of our
1
newbuilds are delivered. In addition, as of December 31, 2007, we had arranged one- to three-year period time charters commencing in 2008 for the three vessels in our fleet which were deployed on spot charters
as of December 31, 2007. As a result, as of December 31, 2007, we had period time charter commitments for approximately 75.9%, 50.6% and 36.1% of our fleets anticipated available days in 2008, 2009 and
2010, respectively, and our contracted period time charter arrangements entered into as of December 31, 2007, for 2008 through 2010 are expected to provide revenues of $347.1 million.
During 2006 and 2007, our fleet utilization was 99.94% and 99.98%, respectively, and our daily time charter equivalent rates were $22,550 and $42,327, respectively, with revenues of $99.0 million and
$172.1 million, respectively. In addition, during 2006 and 2007, our gain on sale of assets was $37.0 million and $112.4 million, respectively, and our net income was $97.2 million and $211.7 million,
respectively.
We are controlled by the Hajioannou family, which has a long history of operating and investing in the international shipping industry, including a long history of vessel ownership. Vassos Hajioannou, the
late father of Polys Hajioannou, our chief executive officer, and Nicolaos Hadjioannou, our chief operating officer, first invested in shipping in 1958. Since that time, the Hajioannou familys presence within the
drybulk shipping industry has become well-established and continues to grow. Polys Hajioannou has been actively involved in the industry since 1987, when he joined the predecessor of our affiliated management
company, Safety Management Overseas S.A., which we refer to as Safety Management or our Manager. Nicolaos Hadjioannou joined Safety Management in 1999. Over the past 13 years, under the leadership
of Polys Hajioannou and Nicolaos Hadjioannou, we have renewed our fleet by selling ten drybulk vessels during periods of what we viewed as favorable secondhand market conditions and contracting to acquire 29
drybulk newbuilds. As a result, we have maintained an average age for the vessels in our fleet of 3.2 years as of the end of each year from 1995 to 2007 and we continue to maintain a modern fleet of vessels
with advanced designs that provide operational advantages. Also under their leadership, we have expanded the classes of drybulk vessels in our fleet and the aggregate carrying capacity of our fleet has grown from
146,000 dwt in 1995 to 887,900 dwt currently. In addition to benefiting from the experience and leadership of Polys Hajioannou and Nicolaos Hadjioannou, we also benefit from the expertise of our Manager
which, along with its predecessor, has specialized in drybulk shipping since 1965, providing services to over 30 drybulk vessels. A number of our Managers key management and operational personnel have been
continuously employed with Safety Management and its predecessor companies for over 25 years.
Our Fleet
Our fleet is currently comprised of 11 Japanese-built drybulk vessels with an aggregate carrying capacity of 887,900 dwt and an average age of 2.6
years as of December 31, 2007. Upon delivery of the
last of our eight contracted newbuilds in May 2010, our fleet will be comprised of five Panamax, five Kamsarmax, seven Post-Panamax and two Capesize class vessels with an aggregate carrying capacity of
1,759,900
dwt, and an average age of 3.2 years. Our main focus is on Panamax, Kamsarmax and Post-Panamax class vessels because these types of vessels have the ability to access all major ports and the
flexibility to handle a wide variety of drybulk cargoes.
As a result of our fleets low average age and our Managers technical and commercial management expertise, we have historically experienced lower maintenance and hull and machinery insurance costs
and relatively fewer unscheduled off-hire days per vessel than the industry in general. All of our vessels, including our newbuilds, have been manufactured or are being manufactured to high specifications that
provide our vessels with operational advantages. Our fleet, as well as our newbuilds, comprise several groups of sister ships which, we believe, provide us and our customers with scheduling flexibility and create
economies of scale that enable us to realize cost efficiencies when maintaining, supplying and crewing our vessels.
2
The table below presents information with respect to our drybulk vessel fleet, including our newbuilds, and its deployment as of December 31, 2007.
Vessel Name
Dwt
Month and
Country
Charterer
Charter
Charter Rate
Commissions (3)
Time Charter
Sister
Current Fleet
($/day)
Panamax class
Efrossini
(Efragel
76,000
Feb. 2003
Japan
Cargill
Spot
$88,750
4.375%
Spot
A
$69,600
/
59,600
/
Feb. 2008
NYK
Time
49,600
(7)
4.50%
Feb. 2011
Maria
76,000
Apr. 2003
Japan
NCS
Spot
$89,000
5.0%
Spot
A
$67,000
/
Feb. 2008
Daiichi
Time
46,000
(8)
1.25%
Feb. 2011
Vassos
Oct. 2007
(Avstes)) (6)
76,000
Feb. 2004
Japan
Daiichi
Time
$43,000
3.75%
Nov. 2008
A
Jan. 2009
Daiichi
Time
$29,000
1.25%
Jan. 2014
Katerina
76,000
May 2004
Japan
Bunge
Spot
$80,000
3.75%
Spot
A
Feb. 2008
Bunge
Time
$62,000
3.75%
Feb. 2009
Maritsa
(Marathassa)) (6)
June 2007
(9)
76,000
Jan. 2005
Japan
Daiichi
Time
$44,500
3.75%
Jan. 2008
A
Jan. 2008
Bunge
Time
$53,500
3.75%
Jan. 2009 (10)
Pedhoulas Merchant
Nov. 2007
(Pemer))
82,300
Mar. 2006
Japan
Daiichi
Time
$38,500
3.75%
Jan. 2009
B
Pedhoulas Trader
July 2007
(Petra)) (11)
82,300
May 2006
Japan
Daiichi
Time
$46,500
1.25%
Feb. 2008
B
Pedhoulas Leader
Dec. 2007
(Pelea))
82,300
Mar. 2007
Japan
Daiichi
Time
$36,750
3.75%
Feb. 2010
B
Post-Panamax class
Stalo
Intermare
July 2007
Corporation
Transport
Sept. 2009
(Staloudi)) (6) (12)
87,000
Jan. 2006
Japan
GmbH
Time
$48,500
5.0%
C
Apr. 2010
Daiichi
Time
$34,160
1.25%
Mar. 2015
3
(Subsidiary Owner)
Year
Built (1)
Built
Type
(2)
Period (4)
Ship (5)
Shipping Corporation
(Efragel)) (6)
(Marindou Shipping
Corporation
(Marindou)) (6)
(Avstes Shipping
Corporation
(Kerasies Shipping
Corporation
(Kerasies)) (6)
(Marathassa Shipping
Corporation
Kamsarmax class
(Pemer Shipping Ltd.
(Petra Shipping Ltd.
(Pelea Shipping Ltd.
(Staloudi Shipping
Vessel Name
Dwt
Month and
Country
Charterer
Charter
Charter
Commissions (3)
Time Charter
Sister
Current Fleet
($/day)
Post-Panamax class
Marina
(Marinouki Shipping
Corporation
Mar. 2007
(Marinouki)) (13) (12)
87,000
Jan. 2006
Japan
Bunge
Time
$
25,000
3.75%
Jan. 2008
C
Sophia
July 2007
(Soffive)) (6) (12)
87,000
June 2007
Japan
Bunge
Time
$
24,000
3.75%
Aug. 2008
C
Nov. 2008
Daiichi
Time
$
34,720
1.25%
Nov. 2013
Subtotal
887,900
Newbuilds
Kamsarmax class
Hull No. 2054
South
(Maxdeka))
81,000
Mar. 2010
Korea
D (14)
Hull No. 2055
South
(Maxenteka))
81,000
May 2010
Korea
D (14)
Eleni
Eniaprohi)) (12),
Apr. 2010
(15)
87,000
Nov. 2008
Japan
Daiichi
Time
$
34,160
1.25%
Mar. 2015
C
Martine
Mar. 2009
(Eniadefhi)) (12)
87,000
Mar. 2009
Japan
Daiichi
Time
$
40,500
1.25%
Mar. 2014
C
Hull No. 1039
South
(Maxdodeka))
92,000
July 2009
Korea
E (14)
Hull No. 1050
South
(Maxdekatria))
92,000
Mar. 2010
Korea
E (14)
Hull No. 1074
176,000
Mar. 2010
China (16)
F
(Subsidiary Owner)
Year
Built (1)
Built
Type
Rate (2)
Period (4)
Ship (5)
(Soffive Shipping
Corporation
(Maxdeka Shipping
Corporation
(Maxenteka Shipping
Corporation
Post-Panamax class
(Eniaprohi Shipping
Corporation
(Eniadefhi Shipping
Corporation
(Maxdodeka Shipping
Corporation
(Maxdekatria Shipping
Corporation
Capesize class
(Eptaprohi Shipping
Corporation
(Eptaprohi))
4
Vessel Name
Dwt
Month and
Country
Charterer
Charter
Charter Rate
Commissions (3)
Time Charter
Sister
Newbuilds
Capesize class
Hull No. 1075
176,000
Jan. 2010
China (16)
F
Subtotal
872,000
TOTAL
1,759,900
(1)
For newbuilds, the dates shown reflect the expected delivery dates. See footnote (15) below for additional information regarding the expected delivery date of the
Eleni
.
(2)
Quoted charter rates are gross charter rates.
(3)
Commissions reflect payments made to third party brokers or our charterers, and do not include the 1.0% fee payable on gross freight, charter hire, ballast bonus and demurrage to our Manager pursuant
to our vessel management agreements with our Manager as of January 1, 2008 and pursuant to our new management agreement that will be in place following this offering.
(4)
The start dates listed reflect either actual start dates or, in the case of contracted charters that had not commenced as of December 31, 2007, scheduled start dates. Actual start dates may differ from the
scheduled start dates depending on the terms of the charter and market conditions, and we generally have the option under our charter contracts to deliver the vessel within 30 to 60 days prior to or after
the scheduled start date. Redelivery dates listed are the expected redelivery dates. Actual redelivery dates may differ from the expected redelivery dates depending on the terms of the charter and market
conditions. Charterers under our charter contracts generally have a period of between 30 and 60 days during which they can redeliver the vessel.
(5)
Each vessel with the same letter is a sister ship of each other vessel that has the same letter.
(6)
This vessel was under period time or spot charter as of December 31, 2007, and, as of that date, was scheduled to commence a future period time charter as indicated in footnote (4) above. Information
for both the charter under which the vessel was deployed as of December 31, 2007 and the future period time charter has been provided for this vessel. To the extent there is an interim period between
the end of the current charter and the future period time charter, we expect to employ such vessel in the spot market during such period.
(7)
The gross daily charter rates to be paid by Nippon Yusen Kaisha (NYK) for the
Efrossini
are $69,600, $59,600 and $49,600 during the first, second and third years, respectively.
(8)
The daily charter rates to be paid by Daiichi for the
Maria
are $67,000 during 2008 and $46,000 during 2009 and 2010.
(9)
On March 13, 2008, we entered a five-year period time charter with Shinwa Kaiun Kaisha Tokyo
(Shinwa) pursuant to which Shinwa will charter the
Maritsa
or a sister ship commencing in the first
quarter of 2010. Pursuant to the charter, Shinwa may choose from among three charter rate structures, and must select among them prior to the commencement of the charter. Under the first option, the
gross daily charter rates under this charter are $32,000 during the first and second years, $28,000 during the third year and $24,000 during the fourth and fifth years; under the second option, the gross
daily charter rates under this charter are $32,500 during the first, second and third years and $21,250 during the fourth and fifth years; and under the third option, the gross daily charter rate under this
charter is $28,000 during all five years. In each case, gross daily charter rates under this charter are subject to a 1.25% commission.
5
(Subsidiary Owner)
Year
Built (1)
Built
Type
(2)
Period (4)
Ship (5)
(tbn Kanaris)
(Maxpente Shipping
Corporation
(Maxpente)) (17)
(10)
The
Maritsa
time charter with Bunge was scheduled to commence in February 2008, but we agreed in January 2008 to early delivery of the vessel in exchange for a payment by Bunge in the amount of
$75,000.
(11)
On January 24, 2008, we entered into a time charter with Bunge pursuant to which we agreed to charter the
Pedhoulas Trader
commencing February 9, 2008 and due to expire by July 24, 2008 at a
gross daily charter rate of $54,000. On March 3, 2008, we agreed with Bunge to terminate the charter. We estimate that the compensation payable to the charterer for early redelivery of the vessel, which
is expected to occur on May 30, 2008, will be approximately $800,000. In April 2008, we entered a five-year period time charter with Kawasaki Kisen Kaisha, Ltd., or K-Line,
pursuant to which K-Line
will charter the
Pedhoulas Trader
commencing July 2008. The gross daily charter rates under this charter are $69,000, $56,500, $42,000, $20,000 and $20,000 during the first, second, third, fourth and
fifth years, respectively, subject to a 1.00% commission.
(12)
Double-hulled vessel.
(13)
On March 5, 2008, we entered a five-year period time charter with K-Line
pursuant to which K-Line will charter the
Marina
or a sister ship commencing in the third or fourth quarter of 2008. The gross
daily charter rates under this charter are $61,500, $51,500, $41,500, $31,500 and $21,500 during the first, second, third, fourth and fifth years, respectively, subject to a 2.5% commission.
(14)
These Kamsarmax and Post-Panamax class newbuilds are being built in different shipyards than our current Kamsarmax and Post-Panamax class vessels, but may be subject to similar operational
treatment as the current vessels of the same class because they have substantially the same specifications as the current vessels. Under certain of our charter contracts, we are able to substitute these
newbuilds for the current vessels nominated under the charter contract, although in certain cases, such substitution may result in a discount in the charter rate.
(15)
Delivery date for this newbuild reflects agreement with the shipyard to deliver the newbuild in the fourth quarter of 2008, which is earlier than the originally scheduled delivery date of January 31, 2009
in the applicable newbuild contract, for an additional fee of $5,265 (¥591,500) per day for each day between the actual delivery date and the January 31, 2009 originally scheduled delivery date. On April
17, 2008, we entered a period time charter with Daiichi pursuant to which Daiichi will charter the
Eleni
commencing in November 2008 through October 2009. The gross daily charter rate under this
charter is $77,000 per day, subject to a 1.25% commission.
(16)
This vessel is being built at the Jiangsu Rongsheng Heavy Industries Group Co., Ltd. (Rongsheng) shipyard.
(17)
On February 7, 2008 we entered into a 20-year period time charter with Eastern Energy Pte. Ltd. pursuant to which Eastern Energy Pte. Ltd. will charter the vessel to be named
Kanaris
commencing in
the third or fourth quarter of 2011. The gross daily charter rate under this charter is $25,928 subject to a 2.5% commission. The obligations of Eastern Energy Pte. Ltd. have been guaranteed by Tata
Power Company Limited and Coastal Gujarat Power Limited, two companies which are part of the Tata Group of companies. During the expected interim period between the scheduled delivery of the
Kanaris
and the commencement of this period time charter, we expect to employ the
Kanaris
in the spot market or on a period time charter.
Management of our Fleet
Our chief executive officer, president, chief operating officer and chief financial officer, collectively referred to in this prospectus as our executive officers, provide strategic management for our company
and also supervise the management of our day-to-day operations by our Manager, Safety Management. We believe our Manager has built a strong reputation in the drybulk shipping community by providing
customized, high-quality operational services in an efficient manner. Under our management agreement to be entered into prior to this offering, our Manager and its affiliates provide us and our subsidiaries with
technical, administrative, commercial and certain other services for an initial term expiring on the second anniversary of this offering with automatic one-year renewals for an additional eight years at our option.
Until the second anniversary of this offering, in return for providing technical, administrative,
6
commercial and certain other services, our Manager receives a fee of $575 per vessel per day for vessels in our fleet. Our Manager also receives a fee of 1.0% on all gross freight, charter hire, ballast bonus and
demurrage with respect to each vessel in our fleet. Further, our Manager receives a commission of 1.0% based on the contract price of any vessel bought or sold by it on our behalf, including each of our
contracted newbuilds other than the purchase of the two Post-Panamax class vessels being built by the IHI shipyard in Japan. For these two Post-Panamax class vessels, our Manager will receive a commission of
1.0% based on the contract prices of the vessels through separate agreements with Itochu Corporation. We also pay our Manager a flat supervision fee of $375,000 per newbuild. After the second anniversary of
this offering, these fees and commissions will be adjusted each year by agreement between us and our Manager. Our arrangements with our Manager and its performance are reviewed by our board of directors.
Our Manager has agreed not to provide management services to any other entities without the prior approval of our board of directors, other than under limited circumstances involving pre-existing business
arrangements or opportunities that we decline to pursue, described under BusinessManagement of Our Fleet, to entities controlled by Polys Hajioannou or Nicolaos Hadjioannou, including SafeFixing Corp.
(SafeFixing). Our Manager is ultimately owned by Machairiotissa Holdings Inc., which is a Marshall Islands corporation wholly owned by Polys Hajioannou.
Our Competitive Strengths
We believe that we possess a number of strengths that provide us with a competitive advantage in the drybulk shipping industry, including:
Young fleet of Panamax, Kamsarmax and Post-Panamax class vessels
. With a carrying capacity of 887,900 dwt, we have one of the worlds youngest fleets of Panamax, Kamsarmax and Post-Panamax
class vessels. Our current fleet of 11 Japanese-built vessels had an average age of 2.6 years as of December 31, 2007, as compared to the average age of 11.5 years for the world fleet of Panamax, Kamsarmax and
Post-Panamax class vessels. Upon delivery in May 2010 of the last of our eight contracted newbuilds, our combined fleet of 19 drybulk vessels will have an average age of 3.2 years. The vessels in our current
fleet are designed to lift more cargo on the same draft, compared to the industry average, to have lower-than-average fuel consumption and to have larger-than-average generators, which offer greater operational
efficiency and safety than smaller generators.
Significant contracted growth at attractive prices
. We have contracts for eight drybulk newbuilds which, upon delivery, will add an aggregate 872,000 dwt in capacity to our fleet, almost doubling the
carrying capacity of our current fleet. These newbuilds, with scheduled deliveries between the fourth quarter of 2008 and the second quarter of 2010, are comprised of two Japanese-built Post-Panamax class
vessels, with contract prices of approximately $37.7 million (¥4.3 billion)
per vessel (plus an estimated additional cost of $0.4 million for early delivery of one of these vessels), two South Korean-built Post-
Panamax class vessels, with contract prices of $73.5 million per vessel, two Chinese-built Capesize class vessels, with contract prices of $80.0 million and $81.0 million, respectively, and two South Korean-built
Kamsarmax class vessels, with contract prices of $48.1 million per vessel, subject to upward price adjustments not to exceed $3.9 million. The contract prices for our newbuilds, which are subject to certain
adjustments such as reimbursement of certain third-party seller interest expenses and payments for early delivery at our request, are significantly below the current market prices for vessels with similar
specifications and delivery dates.
Reputation for operating excellence
. We believe our Manager has established a history of providing excellent service to leading drybulk charterers utilizing our young and well-maintained fleet. Our
Managers high operating standards have resulted in a very limited number of unscheduled off-hire days for our vessels, as reflected by our vessels being utilized on an average of 99.74% of available days for the
three years ended December 31, 2007. We also believe that our focus on operational excellence has enabled us to develop our relationships with high quality charterers such as Bunge, Cargill and Daiichi. This
operational focus has resulted in lower hull and machinery insurance premiums, maintenance expenses and operating costs that create cost advantages to us.
Long-term relationships with key industry players
. We, through our Manager, have established long-term relationships with some of the largest drybulk shippers in the industry by providing reliable service
and consistently meeting customers expectations. Our policy is to charter our vessels primarily to
7
the underlying charterers that use our vessels to transport drybulk commodities rather than charterers that sub-charter them to third parties. We believe our direct relationship with the actual shippers of drybulk
commodities allows us to develop strong customer relationships, which results in significant repeat business and gives us insight into the underlying demand for those commodities. Our Manager has also developed
strong relationships with shipyards, including the Tsuneishi and IHI shipyards in Japan from which we have ordered 20 newbuilds over the past 13 years.
Long history of investing in the drybulk shipping industry
. Our Manager and its affiliates have been focused solely on the drybulk business since the founding of our Managers predecessor in 1965. Our
management team and key management and operational personnel at our Manager consist of experienced executives, many of whom have more than 25 years of experience in the drybulk shipping industry. Our
management team and Manager have demonstrated their ability to successfully manage our business throughout varying cycles in the drybulk industry, strategically balancing the period time and spot charter
deployment of our fleet and employing an opportunistic approach to selling vessels and investing in newbuilds. In connection with this approach, since 1995, we have sold ten vessels and acquired 21 newbuilds, in
addition to the eight newbuilds we currently have on order.
Our Business Strategy
Our primary objectives are to profitably grow our business, increase the distributable cash flow per share and maximize value to our stockholders by pursuing the following strategies:
Pursue a balanced chartering strategy
. We intend to employ our drybulk vessels on a mix of period time and spot charters and, according to our assessment of market conditions, adjust the mix of these
charters to take advantage of the relatively stable cash flow and high utilization rates associated with long-term period time charters or to profit from attractive spot rates during periods of strong charter market
conditions. We have recently entered into five-year period time charters, which are scheduled to commence in late 2008, 2009 and 2010, for six vessels in our current fleet and two of our newbuilds, and have
entered into a 20-year period time charter commencing in 2011 for one of our newbuilds. By chartering these vessels in advance, we have been able to take advantage of the recent strong charter market
conditions, while at the same time, reducing our exposure to charter rate fluctuations in late 2008, 2009 and 2010 when all of our newbuilds are delivered.
Strategically expand the size of our fleet
. We intend to grow our fleet through timely and selective investment in newbuild contracts for drybulk vessels in a manner that is accretive to cash flow per
share. Although we intend to focus on Panamax, Kamsarmax and Post-Panamax class newbuilds, we will monitor market conditions regularly and may purchase drybulk vessels of other sizes or contract for
secondhand drybulk vessels when those acquisitions present favorable investment opportunities. When acquiring vessels, we prefer to invest in groups of vessels, including vessels that will be sister ships to vessels
we already own, in order to take advantage of the operational flexibility and economies of scale that sister ships afford us and our charterers.
Continue to operate a high-quality fleet
. We intend to maintain a young fleet that meets the highest industry standards by strategically replacing existing vessels with newbuilds that have the technical
specifications and advanced designs to allow us to continuously provide our customers with modern, high-quality vessels that meet their needs. During the past 13 years, we have sold ten vessels and acquired 21
newbuilds, which has allowed us to maintain a fleet with an average age of 3.2 years as of the end of each year from 1995 to 2007. As of December 31, 2007, the average age of the vessels in our current fleet
was 2.6 years, and upon delivery of the last of our contracted newbuilds in May 2010, the average age of the vessels in our fleet will be 3.2 years. We preserve the quality of our vessels through a comprehensive
maintenance and inspection program supervised by our experienced, affiliated Manager.
Capitalize on track record and relationships
. We intend to capitalize on our Managers track record of strong operating performance, as demonstrated by its long-term relationships with reputable high-
quality charterers. We believe our safety as an operator and our long-term client relationships have helped us build relationships with financial institutions and shipyards, respectively, which provide us with
attractive growth opportunities. We intend to continue to utilize these relationships to profitably charter Panamax class or larger drybulk vessels to charterers who are end-users of our services.
8
Selected Risk Factors
Our ability to successfully implement our business strategy is dependent on our ability to manage a number of risks relating to our industry and our business. These risks include:
The international drybulk shipping industry is cyclical and volatile
. The drybulk shipping industry is cyclical with attendant volatility in charter rates, vessel values and industry profitability. A decline in
demand for commodities transported in drybulk vessels or a further increase in supply of drybulk vessels could cause a significant decline in charter rates, which could materially adversely affect our results of
operations and financial condition as well as the value of our fleet.
An economic slowdown in the Asian region could materially impact our business
. We expect that a significant number of the port calls made by our vessels will be in the Asian region, and a negative
change in economic conditions in any Asian country, particularly China, Japan and, to some extent, India, may have an adverse effect on our results of operations, as well as our future prospects.
We depend upon a limited number of customers
. We expect to derive a significant part of our revenue from a limited number of customers. If one or more of these customers terminates its charters,
chooses not to recharter our vessels or is unable to perform under its charters with us and we are not able to find replacement charters, we will suffer a loss of revenues.
We depend on our Manager
. Our Manager and its affiliates will provide us with our executive officers and will provide us with technical, administrative and commercial services. Our operational success
will depend significantly upon our Managers satisfactory performance of these services.
We require additional secured indebtedness to fund commitments relating to our eight contracted newbuilds.
Unless we obtain additional secured indebtedness before the end of 2009, we will not be
capable of funding all of our commitments for capital expenditures relating to our eight contracted newbuilds, and may not be able to pay the dividends we intend to pay following this offering, which would
materially adversely affect our results of operations and financial condition. We intend to raise $200.0 million of additional secured indebtedness, which would be used principally to fund these commitments.
For further discussion of the risks that we face, see Risk Factors beginning on page 17 of this prospectus.
Dividend Policy
We intend to pay our stockholders quarterly dividends of $0.475 per share, or $1.90 per share per year, in February, May, August and November of each year. We expect to pay an initial dividend
following closing of this offering in August 2008 calculated based on the pro rata amount of the quarterly dividend for the period from the closing of this offering until the end of the second quarter of 2008.
Our board of directors may review and amend our dividend policy from time to time in light of our plans for future growth and other factors. We cannot assure you that we will be able to pay regular
quarterly dividends in the amounts stated above or elsewhere in this prospectus, and our ability to pay dividends will be subject to the restrictions in our credit facilities and the provisions of Marshall Islands law
as well as the other limitations set forth in the sections of this prospectus entitled Dividend Policy and Risk Factors.
Drybulk Industry Trends
The marine transportation industry is fundamental to international trade, as it is the only practical and cost effective means of transporting large volumes of basic commodities and finished products over
long distances. Drybulk cargoes consist primarily of the major bulk commodities (iron ore, coal and grain) and minor bulk commodities, which are not a major component of demand for Panamax class and larger
vessels and include a wide variety of commodities such as steel products, forest products, agricultural products, minerals, sugar and cement.
In 2007, approximately 3.0 billion tons of drybulk cargo was transported by sea, comprising more than one-third of all international seaborne trade. From 2001 to 2007, trade, by tonnage, in all drybulk
commodities experienced a compound annual growth rate of 5.6% and ton-mile demand in the drybulk
9
sector experienced a compound annual growth rate of 7.0%. The primary factors that have affected the demand for marine transportation of drybulk cargo and the supply of drybulk vessels:
Demand
Increasing global industrial production and consumption and international trade, economic growth and urbanization in China, Russia, Brazil, India and other parts of the Far East, which have
increased the demand for drybulk vessels; and
Increased voyage lengths from producers to consumers of drybulk commodities, which have generated additional ton-mile demand.
Supply
Limited shipyard capacity and long lead times for ordered newbuild vessels, due to a large order book for tankers, containerships and drybulk vessels, which have limited the number of newbuilds
entering the market in the near term; and
Transportation bottlenecks causing vessel delays in cargo discharging and loading at main exporting terminals worldwide, which have effectively reduced the number of drybulk vessels available
for hire.
We can provide no assurance, however, that the industry dynamics described above will continue or that we will be able to expand our business. For further discussion of the risks that we face, see Risk
Factors beginning on page 17 of this prospectus. Please read The International Drybulk Shipping Industry for more information on the drybulk shipping industry.
Corporate Information
Safe Bulkers, Inc. was incorporated on December 11, 2007, under the laws of the Republic of the Marshall Islands, for the purpose of acquiring ownership of 19 Subsidiaries, each incorporated under the
laws of the Republic of Liberia, that either currently own vessels or are scheduled to own vessels. Each of these Subsidiaries, since inception, has been under the common control of Polys Hajioannou and Nicolaos
Hadjioannou. Following the date of the final prospectus, and prior to the closing of this offering, each of our Subsidiaries will be transferred or contributed to Safe Bulkers, Inc. by Vorini Holdings Inc., a Marshall
Islands corporation that will be majority owned by Polys Hajioannou and Nicolaos Hadjioannou, with Maria Hajioannou and Eleni Hajioannou having minority shareholdings (Vorini Holdings). See the section
entitled Managements Discussion and Analysis of Financial Condition and Results of OperationsOverview for more information on our Reorganization (as defined in such section), which will occur following the
date of the final prospectus, and prior to the closing of this offering. Following the closing of this offering, we will conduct our business operations through our Subsidiaries. Each of our vessels is owned by one
of our Subsidiaries.
We maintain our principal executive offices at 32 Avenue Karamanli, P.O. Box 70837, 16605 Voula, Athens, Greece. Our telephone number at that address is 011-30-210-895-7070. After the completion of
this offering, we will maintain a website at
www.safebulkers.com
. The information contained in or connected to our website is not a part of this prospectus.
10
The Offering
Shares of common stock offered
10,000,000 shares.
1,500,000 shares, if the underwriters exercise their overallotment option in full.
Shares of common stock to be outstanding immediately following the offering
54,500,000 shares.
Use of proceeds
The selling stockholder will receive all of the net proceeds from the sale of shares of our common stock
in this offering.
Dividends
We intend to pay quarterly dividends of $0.475 per share, or $1.90 per share per year. We expect to pay
our initial dividend in August 2008, calculated based on the pro rata amount of the quarterly dividend
for the period from the closing of this offering until the end of the second quarter of 2008. Declaration
and payment of any dividend is subject to the discretion of our board of directors. See Dividend
Policy.
NYSE listing
Our common stock has been approved for listing on the New York Stock Exchange under the symbol
SB.
Risk factors
Investment in our common stock involves a high degree of risk. You should carefully read and consider
the information set forth under the heading Risk Factors and all other information set forth in this
prospectus before investing in our common stock.
Each share of our common stock includes one right that, under certain circumstances, will entitle the holder to purchase from us a unit consisting of one-thousandth of a share of preferred stock at a purchase price
of $25.00 per unit, subject to specified adjustments.
11
Summary Combined Financial and Other Data
The following table presents summary:
historical predecessor combined financial and operating data; and
pro forma combined financial and operating data.
The summary historical predecessor combined financial data set forth below as of December 31, 2006 and 2007 and for the years ended December 31, 2005, 2006 and 2007 have been derived from our
audited predecessor combined financial statements, which are included in this prospectus. The summary historical predecessor combined financial data set forth below as of December 31, 2005 have been derived
from our audited predecessor combined financial statements, which are not included in this prospectus.
The unaudited pro forma combined financial and operating data are derived from our unaudited pro forma combined condensed financial statements, which are included in this prospectus, and give effect to
the following transactions, which occurred (or will occur, in the case of the additional dividend) between January 2008 and the date of this offering, as if those transactions had occurred on December 31, 2007, in
the case of the pro forma balance sheet, and January 1, 2007, in the case of the pro forma statement of operations:
Borrowings of $120.0 million by our Subsidiaries Efragel, Marindou and Avstes under three new credit facilities, all of which have been fully drawn. Of the total borrowings of $120.0 million,
$38.5 million was used to refinance an existing credit facility of Efragel and a bank loan of Marindou in the first quarter of 2008, resulting in net additional indebtedness of $81.5 million. Of the
net additional indebtedness of $81.5 million, (i) $16.0 million was retained by the Subsidiaries, and (ii) $65.5 million was advanced to our Manager.
Additional interest expense with respect to the net additional indebtedness of $81.5 million described above.
Repayment of $10.1 million of Advances from Owners from amounts Due from Manager.
Declaration and payment of a dividend in the amount of $147.8 million to our current owners, funded from amounts Due from Manager.
Estimated additional dividend of $31.0 million will be declared and payable to our current owners by our Manager on our behalf prior to the closing of the initial public offering. This dividend
reflects a portion of estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering. Investors in this offering will not be entitled to receive any
portion of this dividend.
Settlement of the remaining Due from Manager balance in the amount of $4.0 million through the transfer of $4.0 million in Restricted cash in collateral accounts held by our Manager to two
new restricted cash collateral accounts of $2.0 million held by each of our Subsidiaries, Petra and Pemer, as security for their respective loan facilities.
Removal of all activities from the historical predecessor financial statements of the Additional Companies, which will not be owned by us following the completion of this offering, and the
activities of our Subsidiary Maxpente with respect to the
Pedhoulas Farmer
, a vessel sold on January 9, 2007 immediately following its acquisition by Maxpente. We did not generate any
operating revenues or operating expenses with respect to the
Pedhoulas Farmer
, and Maxpente is expected to own the newbuild Hull No. 1075 upon its delivery to us. The Additional Companies
have been included in our predecessor combined financial statements, along with the Subsidiaries, because together, the Additional Companies and the Subsidiaries constituted all the vessel
owning activities of Polys Hajioannou and Nicolaos Hadjioannou during the relevant period.
Increase of $2.6 million in general and administrative expenses due to the implementation of the amended management agreements, as of January 1, 2008.
Pro forma earnings per share gives retroactive effect to our Reorganization, which involves the issuance (following the date of the final prospectus and prior to the closing of this offering) of
12
54.5 million shares of our common stock to the selling stockholder, and resulting capital structure following the closing of this offering. This offering will not involve the issuance of additional
shares of our common stock, as all shares of common stock sold in this offering will be sold by the selling stockholder.
The pro forma adjustments do not reflect an estimate of general and administrative expenses to increase as a result of becoming a public company, as such costs are not considered to be factually
supportable. However, we currently expect an annual increase of approximately $2.2 million as a result of becoming a public company upon completion of this offering.
The unaudited pro forma predecessor combined condensed financial and operating data is provided for illustrative purposes only and does not represent what our financial position or results of operation
would actually have been if the transactions and other events reflected in such statements had occurred during the relevant periods, and is not representative of our results of operations or financial position for any
future periods. Investors are cautioned not to place undue reliance on this unaudited pro forma predecessor combined financial and operating data.
Share data in the table below gives effect to the issuance of 54.5 million shares of our common stock as a result of our Reorganization, which will occur following the date of the final prospectus and
prior to the closing of this offering.
This information should be read together with, and is qualified in its entirety by, our predecessor combined financial statements and the notes thereto and our unaudited proforma combined condensed
financial statements and notes thereto included elsewhere in this prospectus. You should also read Managements Discussion and Analysis of Financial Condition and Results of Operations.
Year Ended December 31,
Pro Forma
Year Ended
2005
2006
2007
(In thousands of U.S. dollars except share data and fleet data)
STATEMENT OF INCOME
Revenues
$
82,877
$
99,040
$
172,057
$
167,150
Commissions
(3,211
)
(3,731
)
(6,209
)
(6,027
)
Net revenues
79,666
95,309
165,848
161,123
Voyage expenses
(228
)
(420
)
(179
)
(166
)
Vessel operating expenses
(10,366
)
(13,068
)
(12,429
)
(12,327
)
Depreciation
(7,610
)
(9,553
)
(9,583
)
(9,583
)
General and administrative expenses
(803
)
(1,006
)
(1,177
)
(3,759
)
Early redelivery cost
(150
)
(21,438
)
(21,438
)
Gain on sale of assets
26,785
37,015
112,360
Operating income
87,444
108,127
233,402
113,850
Interest expense
(3,668
)
(6,140
)
(8,225
)
(12,298
)
Other finance costs
(124
)
(116
)
(161
)
(167
)
Interest income
692
775
1,290
1,195
(Loss) on derivatives
(3,171
)
(1,963
)
(704
)
(704
)
Foreign currency gain/(loss)
13,477
(3,279
)
(13,759
)
(13,966
)
Amortization and write-off of deferred finance charges
(63
)
(180
)
(166
)
(117
)
Net income
$
94,587
$
97,224
$
211,677
$
87,793
Pro forma earnings per share, basic and diluted (unaudited) (1)
$
1.74
$
1.78
$
3.88
$
1.61
Pro forma weighted average number of shares, basic and diluted (unaudited)
54,500,000
54,500,000
54,500,000
54,500,000
13
December 31,
2007
Management fee to related party
Year Ended December 31,
Pro Forma
Year Ended
2005
2006
2007
(In thousands of U.S. dollars except share data and fleet data)
OTHER FINANCIAL DATA
Net cash (used in)/provided by operating activities
$
(22,349
)
$
(12,806
)
$
278,506
Net cash (used in)/provided by investing activities
(6,065
)
(33,835
)
88,416
Net cash provided by/(used in) financing activities
28,414
46,641
(366,922
)
Net increase/(decrease) in cash and cash equivalents
OTHER DATA
EBITDA (2)
$
105,236
$
112,322
$
228,361
$
108,596
Adjusted EBITDA (3)
78,451
75,307
116,001
108,596
As of December 31,
Pro Forma
As of
2005
2006
2007
BALANCE SHEET DATA
Total current assets
$
159,538
$
282,021
$
98,883
$
18,513
Total fixed assets
232,655
253,448
308,340
308,340
Other non-current assets
405
314
434
4,434
Total assets
392,598
535,783
407,657
331,287
Total current liabilities
111,271
172,275
41,507
62,421
Derivative liabilities
242
242
Long-term debt, net of current portion
149,500
134,457
306,267
387,753
Time charter discount
2,766
2,766
Total owners equity/(deficit)
131,827
229,051
56,875
(121,895
)
Total liabilities and owners equity/(deficit)
392,598
535,783
407,657
331,287
Year Ended December 31,
Pro Forma
Year Ended
2005
2006
2007
FLEET DATA
(4)
Average number of vessels
9.2
11.5
10.7
10.3
Ownership days
3,370
4,208
3,914
3,778
Available days
3,350
4,208
3,914
3,778
Operating days
3,343
4,205
3,913
3,777
Fleet utilization
99.21
%
99.94
%
99.98
%
99.99
%
Time charter equivalent rates
$
23,713
$
22,550
$
42,327
$
42,604
Daily vessel operating expenses
$
3,076
$
3,106
$
3,176
$
3,263
December 31,
2007
December 31,
2007
December 31,
2007
|
||||||||||||||||||||
(1) |
|
With respect to the periods presented based on our historical predecessor combined statements of operations, pro forma earnings per share gives retroactive effect to our Reorganization and resulting capital structure following the completion of this offering. |
||||||||||||||||||
|
||||||||||||||||||||
|
|
With respect to the periods presented based on our unaudited pro forma combined statements of operations, pro forma earnings per share reflects earnings per share after giving retroactive effect to our Reorganization and the other pro forma events as set forth in our unaudited pro forma combined condensed financial statements and resulting capital structure following the completion of this offering. See the section entitled Managements Discussion and Analysis of Financial Condition and Results of OperationsOverview for more information on our Reorganization (as defined in such section) prior to this offering. |
||||||||||||||||||
|
||||||||||||||||||||
|
|
This offering will not involve the issuance of additional shares of our common stock as all shares of common stock sold in this offering will be sold by the selling stockholder.
|
14
(2)
EBITDA represents net income before interest, income tax expense, depreciation and amortization. EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or
GAAP. EBITDA assists our management and investors by increasing the comparability of our fundamental performance from period to period and against the fundamental performance of other
companies in our industry that provide EBITDA information. We believe that EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the
calculation of EBITDA generally eliminates the effects of financings, income taxes and the accounting effects of capital expenditures and acquisitions, items which may vary for different companies for
reasons unrelated to overall operating performance.
EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. EBITDA should not be considered a
substitute for net income and other operations data prepared in accordance with U.S. GAAP or as a measure of profitability. While EBITDA is frequently used as a measure of operating results and
performance, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.
The following table sets forth a reconciliation of net income to EBITDA for the periods presented:
Year Ended December 31,
Pro Forma
Year Ended
2005
2006
2007
(In thousands of U.S. dollars)
Reconciliation of Net Income to EBITDA:
Net income
$
94,587
$
97,224
$
211,677
$
87,793
Depreciation
7,610
9,553
9,583
9,583
Interest expense
3,668
6,140
8,225
12,298
Interest income
(692
)
(775
)
(1,290
)
(1,195
)
Amortization and write-off of deferred finance charges
63
180
166
117
EBITDA
$
105,236
$
112,322
$
228,361
$
108,596
(3)
Adjusted EBITDA represents our EBITDA after giving effect to the removal of the gain on sale of assets for the relevant periods. Adjusted EBITDA is not a recognized measurement under GAAP.
Adjusted EBITDA assists our management and investors by increasing the comparability of our fundamental performance with respect to our vessel operation, without including the gains we have received
through the sale of assets during the relevant periods. We believe that this removal of the gain on sale of assets allows us to better illustrate the operating results of our vessels for the periods indicated.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Adjusted EBITDA should not be
considered a substitute for net income and other operations data prepared in accordance with U.S. GAAP or as a measure of profitability. While Adjusted EBITDA may also be used as a measure of
operating results and performance, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.
The following table sets forth a reconciliation of EBITDA to Adjusted EBITDA for the periods presented:
Year Ended December 31,
Pro Forma
Year Ended
2005
2006
2007
(In thousands of U.S. dollars)
Reconciliation of EBITDA to Adjusted EBITDA:
EBITDA
$
105,236
$
112,322
$
228,361
$
108,596
Gain on sale of assets
(26,785
)
(37,015
)
(112,360
)
Adjusted EBITDA
$
78,451
$
75,307
$
116,001
$
108,596
(4)
For a description of the items listed under this heading, see Managements Discussion and Analysis of Financial Condition and Results of OperationsFactors Affecting Our Results of Operations.
15
December 31,
2007
December 31,
2007
Recent Developments
Our first quarter ended on March 31, 2008. Set forth below is a discussion of our financial information for the three months ended March 31, 2008, compared to the three months ended March 31, 2007.
Net revenues for the three months ended March 31, 2008 were $49.3 million, compared to net revenues of $30.3 million for the three months ended March 31, 2007. Net income for the three months
ended March 31, 2008 was $24.7 million, compared to $120.0 million for the three months ended March 31, 2007. The increase in net revenues for the three months ended March 31, 2008, compared with the
three months ended March 31, 2007, is primarily attributable to higher charter rates.
The decrease in net income for the three months ended March 31, 2008, compared with the three months ended March 31, 2007, is primarily attributable to the sale of four of our vessels in the three
months ended March 31, 2007, the
Pedhoulas Farmer
, the
Pedhoulas Fighter
, the
Old Kanaris
and the
Old Eleni
, which resulted in a one-time aggregate gain on sale of assets in the amount of $112.4 million in
that quarter. We also incurred exchange rate losses of $10.2 million for the three months ended March 31, 2008, compared to $1.2 million for the three months ended March 31, 2007. The exchange rate losses for
the three months ended March 31, 2008 largely resulted from the conversion of our loan and credit facilities in currencies other than the U.S. dollar into U.S. dollar amounts. Such conversion resulted in a further
reduction of the percentage of outstanding principal amount denominated in foreign currencies from 47.3% on December 31, 2007 to approximately 3.5% as of March 31, 2008, reducing our exposure to currency
fluctuations. We also incurred losses on derivatives of $2.6 million for the three months ended March 31, 2008, compared to a gain of approximately $0.04 million for the three months ended March 31, 2007. This
change was primarily attributable to the fair value losses of six interest rate swap derivatives offset by a foreign exchange derivative gain on settlement during the threee months ended March 31, 2008. During the
three months ended March 31, 2007, there were no interest rate swap derivatives, and the gain arose from foreign exchange derivatives.
Net income for the three months ended March 31, 2008 has also decreased as a result of an increase in general and administrative expenses, from $0.3 million for the three months ended March 31, 2007
to $1.1 million for the three months ended March 31, 2008, primarily due to the implementation of the amended management agreements as of January 1, 2008.
The results of operations and related financial information for the three months ended March 31, 2008 and the three months ended March 31, 2007 are unaudited, and reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the results for the interim periods presented. Such adjustments are of a normal recurring nature.
CONDENSED COMBINED STATEMENTS OF INCOME
2007
2008
(in thousands of
Net revenues
$
30,287
$
49,327
Operating income
122,750
41,240
Net Interest and finance cost
(1,549
)
(3,766
)
Gain/(loss) on derivatives
41
(2,592
)
Foreign currency (loss)
(1,250
)
(10,159
)
Net income
$
119,992
$
24,723
16
For the Three Months Ended March 31,
(Unaudited)
U.S. dollars)
Any investment in our common stock involves a high degree of risk. You should consider carefully the following risk factors, as well as the other information contained in this prospectus, before making an
investment in our common stock. Any of the risk factors described below could significantly and negatively affect our business, results of operations or financial condition, which may reduce our ability to pay
dividends and lower the trading price of our common stock. You may lose all or part of your investment.
Risks Inherent in Our Industry
The international drybulk shipping industry is cyclical and volatile, and charter rates have in the recent past been at historically high levels; these factors may lead to reductions and volatility in our charter
rates, vessel values and results of operations.
The drybulk shipping industry is cyclical with attendant volatility in charter rates, vessel values and industry profitability. During the period from January 2005 to December 2007, the Panamax time charter
average daily rates for one-year period time charters experienced a low of $25,000 and a high of $81,000. At various times since January 2004, charter rates have reached historic highs and in the recent past have
been at historically high levels. Charter rates may not be as high as they have been during this recent period or as they are currently in the future. Please see the section of this prospectus entitled The
International Drybulk Shipping IndustryCharter Rates for information concerning charter rates.
The factors affecting the supply and demand for vessels are outside of our control and are unpredictable, and, as a result, the nature, timing, direction and degree of changes in industry conditions are also
unpredictable.
Factors that influence demand for vessel capacity include:
demand for and production of drybulk products;
global and regional economic conditions;
environmental and other regulatory developments;
the distance drybulk cargoes are to be moved by sea; and
changes in seaborne and other transportation patterns.
Factors that influence the supply of vessel capacity include:
the number of newbuild deliveries and the ability of shipyards to deliver newbuilds by contracted delivery dates;
the scrapping rate of older vessels;
port and canal congestion;
the number of vessels that are out of service, including due to vessel casualties; and
changes in environmental and other regulations that may limit the useful lives of vessels.
We anticipate that the future demand for our drybulk vessels and, in turn, drybulk charter rates will be dependent upon, among other things, continued demand for imported commodities, economic growth
in emerging markets, including China and the rest of the Asia Pacific region, India, Brazil and Russia and the rest of the world, including the United States, which has recently experienced slowing growth,
seasonal and regional changes in demand, changes in the capacity of the global drybulk vessel fleet and the sources and supply of drybulk cargo to be transported by sea. The capacity of the world fleet seems
likely to increase, and there can be no assurance that economic growth will continue. Adverse economic, political, social or other developments could decrease demand and growth in the shipping industry and
thereby reduce our revenue significantly. A decline in demand for commodities transported in drybulk vessels or an increase in supply of drybulk vessels could cause a significant decline in charter rates, which
could materially adversely affect our results of operations and financial condition.
17
An oversupply of drybulk vessel capacity may lead to reductions in charter rates and profitability.
The market supply of drybulk vessels has been increasing, and the number of drybulk vessels on order is near historic highs. As of January 31, 2008, newbuild orders had been placed for an aggregate of
approximately 56.4% (by dwt) of the existing global drybulk fleet, with deliveries expected during the next 60 months, which is high relative to historical levels. Furthermore, as of January 31, 2008, for Panamax,
Kamsarmax and Post-Panamax class vessels in which we currently operate, the vessels on order represented approximately 49.2% (by dwt) of the current fleet capacity, and for Capesize class vessels, the vessels on
order represented approximately 77.1% (by dwt) of the current fleet capacity, which also is high historically. This large order book will result in high levels of deliveries over the next few years, which will
significantly increase the size of the global fleet of drybulk vessels. This may have a negative impact on charter rates and vessel values depending on the ultimate rate of growth of the fleet, which is also
dependent on the number of drybulk vessels taken off-line, including due to scrapping. In recent years, given the high charter rates in the market, there has been minimal scrapping activity in the drybulk sector,
with an average of 0.8% (by dwt) of the global drybulk fleet scrapped from 2001 to 2007, and the average age at which vessels are scrapped has increased. Please read The International Drybulk Shipping
IndustrySupply of Drybulk Vessels for information on the supply of drybulk vessels. Although our contracted newbuilds are generally scheduled to be delivered sooner than the average newbuild currently on order
for the global fleet and we have entered into five-year period time charters for two of our newbuilds and a 20-year period time charter for one of our newbuilds, we will be exposed to changes in charter rates with
respect to our remaining five newbuilds depending on the ultimate growth of the global drybulk fleet. If we cannot enter into period time charters, we may have to secure a charter in the spot market, where
charter rates are volatile and revenues are, therefore, less predictable. In addition, a material increase in the net supply of drybulk vessel capacity without corresponding growth in drybulk vessel demand could have
a material adverse effect on our fleet utilization and our charter rates generally and could, accordingly, materially adversely affect our business, financial condition and results of operations.
An economic slowdown in the Asian region could have a material adverse effect on our business, financial position and results of operations.
We expect that a significant number of the port calls made by our vessels will involve the loading or discharging of raw materials in ports in the Asian region, particularly China and Japan. As a result, a
negative change in economic conditions in any Asian country, particularly China, Japan and, to some extent, India, may have an adverse effect on our business, financial position and results of operations, as well
as our future prospects, by reducing demand and, as a result, charter rates. In recent years, China and India have had two of the worlds fastest growing economies in terms of gross domestic product and have
been the main driving force behind the recent increase in marine drybulk trade and the demand for drybulk vessels. We cannot assure you that such recent increase will be sustained or that the Chinese and Indian
economies will not experience a decline in the future. Moreover, any additional slowdown in the United States economy or slowdown in the economies of the European Union or certain Asian countries may
adversely affect economic growth in China, India and elsewhere. Our business, financial position, results of operations, ability to pay dividends, as well as our future prospects, will likely be materially and
adversely affected by an economic downturn in any of these countries.
The international drybulk shipping industry is highly competitive, and we may not be able to compete successfully for charters with new entrants or established companies with greater resources.
We employ our vessels in a highly competitive market that is capital intensive and highly fragmented. Competition arises primarily from other vessel owners, some of which have substantially greater
resources than we do. Competition for the transportation of drybulk cargo by sea is intense and depends on price, customer relationships, operating expertise, professional reputation and size, age, location and
condition of the vessel. Due in part to the highly fragmented market, additional competitors with greater resources could enter the drybulk shipping industry and operate larger fleets through consolidations or
acquisitions and may be able to offer lower charter rates than we are able to offer.
18
Rising crew costs may adversely affect our profits.
Crew costs are a significant expense for us under our charters. Recently, the limited supply of and increased demand for well-qualified crew, due to the increase in the size of the global shipping fleet, has
created upward pressure on crewing costs, which we generally bear under our period time and spot charters. Increases in crew costs may adversely affect our profitability.
We are subject to regulation and liability under environmental laws that could require significant expenditures and affect our cash flow and net income.
Our business and the operation of our vessels are regulated under international conventions, national, state and local laws and regulations in force in the jurisdictions in which our vessels operate, as well
as in the country or countries of their registration, in order to protect against potential environmental impacts. As a result of highly publicized accidents in recent years, government regulation of vessels, particularly
in the area of environmental requirements, can be expected to become more stringent in the future and could require us to incur significant capital expenditures on our vessels to keep them in compliance, or even
to scrap or sell certain vessels altogether. For example, various jurisdictions that do not already regulate management of ballast waters are considering regulating the management of ballast waters to prevent the
introduction of non-indigenous species that are considered invasive. Such regulations could, if implemented, require us to make changes to the ballast water management plans we currently have in place. Additional
conventions, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which may materially adversely affect our operations. Because such
conventions, laws and regulations are often revised, we cannot predict the ultimate cost of complying with such conventions, laws and regulations or the impact thereof on the resale prices or useful lives of our
vessels. We are also required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, certificates and financial assurances with respect to our operations.
These requirements can also affect the resale prices or useful lives of our vessels, require reductions in cargo capacity, ship modifications or operational changes or restrictions, lead to decreased availability
of or more costly insurance coverage for environmental matters or result in the denial of access to certain jurisdictional waters or ports, or detention in certain ports. Under local, national and foreign laws, as well
as international treaties and conventions, we could incur material liabilities, including cleanup obligations and claims for natural resource, personal injury and property damages in the event that there is a release of
petroleum or other hazardous materials from our vessels or otherwise in connection with our operations. Violations of, or liabilities under, environmental regulations can result in substantial penalties, fines and
other sanctions, including in certain instances, seizure or detention of our vessels. Events of this nature would have a material adverse effect on our financial condition, results of operations and ability to pay
dividends to our stockholders.
The operation of our vessels is affected by the requirements set forth in the United Nations International Maritime Organizations International Management Code for the Safe Operation of Ships and for
Pollution Prevention, or ISM Code. The ISM Code requires vessel owners and ship managers to develop and maintain an extensive Safety Management System (SMS) that includes the adoption of a safety and
environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. The failure of a vessel owner or vessel manager to comply with
the ISM Code may subject it to increased liability, invalidate existing insurance or decrease available insurance coverage for the affected vessels and result in a denial of access to, or detention in, certain ports.
Currently, each of the vessels in our current fleet is ISM Code-certified. However, there can be no assurance that such certification will be maintained indefinitely. If we fail to maintain ISM Code certification for
our vessels, we may also breach covenants in certain of our credit facilities that require that our vessels be ISM Code-certified. If we breach such covenants due to failure to maintain ISM Code certification and
are unable to remedy the relevant breach, our lenders could accelerate our indebtedness and foreclose on the vessels in our fleet securing those credit facilities.
For additional information on these and other environmental requirements, you should carefully review the information contained in the section entitled BusinessEnvironmental and Other Regulations.
19
Increased inspection procedures, tighter import and export controls and survey requirements could increase costs and disrupt our business.
International shipping is subject to various security and customs inspections and related procedures in countries of origin and destination. Inspection procedures can result in the seizure of the contents of
our vessels, delays in the loading, offloading or delivery and the levying of customs duties, fines and other penalties against us.
It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Furthermore, changes to inspection procedures could also impose additional costs and
obligations on our customers and may, in certain cases, render the shipment of certain types of cargo impractical. Any such changes or developments may have a material adverse effect on our business, financial
condition, results of operations and our ability to pay dividends.
The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in
accordance with the applicable rules and regulations of the country of registry of the vessel and the International Convention for the Safety of Life at Sea. A vessel must undergo annual surveys, intermediate
surveys and special surveys as part of a continuous five-year survey cycle. Annual surveys are performed every year. Intermediate surveys are extended annual surveys which typically are conducted approximately
two and one-half years after commissioning and upon each class renewal. Most vessels are drydocked during the intermediate survey for inspection of underwater parts, however, an in-water intermediate survey
may be undertaken in lieu of drydocking, upon the tenth anniversary of vessel delivery, subject to certain conditions. Class renewal surveys, also known as special surveys, are more extensive than intermediate
surveys and are carried out at the end of each five year period. During the special survey the vessel is thoroughly examined, including thickness-gauging to determine any diminution in the steel structures. Should
the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. If any vessel does not maintain its class and/or fails any annual survey, intermediate survey or
special survey, the vessel will be unable to trade between ports and will be unemployable and we would be in violation of certain covenants in our credit facilities. This would negatively impact our revenues.
Risks associated with operating oceangoing vessels could negatively affect our business and reputation, which could adversely affect our revenues and stock price.
The operation of oceangoing vessels carries inherent risks. These risks include the possibility of:
marine disaster;
environmental accidents;
cargo and property losses or damage;
business interruptions caused by mechanical failure, human error, war, terrorism, political action in various countries, labor strikes or adverse weather conditions; and
piracy.
Such occurrences could result in death or injury to persons, loss of property or environmental damage, delays in the delivery of cargo, loss of revenues from or termination of charter contracts,
governmental fines, penalties or restrictions on conducting business, higher insurance rates and damage to our reputation and customer relationships generally. Although we maintain hull and machinery and war
risks insurance, as well as protection and indemnity insurance, which may cover certain risks of loss resulting from such occurrences, our insurance coverage may be subject to caps or otherwise not fully cover
such losses, and any of these circumstances or events could increase our costs or lower our revenues, which could result in a reduction in the market price of our shares of common stock. The involvement of our
vessels in an environmental disaster may also harm our reputation as a safe and reliable vessel owner and operator.
20
The shipping industry has inherent operational risks that may not be adequately covered by our insurance.
The operation of any vessel includes risks such as mechanical failure, collision, fire, contact with floating objects, cargo or property loss or damage and business interruption due to political circumstances
in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of a marine disaster, including oil spills and other environmental mishaps. Although our vessels carry a relatively
small amount of bunkers, a spill of oil from one of our vessels or losses as a result of fire or explosion could be catastrophic under certain circumstances. There are also liabilities arising from owning and
operating vessels in international trade. Our current insurance includes (a) hull and machinery insurance covering damage to our vessels hull and machinery from, among other things, contact with free and floating
objects, (b) war risks insurance covering losses associated with the outbreak or escalation of hostilities, (c) protection and indemnity insurance (which includes environmental damage and pollution insurance)
covering third-party and crew liabilities, such as expenses resulting from the injury or death of crew members, passengers and other third parties, the loss or damage to cargo, third-party claims arising from
collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs and (d) increased value insurance.
We can give no assurance that we are adequately insured against all risks or that our insurers will pay a particular claim. Even if our insurance coverage is adequate to cover our losses, we may not be
able to timely obtain a replacement vessel in the event of a loss. Under the terms of our credit facilities, we will be subject to restrictions on the use of any proceeds we may receive from claims under our
insurance policies. Furthermore, in the future, we may not be able to maintain or obtain adequate insurance coverage at reasonable rates for our fleet. We may also be subject to calls, or premiums, in amounts
based not only on our own claim records but also the claim records of all other members of the protection and indemnity associations through which we receive indemnity insurance coverage for tort liability. Our
insurance policies also contain deductibles, limitations and exclusions which, although we believe are standard in the shipping industry, may nevertheless increase our costs in the event of a claim or decrease any
recovery in the event of a loss. If the damages from a catastrophic oil spill or other marine disaster exceeded our insurance coverage, the payment of those damages could have a severe, adverse effect on us and
could possibly result in our insolvency.
In addition, we do not carry loss of hire insurance. Loss of hire insurance covers the loss of revenue during extended vessel off-hire periods, such as those that occur during an unscheduled drydocking due
to damage to the vessel from accidents. Accordingly, any loss of a vessel or any extended period of vessel off-hire, due to an accident or otherwise, could have a material adverse effect on our business, results of
operations and financial condition and our ability to pay dividends to our stockholders.
The operation of drybulk vessels has certain unique operational risks.
With a drybulk vessel, the cargo itself and its interaction with the vessel may create operational risks. By their nature, drybulk cargoes are often heavy, dense and easily shifted, and they may react badly
to water exposure. In addition, drybulk vessels are often subjected to battering treatment during unloading operations with grabs, jackhammers (to pry encrusted cargoes out of the hold) and small bulldozers. This
treatment may cause damage to the vessel. Vessels damaged due to treatment during unloading procedures may be more susceptible to breach while at sea. Breaches of a drybulk vessels hull may lead to the
flooding of the vessels holds. If a drybulk vessel suffers flooding in its forward holds, the bulk cargo may become so dense and waterlogged that its pressure may buckle the vessels bulkheads, leading to the loss
of a vessel. If we are unable to adequately maintain our vessels, we may be unable to prevent these events. Any of these circumstances or events could negatively impact our business, financial condition, results of
operations and ability to pay dividends. In addition, the loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator.
Maritime claimants could arrest one or more of our vessels, which could interrupt our cash flow.
Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many
jurisdictions, a claimant may seek to obtain security for its claim by arresting a vessel through foreclosure
21
proceedings. The arrest or attachment of one or more of our vessels could cause us to default on a charter, breach covenants in certain of our credit facilities, interrupt our cash flow and require us to pay large
sums of money to have the arrest or attachment lifted.
In addition, in some jurisdictions, such as South Africa, under the sister ship theory of liability, a claimant may arrest both the vessel which is subject to the claimants maritime lien and any
associated vessel, which is any vessel owned or controlled by the same owner. Claimants could attempt to assert sister ship liability against one vessel in our fleet for claims relating to another of our vessels.
Changes in the economic and political environment in China and policies adopted by the government to regulate its economy may have a material adverse effect on our business, financial condition and
results of operations.
The Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD, in respects such as structure, government
involvement, level of development, growth rate, capital reinvestment, allocation of resources, rate of inflation and balance of payments position. Prior to 1978, the Chinese economy was a planned economy. Since
1978, increasing emphasis has been placed on the use of market forces in the development of the Chinese economy. Annual and five-year State Plans are adopted by the Chinese government in connection with the
development of the economy. Although state-owned enterprises still account for a substantial portion of the Chinese industrial output, in general, the Chinese government is reducing the level of direct control that
it exercises over the economy through State Plans and other measures. There is an increasing level of freedom and autonomy in areas such as allocation of resources, production, pricing and management and a
gradual shift in emphasis to a market economy and enterprise reform. Limited price reforms have been undertaken, with the result that prices for certain commodities are principally determined by market forces.
Many of the reforms are unprecedented or experimental and may be subject to revision, change or abolition based on the outcome of such experiments. The Chinese government may cease pursuing a policy of
economic reform. The level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government, as well as by changes in political, economic and
social conditions or other relevant policies of the Chinese government, such as changes in laws, regulations or export and import restrictions, all of which could adversely affect our business, results of operations
and financial condition.
World events could affect our results of operations and financial condition.
Terrorist attacks such as the attacks on the United States on September 11, 2001, other terrorist attacks since that time and the continuing response of the United States and other countries to these attacks,
as well as the threat of future terrorist attacks in the United States or elsewhere, continues to cause uncertainty in the world financial markets and may affect our business, results of operations and financial
condition. The continuing conflict in the Middle East may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial
markets. In addition, political tensions or conflicts in the Asia Pacific Region, particularly involving China, may reduce the demand for our services. These uncertainties could also adversely affect our ability to
obtain any additional financing or, if we are able to obtain additional financing, to do so on terms favorable to us. In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and
other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea. Terrorist attacks
targeted at sea vessels, such as the October 2002 attack in Yemen on the
VLCC Limburg
, a ship not related to us and other similar attacks since that time, may in the future also negatively affect our operations
and financial condition and directly impact our vessels or our customers. Future terrorist attacks could result in increased volatility of the financial markets in the United States and globally and could result in an
economic recession affecting the United States, Europe, Asia, the Middle East or the entire world. Any of these occurrences could have a material adverse effect on our business, financial condition, results of
operations, revenue, costs and ability to pay dividends.
Changing economic, political and governmental conditions in the countries where we are engaged in business or where our vessels are registered could affect us. In addition, future hostilities or other
22
political instability in regions where our vessels trade could also affect our trade patterns and adversely affect our operations and performance.
Governments could requisition our vessels during a period of war or emergency, resulting in a loss of earnings.
A government could requisition one or more of our vessels for title or for hire. Requisition for title occurs when a government takes control of a vessel and becomes its owner, while requisition for hire occurs
when a government takes control of a vessel and effectively becomes its charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments may elect to
requisition vessels in other circumstances. Although we would be entitled to compensation in the event of a requisition of one or more of our vessels, the amount and timing of payment would be uncertain.
Government requisition of one or more of our vessels may cause us to breach covenants in certain of our credit facilities, negatively impact our business, financial condition, results of operations and ability to pay
dividends.
Rising fuel prices may adversely affect our profits.
Upon redelivery of vessels at the end of a period time or trip time charter, we may be obligated to repurchase the fuel (bunkers) on board at prevailing market prices, which could be materially higher than
fuel prices at the inception of the charter period. In addition, although we rarely deploy our vessels on voyage charters, fuel is a significant, if not the largest, expense that we would incur with respect to vessels
operating on voyage charter. As a result, an increase in the price of fuel may adversely affect our profitability. The price and supply of fuel is unpredictable and fluctuates based on events outside our control,
including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and
environmental concerns and regulations.
Seasonal fluctuations in industry demand could adversely affect our results of operations and the amount of available cash with which we can pay dividends.
We operate our vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter rates. This seasonality may result in quarter-to-quarter volatility in our results of
operations, which could affect the amount of dividends, if any, that we pay to our stockholders from quarter to quarter. The market for marine drybulk transportation services is typically stronger in the fall and
winter months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere during the winter months. In addition, unpredictable weather patterns in these months tend to
disrupt vessel scheduling and supplies of certain commodities. This seasonality could materially affect our business, financial condition, results of operations and ability to pay dividends.
Risks Related to Our Company
The market values of our vessels may decrease, which could cause us to breach covenants in our credit facilities and adversely affect our results of operations.
The market value of drybulk vessels has generally experienced high volatility, and market prices for secondhand and newbuild drybulk vessels are at historically high levels. You should expect the market
value of our vessels to fluctuate depending on a number of factors, including:
general economic and market conditions affecting the shipping industry;
prevailing level of charter rates;
competition from other shipping companies;
configurations, sizes and ages of vessels;
cost of newbuilds;
governmental or other regulations; and
technological advances.
23
If the market value of our vessels or newbuilds declines, we may breach some of the covenants contained in our credit facilities, including covenants in our new and existing credit facilities. If we do
breach such covenants and we are unable to remedy the relevant breach, our lenders could accelerate our indebtedness and foreclose on the vessels in our fleet securing those credit facilities. If the book value of a
vessel is impaired due to unfavorable market conditions, we would incur a loss that could adversely affect our results of operations. In addition, if we sell vessels at a time when vessel prices have fallen and
before we have recorded an impairment adjustment to our financial statements, the sale may be at less than the vessels carrying amount on our financial statements, resulting in a loss that could adversely affect
our results of operations.
Please see the section of this prospectus entitled The International Drybulk Shipping IndustryVessel Prices for information concerning historical prices of drybulk vessels.
The market values of our vessels may decrease, which could limit the amount of funds that we can borrow under any future credit facility.
In the event of a decline in the market value of our fleet, we may not be able to obtain future financing or incur debt on terms that are acceptable to us or at all.
Please see the section of this prospectus entitled The International Drybulk Shipping IndustryVessel Prices for information concerning historical prices of drybulk vessels.
When our current charters end, we may not be able to replace them promptly or with profitable chartering arrangements, which would affect our results of operations and ability to pay dividends.
Of our 11 drybulk vessels currently in service, as of December 31, 2007, three vessels were deployed in the spot market and eight vessels were deployed on period time charters of two years or less. In
general, we intend to deploy a portion of our fleet in the spot market.
As described above, charter rates fluctuate significantly based upon available charters and the supply of, and demand for, marine shipping capacity. Our current spot charters and many of our period time
charters expire over the next several months, and we are scheduled to receive eight newbuilds over the next few years. As a result, although we have entered into five-year period time charters for six vessels in
our current fleet, commencing in late 2008, 2009 and 2010, and two of our newbuilds, commencing in the first quarter of 2009 and the second quarter of 2010, and have entered into a 20-year period time charter
for one of our newbuilds commencing in 2011, we will be exposed to changes in charter rates for drybulk vessels and may be entering into charters during downturns in the highly volatile market for marine
drybulk transportation services.
We cannot assure you that future charter rates will enable us to operate our vessels profitably or to pay you dividends. We also cannot assure you that we will be able to obtain charters at comparable
rates or with comparable charterers, if at all, when the current charters for the vessels in our fleet expire. If we cannot recharter these vessels on new period time charters following the expiration of previous
charters, or employ them in the spot market profitably, our results of operations and operating cash flow will suffer. Current drybulk vessel charter rates are high, however, as described above, the market is
volatile, and when we enter into a charter when charter rates are low, our revenues and earnings will be adversely affected as we do not expect to be able to substantially lower our operating costs during periods
of industry weakness. In the past, short-term period time charter rates and spot market charter rates for drybulk vessels have declined below the operating costs of vessels. In addition, a decline in charter rates will
also cause the value of our vessels to decline.
In addition, when our current charters expire, we may have to reposition our vessels without cargo or compensation to deliver them to future charterers or to move vessels to areas where we believe that
future employment may be more likely or advantageous. Repositioning our vessels in these circumstances would increase our vessel operating costs.
24
A decline in spot market charter rates would affect our results of operations and ability to pay dividends.
During the years ended December 31, 2005, 2006 and 2007, our revenue from spot charters accounted for 38.56%, 52.17% and 51.1%, respectively, of our total revenues. The drybulk charter market is
highly competitive and spot charter rates fluctuate significantly. Vessels operating in the spot market generate revenues that are less predictable than those on period time charters. We are therefore exposed to the
risk of fluctuating drybulk charter rates, which may have a materially adverse impact on our financial performance. As a result of the volatility in the drybulk carrier charter market, we may not be able to employ
our vessels upon the termination of their existing charters at their current charter rates. We cannot assure you that future charter rates will enable us to operate our vessels profitably or to pay you dividends.
Charterers may default on period time charters that provide for above-market rates, which could reduce our revenues.
If we enter into period time charters with charterers when charter rates are high and charter rates subsequently fall significantly, charterers may default under those charters. We intend to enter into period
time charters only with reputable charterers, but we cannot assure you that our charterers will not default on the charters. If a charterer defaults on a charter with an above-market charter rate, we will seek the
remedies available to us, which may include arbitration or litigation to enforce the contract. After a charterer defaults on a period time charter, we may have to enter into a charter at a lower charter rate, which
would reduce our revenues. If we cannot enter into a new period time charter, we may have to secure a charter in the spot market, where charter rates are volatile and revenues are less predictable. It is also
possible that we would be unable to secure a charter at all, which would also reduce our revenues.
We cannot assure you that our board of directors will declare dividends.
Our policy is to pay our stockholders quarterly dividends of $0.475 per share, or $1.90 per share per year, in February, May, August and November of each year. We expect to pay an initial dividend
following completion of this offering in August 2008, calculated based on the pro rata amount of the quarterly dividend for the period from the closing of this offering until the end of the second quarter of 2008.
The declaration and payment of dividends, if any, will always be subject to the discretion of our board of directors and the requirements of Marshall Islands law. The timing and amount of any dividends declared
will depend on, among other things: (a) our earnings, financial condition and cash requirements and availability, (b) our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth
strategy, (c) provisions of Marshall Islands law governing the payment of dividends and (d) restrictive covenants in our existing and future debt instruments.
The international drybulk shipping industry is highly volatile, and we cannot predict with certainty the amount of cash, if any, that will be available for distribution as dividends in any period. Also, there may be
a high degree of variability from period to period in the amount of cash, if any, that is available for the payment of dividends. The amount of cash we generate from operations may fluctuate based upon, among other
things:
the rates we obtain from our charters as well as the rates obtained upon the expiration of our existing charters;
the level of our operating costs;
the number of unscheduled off-hire days and the timing of, and number of days required for, scheduled drydocking of our ships;
vessel acquisitions and related financings;
restrictions in our credit facilities and in any future debt program;
prevailing global and regional economic and political conditions; and
the effect of governmental regulations and maritime self-regulatory organization standards on the conduct of our business.
The actual amount of cash we will have available for dividends will also depend on many additional factors, including:
our expenses, liabilities and cash reserves;
25
changes in our operating cash flows, capital expenditure requirements, working capital requirements and other cash needs;
our growth strategy and associated uses of our cash and our financing requirements;
modification or revocation of our dividend policy by our board of directors;
the amount of cash reserves established by our board of directors; and
restrictions under Marshall Islands law.
We may incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, if any, including as
a result of the risks described in this section of this prospectus. Our growth strategy contemplates that we will finance the acquisition of additional vessels through a combination of our operating cash flow and
debt or equity financing. If financing is not available to us on acceptable terms, our board of directors may determine to finance or refinance acquisitions with a greater percentage of cash from operations to the
extent available, which would reduce or even eliminate the amount of cash available for the payment of dividends. We may also enter into other agreements that will restrict our ability to pay dividends.
Under the terms of certain of our existing credit facilities, our Subsidiaries are not permitted to pay dividends if an event of default has occurred and is continuing or would occur as a result of the
payment of such dividend. We expect that any future debt agreements will have similar restrictions on the payment of dividends.
Marshall Islands laws and the laws of the Republic of Liberia, where each of our Subsidiaries is incorporated, generally prohibit the payment of dividends other than from surplus or net profits, or while a
company is insolvent or would be rendered insolvent by the payment of such a dividend. We may not have sufficient surplus or net profits in the future to pay dividends, and our Subsidiaries may not have
sufficient funds, surplus or net profits to make distributions to us.
The amount of cash we generate from our operations may differ materially from our net income or loss for the period, which will be affected by non-cash items. We may incur other expenses or liabilities
that could reduce or eliminate the cash available for distribution as dividends. As a result of these and the other factors mentioned above, we may pay dividends during periods when we record losses and may not
pay dividends during periods when we record net income.
We can give no assurance that dividends will be paid in the future.
We depend upon a limited number of customers for a large part of our revenues and the loss of one or more of these customers could adversely affect our financial performance.
We expect to derive a significant part of our revenues from a limited number of customers. During 2006, approximately 75.2% of our charter revenues were derived from two charterers, Bunge and Cargill,
and during 2007, approximately 69.2% of our revenues were derived from three charterers, Bunge, Cargill and Daiichi. In addition, as of December 31, 2007, eight of our current vessels and two of our newbuilds
were deployed, or scheduled to be deployed in the future, on period time charters with Daiichi. If one or more of these customers terminates its charters, chooses not to recharter our vessels or is unable to perform
under its charters with us and we are not able to find replacement charters, we will suffer a loss of revenues that could adversely affect our financial condition, results of operations and cash available for
distribution as dividends to our stockholders.
We could lose a customer or the benefits of a time charter for many different reasons, including if:
the customer fails to make charter payments because of its financial inability, disagreements with us or otherwise;
the customer terminates the charter because we fail to deliver the vessel within a fixed period of time, the vessel is lost or damaged beyond repair, there are serious deficiencies in the vessel or
prolonged periods of off-hire or we default under the charter; or
in certain cases, a prolonged force majeure event affecting the customer, including damage to or destruction of relevant production facilities, war or political unrest prevents us from performing
services for that customer.
26
If we lose a key customer, we may be unable to obtain period time charters on comparable terms with charterers of comparable standing or may have increased exposure to the volatile spot market, which
is highly competitive and subject to significant price fluctuations. The loss of any of our customers, charters or vessels, or a decline in payments under our charters, could have a material adverse effect on our
business, results of operations, financial condition and our ability to pay dividends.
We may have difficulty properly managing our planned growth through acquisitions of additional vessels.
We expect to take delivery of one newbuild in the fourth quarter of 2008, one newbuild in the first quarter of 2009, one newbuild in the third quarter of 2009 and five newbuilds in the first half of 2010.
We intend to grow our business through selective acquisitions of additional vessels, in addition to our contracted newbuilds. Our future growth will primarily depend on our ability to:
locate and acquire suitable newbuild and other vessels;
identify and consummate vessel acquisitions or joint ventures relating to vessel acquisitions;
enlarge our customer base;
manage our expansion;
operate and supervise any newbuilds we may order; and
obtain required debt or equity financing on acceptable terms.
During periods in which charter rates are high, vessel values generally are high as well, and it may be difficult to consummate vessel acquisitions or enter into newbuild contracts at favorable prices. Other
risks include the possibility that indemnification agreements will be unenforceable or insufficient to cover potential losses and difficulties associated with imposing common standards, controls, procedures and
policies. We cannot give any assurance that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in connection with our future growth efforts.
As we expand our business, we will need to improve or expand our operations and financial systems, staff and crew; if we cannot improve these systems or recruit suitable employees, our performance may be
adversely affected.
Our current operating and financial systems may not be adequate as we implement our plan to expand the size of our fleet, and our Managers attempts to improve those systems may be ineffective. In addition,
as we expand our fleet, we will have to rely on our Manager to recruit additional seafarers and shoreside administrative and management personnel. We cannot assure you that our Manager will be able to continue to
hire suitable employees or a sufficient number of employees as we expand our fleet. If our Managers unaffiliated crewing agents encounter business or financial difficulties, we may not be able to adequately staff our
vessels. We may also have to increase our customer base to provide continued employment for most of our new vessels. If we are unable to operate our financial system, our Manager is unable to operate our operations
systems effectively or to recruit suitable employees in sufficient numbers or we are unable to increase our customer base as we expand our fleet, our performance may be adversely affected.
Unless we set aside reserves for vessel replacement, at the end of a vessels useful life, our revenue will decline, which would adversely affect our cash flows and income.
As of December 31, 2007, the vessels in our current fleet had an average age of 2.6 years, and following delivery of all of our contracted newbuilds in May 2010, the vessels in our fleet will have an
average age of 3.2 years. Unless we maintain cash reserves for vessel replacement, we may be unable to replace the vessels in our fleet upon the expiration of their useful lives. Our cash flows and income are
dependent on the revenues we earn by chartering our vessels to customers. If we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, results of operations, financial
condition and ability to pay dividends will be adversely affected. Any reserves set aside for vessel replacement would not be available for other cash needs or dividends. While we have not set aside cash reserves
to date, pursuant to our dividend policy, we expect to pay a quarterly dividend of $0.475 per share, or $1.90 per share per year, however, in periods where we make acquisitions, including acquisitions
27
to replace vessels, our board of directors may limit the amount or percentage of our cash from operations available to pay dividends. See the section entitled Dividend Policy.
If our drybulk newbuilds are not delivered on time or are delivered with significant defects, our earnings and financial condition could suffer.
We have entered into agreements to purchase four Post-Panamax, two Kamsarmax and two Capesize class drybulk newbuilds. Of these additional vessels, one Post-Panamax class vessel is scheduled for
delivery in the fourth quarter of 2008, one Post-Panamax class vessels is scheduled for delivery in the first quarter of 2009, one Post-Panamax class vessel is scheduled for delivery in the third quarter of 2009, one
Kamsarmax, one Post-Panamax and two Capesize class vessels are scheduled for delivery in the first quarter of 2010 and one Kamsarmax class vessel is scheduled for delivery in the second quarter of 2010.
A delay in the delivery of any of these vessels to us or the failure of the shipyard to deliver a vessel at all could cause us to breach our obligations under a related charter and could adversely affect our earnings,
our financial condition and the amount of dividends, if any, that we can pay in the future. In addition, the delivery of any of these vessels with substantial defects could have similar consequences.
The delivery of a newbuild could be delayed because of:
work stoppages or other labor disturbances or other event that disrupts the operations of the shipyard;
quality or engineering problems;
changes in governmental regulations or maritime self-regulatory organization standards;
lack of raw materials;
bankruptcy or other financial crisis of the shipyard;
a backlog of orders at the shipyard;
hostilities, political or economic disturbances in the country where the vessels are being built;
weather interference or catastrophic events, such as major earthquakes or fires;
our requests for changes to the original vessel specifications;
shortages of or delays in the receipt of necessary construction materials, such as steel, or equipment, such as main engines, electricity generators and propellers;
our inability to obtain requisite permits or approvals; or
disputes with the shipyard.
In addition, the shipbuilding contracts for the newbuilds generally contain a force majeure provision whereby the occurrence of certain events could delay delivery or possibly terminate the contract. If
delivery of a vessel is materially delayed or if a shipbuilding contract is terminated, it could adversely affect our results of operations and financial condition and our ability to pay dividends to our stockholders.
If we are unable to enter into our new credit facilities and obtain additional secured indebtedness, we may default on our commitments relating to our eight contracted newbuilds, and we may not be able to
pay the dividends we intend to pay following this offering, which would materially adversely affect our results of operations and financial condition.
We are scheduled to take delivery of our eight newbuilds in late 2008, 2009 and 2010. The remaining balance of the contract prices are $368.2 million and ¥7.5 billion as of December 31, 2007, including
certain additional amounts for adjustments (together, the equivalent of $434.7 million, based on a ¥112.35/$1.00 exchange rate in effect on December 31, 2007), as provided under our newbuild contracts, including
certain third party seller interest expenses and adjustments for early delivery. We intend to fund these commitments with available cash, borrowings under our two new credit facilities for which we have accepted
commitment letters of $45.0 million each and the majority of available borrowings under an additional secured facility of up to $200.0 million which we intend to obtain before the end of 2009. To the extent that
we are unable to enter into these two new credit facilities and obtain such additional secured indebtedness on terms acceptable to us, we will need to find alternative financing. If we are unable to find
28
alternative financing, we will not be capable of funding all of our commitments for capital expenditures relating to our eight contracted newbuilds, and we may not be able to pay the dividends we intend to pay
following this offering, which would materially adversely affect our results of operations and financial condition.
The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings.
In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. As of December 31, 2007, the average age of the vessels in our current fleet was 2.6 years. As
our vessels age, they may become less fuel efficient and more costly to maintain and will not be as advanced as more recently constructed vessels due to improvements in design and engine technology. Rates for
cargo insurance, paid by charterers, also increase with the age of a vessel, making older vessels less desirable to charterers.
Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment, to our vessels and may restrict the
type of activities in which our vessels may engage. We cannot assure you that, as our vessels age, market conditions will justify those expenditures or enable us to operate our vessels profitably during the
remainder of their useful lives. If we sell vessels, we are not certain that the price at which we sell them will equal or exceed their carrying amounts at that time.
Our vessels may suffer damage and we may face unexpected costs, which could adversely affect our cash flow and financial condition.
If our vessels suffer damage, they may need to be repaired. The costs of repairs are unpredictable and can be substantial. We may not have insurance that is sufficient to cover all or any of these costs or
losses and may have to pay costs not covered by our insurance. The loss of earnings while our vessels are being repaired and repositioned, as well as the actual cost of these repairs, would decrease our earnings
and reduce the amount of cash that we have available for dividends.
Because we generate substantially all of our revenues in U.S. dollars but incur a portion of our expenses, hold a portion of our indebtedness and have obligations under two of our newbuild contracts in other
currencies, exchange rate fluctuations could adversely affect our results of operations, financial condition and ability to pay dividends.
We generate substantially all of our revenues in U.S. dollars but in 2006 and 2007, incurred approximately 17.7% and 19.1%, respectively, of our expenses in currencies other than the U.S. dollar. As of
December 31, 2007, of our aggregate indebtedness of $322.9 million, CHF86.4 million (the equivalent of $76.7 million) was denominated in Swiss francs and ¥8.5 billion (the equivalent of $75.8 million) was
denominated in Japanese yen, however, we subsequently converted all of the indebtedness in these currencies into U.S. dollars except for CHF12.9 million (the equivalent of $12.99 million), which remained
outstanding as of March 31, 2008. The contract prices, in an aggregate amount of $75.5 million (¥8.5 billion), under two of our newbuild contracts are also denominated in Japanese yen. The difference in currencies
could lead to fluctuations in our net income due to changes in the value of the U.S. dollar relative to other currencies, in particular the euro and the Japanese yen. For example, from January 1, 2006 to
December 31, 2007, the value of the U.S. dollar declined by approximately 19.6% as compared to the euro and declined by approximately 4.5% as compared to the Japanese yen. We have not hedged our currency
exposure, and as a result, our U.S. dollar denominated results of operations and financial condition and our ability to pay dividends could suffer.
Restrictive covenants in our existing credit facilities impose, and any future credit facilities will impose, financial and other restrictions on us.
Our existing credit facilities impose, and any future credit facility will impose, operating and financial restrictions on us. These restrictions in our existing credit facilities generally limit most of our
Subsidiaries ability to, among other things:
29
pay dividends if an event of default has occurred and is continuing or would occur as a result of the payment of such dividend;
enter into long-term charters for more than 13 months;
incur additional indebtedness, including through the issuance of guarantees;
change the flag, class or management of the vessel mortgaged under such facility or terminate or materially amend the management agreement relating to such vessel;
create liens on their assets;
make loans;
make investments;
make capital expenditures;
undergo a change in ownership; and
sell the vessel mortgaged under such facility.
Therefore, we may need to seek permission from our lenders in order to engage in some corporate actions. Our lenders interests may be different from ours, and we cannot guarantee that we will be able
to obtain our lenders permission when needed. This may limit our ability to pay dividends to our stockholders, finance our future operations or pursue business opportunities.
Certain of our existing credit facilities require our Subsidiaries to maintain specified financial ratios and satisfy financial covenants. Depending on the credit facility, certain of our Subsidiaries are subject
to financial ratios and covenants requiring that these Subsidiaries:
ensure that the value of the vessel mortgaged under the applicable credit facility does not fall below 100% to 120%, as applicable, of the outstanding amount of the loan; and
ensure that outstanding amounts in currencies other than the U.S. dollar do not exceed 100% or 110%, as applicable, of the U.S. dollar equivalent amount specified in the relevant credit
agreement for the applicable period by, if necessary, providing cash collateral security in an amount necessary for the outstanding amounts to meet this threshold.
Although
certain of our existing facilities (Pelea, Avstes, New Marindou and New Efragel
credit facilties) contain a covenant requiring us to obtain the relevant
lenders consent prior to the payment of
dividends by the Subsidiary borrowers, we intend to enter into supplementary
agreements removing this covenant prior to the closing of this offering.
If, despite our expectation, we remain bound by this covenant after the closing
of this offering (which relates to four of our 19 Subsidiaries), it could
limit our ability to pay dividends.
The covenants described above are those contained in certain of our Subsidiaries existing credit facilities. In addition, we intend to enter into supplemental agreements with respect to certain of our
Subsidiaries existing credit facilities (see the section entitled Description of IndebtednessOur Credit Facilities). Although the relevant lender has proposed, and we agree with, certain key terms to be included in
the supplemental agreements (such as the margin and covenants to apply following the offering), the lenders proposal is subject to agreement on all relevant terms of the supplemental agreements. Accordingly, the
final terms of these supplemental agreements may differ from the proposed terms and could be more onerous, which my require us to seek alternative financing.
We
have accepted commitment letters to enter into two $45.0 million credit facilities
through two of our Subsidiaries. Upon the completion of this offering, we
intend to guarantee the obligations of our Subsidiaries under those two new
credit facilities and the existing credit facilities of our Subsidiaries
Avstes Shipping Corporation, Efragel Shipping Corporation, Marindou Shipping
Corporation and Pelea Shipping Ltd., and certain financial covenants will
apply to us, including a consolidated leverage ratio, and debt-to-EBITDA
ratios, and minimum tangible net worth. In addition, these credit facilities
will contain a covenant that the Hajioannou family maintain its majority
interest in us. In addition, we also intend to guarantee the obligations
of our Subsidiaries under the credit facilities of Marathassa Shipping Corporation,
Marinouki Shipping Corporation, Soffive Shipping Corporation and Kerasies
Shipping Corporation, and similar financial covenants will apply to us as
those described above.
30
We expect that the restrictions and covenants that will be contained in any new credit facility will differ to those described above. See Description of Indebtedness for more information about our
Subsidiaries existing credit facilities, our new credit facilities and our future credit facilities.
A failure to meet our payment and other obligations or to maintain compliance with the financial covenants that will be in our new credit facilities could lead to defaults under our secured credit facilities.
Our lenders could then accelerate our indebtedness and foreclose on the vessels in our fleet securing those credit facilities. The loss of these vessels would have a material adverse effect on our results of operations
and financial condition.
Servicing our existing and future indebtedness will limit funds available for other purposes, such as the payment of dividends.
In addition to our existing outstanding secured indebtedness, and the two facilities of $45.0 million each for which we have accepted commitment letters, we intend to finance our growth program in part
with additional secured indebtedness. We will have to dedicate cash flow from operations to pay the principal and interest of this indebtedness. If we are not able to satisfy these obligations, we may have to
undertake alternative financing plans. The actual or perceived credit quality of our charterers, any defaults by them and the market value of our fleet, among other things, may materially affect our ability to obtain
alternative financing. In addition, debt service payments under our existing and any future credit agreements or alternative financing may limit funds otherwise available for working capital, capital expenditures and
other purposes, such as the payment of dividends. If we are unable to meet our debt obligations, or if we otherwise default under any existing or future credit facilities, our lenders could accelerate our indebtedness
and foreclose on the vessels in our fleet securing those credit facilities. As of December 31, 2007, we had aggregate outstanding indebtedness of approximately $322.9 million
(based on the prevailing exchange
rates as of that date), and immediately after the closing of this offering, we expect to have aggregate indebtedness of $416.8 million plus the equivalent of ¥400 million in U.S. dollars as of May 27, 2008.
Following this offering, we expect to incur additional debt to finance our growth strategy and working capital requirements.
Our ability to obtain additional financing may be dependent on the creditworthiness of our charterers.
The actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the additional capital resources that we will require to purchase additional
vessels or may significantly increase our costs of obtaining such capital. Our inability to obtain additional financing at all or other than at a higher than anticipated cost may materially affect our results of
operation and our ability to implement our business strategy.
We are a holding company, and we depend on the ability of our Subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make dividend payments.
We are a holding company and our Subsidiaries, which are all wholly owned by us either directly or indirectly, conduct all of our operations and own all of our operating assets. We have no significant
assets other than the equity interests in our wholly owned Subsidiaries. As a result, our ability to make dividend payments depends on our Subsidiaries and their ability to distribute funds to us. The ability of a
Subsidiary to make these distributions could be affected by a claim or other action by a third party, including a creditor, and the laws of the Republic of Liberia, where each of our Subsidiaries is incorporated,
which regulate the payment of dividends by companies. If we are unable to obtain funds from our Subsidiaries, our board of directors may exercise its discretion not to declare or pay dividends.
Prior to this offering, we have and expect to pay dividends comprising a substantial portion of our retained earnings. As a result, we will have limited cash reserves and would need to seek financing should
any circumstance arise that required significant liquid resources.
On December 31, 2007, we paid Polys Hajioannou and Nicolaos Hadjioannou aggregate dividends of $383.9 million, representing our retained earnings as of June 30, 2007. In March and April 2008, we
paid Polys Hajioannou and Nicolaos Hadjioannou aggregate dividends of $147.8 million, of which $56.9
31
million represented our retained earnings as of December 31, 2007. The dividends of $147.8 million were funded using amounts due from our Manager. An estimated additional dividend of $31.0 million, which
will be funded using amounts due from our Manager, reflecting a portion of estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering will also be declared
and payable prior to the closing of this offering to Polys Hajioannou and Nicolaos Hadjioannou. Investors in this offering will not be entitled to any portion of this dividend. As a result, immediately following the
completion of this offering, our principal source of cash reserves will be (x) $16.0 million of cash on hand, (y) $4.0 million of restricted cash in collateral accounts and (z) cash flow from operations. Accordingly,
should circumstances arise that require significant liquid resources, we would have to obtain a loan providing these funds from our existing outstanding and committed credit facilities, other lenders, our existing
stockholder or other sources. There can be no assurance that we would be able to obtain such financing on favorable terms or at all, and our business and results of operations could be adversely affected by this
lack of liquidity.
We depend on our Manager to operate our business and our business could be harmed if our Manager failed to perform its services satisfactorily.
Pursuant to our management agreement, our Manager and its affiliates will provide us with our executive officers and will provide us with technical, administrative and commercial services (including
vessel maintenance, crewing, purchasing, shipyard supervision, insurance, assistance with regulatory compliance, financial services and office space). Our operational success will depend significantly upon our
Managers satisfactory performance of these services. Our business would be harmed if our Manager failed to perform these services satisfactorily. In addition, if the management agreement were to be terminated
or if its terms were to be altered, our business could be adversely affected, as we may not be able to immediately replace such services, and even if replacement services were immediately available, the terms
offered could be less favorable than those under our management agreement.
Our ability to compete for and enter into new period time and spot charters and to expand our relationships with our existing charterers will depend largely on our relationship with our Manager and its
reputation and relationships in the shipping industry. If our Manager suffers material damage to its reputation or relationships, it may harm our ability to:
renew existing charters upon their expiration;
obtain new charters;
successfully interact with shipyards during periods of shipyard construction constraints;
obtain financing on commercially acceptable terms;
maintain satisfactory relationships with our charterers and suppliers; and
successfully execute our business strategies.
If our ability to do any of the things described above is impaired, it could have a material adverse effect on our business and affect our profitability.
Although we may have rights against our Manager if it defaults on its obligations to us, you will have no recourse against our Manager.
In addition, we have agreed, under our management agreement, to allow our Manager to continue to provide certain management services to an affiliate of our Manager, SafeFixing, that is engaged in the
business of chartering in vessels owned by other vessel owners for subsequent chartering out to third party customers. Although our Manager will be required to provide preferential treatment to our vessels with
respect to chartering arrangements under the management agreement, our Managers time and attention may be diverted from the management of our vessels because of its management of SafeFixings vessels.
Further, we may need to seek approval from our lenders to change our Manager.
Management fees are payable to our Manager regardless of our profitability.
Pursuant to our management agreement, we pay our Manager a fee of $575 per day per vessel for providing commercial, technical and administrative services and a fee of 1.0% on gross freight, charter
hire,
32
ballast bonus and demurrage. In addition, we will pay our manager certain commissions and fees with respect to vessel purchases and newbuilds. The management fees do not cover expenses such as voyage
expenses, vessel operating expenses, maintenance expenses, crewing costs, insurance premiums, commissions and certain public company expenses such as directors and officers liability insurance, legal and
accounting fees and other similar third party expenses, which are reimbursed by us. The management fees are fixed until the second anniversary of our management agreement, and thereafter, will be adjusted every
year by agreement between us and our Manager. The management fees are payable whether or not our vessels are employed, and regardless of our profitability, and we have no ability to require our Manager to
reduce the management fees if our profitability decreases. If our profitability decreases, we may be contractually obligated to pay management fees which could have a material adverse effect on our results of
operations and financial condition.
Our Manager is a privately held company, and there is little or no publicly available information about it.
The ability of our Manager to continue providing services for our benefit will depend in part on its own financial strength. Circumstances beyond our control could impair our Managers financial strength.
Because our Manager is privately held, it is unlikely that information about its financial strength would become public or available to us prior to any default by our Manager under the management agreement. As
a result, an investor might have little advance warning of problems that affect our Manager, even though those problems could have a material adverse effect on us. As part of our reporting obligations as a public
company, we will disclose information regarding our Manager that has a material impact on us to the extent that we become aware of such information.
Our chief executive officer has affiliations with our Manager which could create conflicts of interest between us and our Manager.
Our chief executive officer, Polys Hajioannou, owns all of the issued and outstanding capital stock of our Manager through his wholly owned company, Machairiotissa Holdings Inc. This relationship could
create conflicts of interest between us, on the one hand, and our Manager, on the other hand. These conflicts may arise in connection with the chartering, purchase, sale and operation of the vessels in our fleet
versus vessels owned or chartered-in by other companies affiliated with our Manager or our chief executive officer. Currently, SafeFixing is the only such affiliate that operates vessels managed by our Manager,
however, to the extent we elect not to exercise our right of first refusal with respect to any drybulk vessel that may be acquired by Polys Hajioannou, Nicolaos Hadjioannou, Vorini Holdings Inc., Machairiotissa
Holdings Inc., or any entity controlled by or under common control with Polys Hajioannou, Nicolaos Hadjioannou, Vorini Holdings Inc., and/or Machairiotissa Holdings Inc., including SafeFixing (together, the
Hajioannou Entities), in the future, any of the Hajioannou Entities could acquire and operate such drybulk vessels under the management of our Manager in competition with us. Although, under our management
agreement, our Manager will be required to first provide us any chartering opportunities in the drybulk sector, our Manager is not prohibited from giving preferential treatment in other areas of its management to
vessels that are beneficially owned by related parties. These conflicts of interest may have an adverse effect on our results of operations. Please read the sections entitled Our Manager and Management Related
Agreements and Certain Relationships and Related Party Transactions.
Our business depends upon certain employees who may not necessarily continue to work for us.
Our future success depends, to a significant extent, upon our chief executive officer, Polys Hajioannou, our chief operating officer, Nicolaos Hadjioannou, and certain other members of our senior
management and that of our Manager. Polys Hajioannou and Nicolaos Hadjioannou have substantial experience in the drybulk shipping industry and for 20 and eight years, respectively, have worked with us and
our Manager and its predecessor. They and others employed by us and our Manager are crucial to the execution of our business strategies and to the growth and development of our business. If these individuals
were no longer to be affiliated with us or our Manager, or if we were to otherwise cease to receive advisory services from them, we may be unable to recruit other employees with equivalent talent and
33
experience, and our business and financial condition could suffer. We do not intend to maintain key man life insurance on any of our executive officers.
The provisions in our restrictive covenant arrangements with our chief executive officer and chief operating officer restricting their ability to compete with us, like restrictive covenants generally, may not be
enforceable.
Our chief executive officer, Polys Hajioannou, and our chief operating officer, Nicolaos Hadjioannou, have entered into restrictive covenant agreements with us under which they are precluded during the
term of their services with us as executives and directors and for one year thereafter (and, in the case of our chief executive officer, for the term of our management agreement with our Manager and one year
thereafter, if longer) from owning and operating drybulk vessels and from acquiring, investing or controlling any business that owns or operates such vessels. Courts generally do not favor the enforcement of such
restrictions, particularly when they involve individuals and could be construed as infringing on their ability to be employed or to earn a livelihood. Our ability to enforce these restrictions, should it ever become
necessary, will depend upon the circumstances that exist at the time enforcement is sought. A court may not enforce the restrictions as written by way of an injunction and we may not necessarily be able to
establish a case for damages as a result of a violation of the restrictive covenants. Please read the section entitled ManagementEmployment and Restrictive Covenant Agreements.
Our vessels call on ports located in Iran, which is subject to restrictions imposed by the United States government, which could be viewed negatively by investors and adversely affect the trading price of our
common stock.
From time to time, vessels in our fleet have called and/or may call on ports located in countries subject to sanctions and embargoes imposed by the United States government and countries identified by
the United States government as state sponsors of terrorism. From January 1, 2005 through December 31, 2007, vessels in our fleet have made 14 calls to ports in Iran out of a total of 695 calls on worldwide ports.
One of our vessels, the
Pedhoulas Leader
, also made one port call to Iran from July 7, 2007 to July 8, 2007 for the sole purpose of bunkering (refueling). Iran continues to be subject to sanctions and embargoes
imposed by the United States government and is identified by the United States government as a state sponsor of terrorism. Although these sanctions and embargoes do not prevent our vessels from making calls to
ports in these countries, potential investors could view such port calls negatively, which could adversely affect our reputation and the market for our common stock. Investor perception of the value of our common
stock may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.
We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate law.
Our corporate affairs are governed by our articles of incorporation and by the Marshall Islands Business Corporations Act, or the BCA. The provisions of the BCA resemble provisions of the corporation
laws of a number of states in the United States. However, there have been few judicial cases in the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the laws of the
Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain United States jurisdictions. The rights of stockholders
of companies incorporated in the Marshall Islands may differ from the rights of stockholders of companies incorporated in the United States. While the BCA provides that it is to be interpreted according to the
laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we cannot predict whether
Marshall Islands courts would reach the same conclusions as United States courts. Thus, you may have more difficulty in protecting your interests in the face of actions by our management, directors or controlling
stockholders than would stockholders of a corporation incorporated in a United States jurisdiction which has developed a more substantial body of case law in the corporate law area. For more information with
respect to how stockholder rights under Marshall Islands law compares to stockholder rights under Delaware laws, please read Marshall Islands Company Considerations.
34
It may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.
We are incorporated under the laws of the Marshall Islands, and our business is operated primarily from our offices in Athens, Greece. In addition, a majority of our directors and officers are or will be
non-residents of the United States, and all of our assets and a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for you to
bring an action against us or against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise. You may also have difficulty enforcing, both within
and outside of the United States, judgments you may obtain in the United States courts against us or these persons in any action, including actions based upon the civil liability provisions of United States Federal
or state securities laws.
There is also substantial doubt that the courts of the Marshall Islands or Greece would enter judgments in original actions brought in those courts predicated on United States Federal or state securities
laws. For more information regarding the relevant laws of the Marshall Islands, please read Enforceability of Civil Liabilities.
Risks Relating to the Offering
Because our common stock has never been publicly traded, a trading market may not develop for our common stock and stockholders may not be able to sell their stock.
Prior to this offering, there has not been a public market for our common stock. A liquid trading market for our common stock may not develop. The initial public offering price will be determined in
negotiations between the representatives of the underwriters, us and our existing stockholder and may not be indicative of prices that will prevail in the trading market.
The price of our common stock may be volatile following completion of this offering.
The price of our common stock after this offering may be volatile and may fluctuate due to factors including:
actual or anticipated fluctuations in our quarterly and annual revenues and earnings and those of our publicly held competitors;
fluctuations in the drybulk market;
mergers and strategic alliances in the shipping industry;
market conditions in the shipping industry;
changes in government regulations;
revenues and earnings and those of our publicly held competitors;
shortfalls in our results of operations from levels forecasted by securities analysts;
payment of dividends;
announcements concerning us or our competitors;
the general state of the securities market; and
other developments affecting us, our industry or related industries or our competitors.
The drybulk sector of the shipping industry has been highly unpredictable and volatile. The market price for our common stock may also be volatile. Consequently, you may not be able to sell our
common stock at prices equal to or greater than those that you pay in this offering.
Vorini Holdings, our principal stockholder, will control the outcome of matters on which our stockholders are entitled to vote following this offering and its interests may be different from yours.
Vorini Holdings, which is controlled by our chief executive officer, Polys Hajioannou, and our chief operating officer, Nicolaos Hadjioannou, will own approximately 81.7% of our outstanding common
stock after this offering, assuming the underwriters do not exercise their overallotment option. This
35
stockholder will be able to control the outcome of matters on which our stockholders are entitled to vote, including the election of our entire board of directors and other significant corporate actions. The interests
of this stockholder may be different from yours.
We will be a controlled company under the New York Stock Exchange rules, and as such we are entitled to exemption from certain New York Stock Exchange corporate governance standards, and you may
not have the same protections afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements.
After the consummation of this offering, our chief executive officer, Polys Hajioannou, and our chief operating officer, Nicolaos Hadjioannou, through Vorini Holdings, will continue to control a majority
of our outstanding common stock. As a result, we will be a controlled company within the meaning of the New York Stock Exchange corporate governance standards. Under the New York Stock Exchange rules,
a company of which more than 50% of the voting power is held by another company or group is a controlled company and may elect not to comply with certain New York Stock Exchange corporate governance
requirements, including: (a) the requirement that a majority of the board of directors consist of independent directors, (b) the requirement that the nominating committee be composed entirely of independent
directors and have a written charter addressing the committees purpose and responsibilities, (c) the requirement that the compensation committee be composed entirely of independent directors and have a written
charter addressing the committees purpose and responsibilities and (d) the requirement of an annual performance evaluation of the nominating, corporate governance and compensation committees. Following this
offering, we intend to utilize certain of these exemptions. As a result, non-independent directors, including members of our management who also serve on our board of directors, will comprise the majority of our
board of directors and will serve on the nominating, corporate governance and compensation committee of our board of directors which, among other things, fixes the compensation of certain members of our
management and resolves governance issues regarding our company. Accordingly, in the future you may not have the same protections afforded to stockholders of companies that are subject to all of the New York
Stock Exchange corporate governance requirements.
If we do not implement all required accounting practices and policies, we may be unable to provide the required financial information in a timely and reliable manner.
Prior to this offering, as a privately held company, we did not adopt the financial reporting practices and policies required of a publicly traded company. Implementation of these practices and policies
could disrupt our business, distract our management and employees and increase our costs. If we fail to develop and maintain effective controls and procedures, we may be unable to provide the financial
information that a publicly traded company is required to provide in a timely and reliable fashion. Any such delays or deficiencies may limit our ability to obtain financing, either in the public capital markets or
from private sources, and thereby impede our ability to implement our growth strategy. In addition, any such delays or deficiencies may result in failure to meet the requirements for continued quotation of our
common stock on the New York Stock Exchange, which would adversely affect the liquidity of our common stock.
Under Section 404 of the Sarbanes-Oxley Act of 2002, we will be required to include in each of our future annual reports on Form 20-F a report containing our managements assessment of the
effectiveness of our internal control over financial reporting and a related attestation of our independent auditors. This requirement for an attestation of our independent auditors will first apply to us with respect to
our annual report on Form 20-F for the fiscal year ending December 31, 2009. After the completion of this offering, we will undertake a comprehensive effort in preparation for compliance with Section 404. This
effort will include the documentation, testing and review of our internal controls under the direction of our management. We cannot be certain at this time that all our controls will be considered effective.
Therefore, we can give no assurances that our internal control over financial reporting will satisfy the new regulatory requirements when they become applicable to us.
36
Future sales of our common stock could cause the market price of our common stock to decline.
Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that these sales could occur, may depress the market price for our common
stock. These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future.
Although we do not currently have any plans to sell additional shares of our common stock, we may issue additional shares of our common stock in the future and our stockholders may elect to sell large
numbers of shares held by them from time to time. The number of shares of common stock available for sale in the public market will be limited by restrictions applicable under securities laws and agreements
that we and our executive officers, directors and existing stockholder have entered into with the underwriters of this offering. Subject to certain exceptions, these agreements generally restrict us and our executive
officers, directors and existing stockholder from directly or indirectly offering, selling, pledging, hedging or otherwise disposing of our equity securities or any security that is convertible into or exercisable or
exchangeable for our equity securities and from engaging in certain other transactions relating to such securities for a period of 180 days after the date of this prospectus without the prior written consent of Merrill
Lynch Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC.
We intend to enter into a registration rights agreement prior to the closing of this offering with Vorini Holdings, our existing stockholder, pursuant to which we will grant it and certain of its transferees
the right, under certain circumstances and subject to certain restrictions and lock-up agreements, to require us to register under the Securities Act shares of our common stock held by them. Under the registration
rights agreement, Vorini Holdings and certain of its transferees will have the right to request us to register the sale of shares held by them on their behalf and may require us to make available shelf registration
statements permitting sales of shares into the market from time to time over an extended period. In addition, those persons will have the ability to exercise certain piggyback registration rights in connection with
registered offerings initiated by us. Registration of such shares under the Securities Act would, except for shares purchased by affiliates, result in such shares becoming freely tradable without restriction under the
Securities Act immediately upon the effectiveness of such registration. We refer you to the sections of this prospectus entitled Certain Relationships and Related Party TransactionsRegistration Rights Agreement,
Shares Eligible for Future Sale and Underwriting for further information regarding the circumstances under which additional shares of our common stock may be sold.
Anti-takeover provisions in our organizational documents could make it difficult for our stockholders to replace or remove our current board of directors or could have the effect of discouraging, delaying or
preventing a merger or acquisition, which could adversely affect the market price of the shares of our common stock.
Several provisions of our articles of incorporation and bylaws could make it difficult for our stockholders to change the composition of our board of directors in any one year, preventing them from
changing the composition of our management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable.
These provisions:
authorize our board of directors to issue blank check preferred stock without stockholder approval;
provide for a classified board of directors with staggered, three-year terms;
prohibit cumulative voting in the election of directors;
authorize the removal of directors only for cause;
prohibit stockholder action by written consent unless the written consent is signed by all stockholders entitled to vote on the action; and
establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.
37
We have adopted a stockholder rights plan pursuant to which our board of directors may cause the substantial dilution of the holdings of any person that attempts to acquire us without the approval of our
board of directors.
These anti-takeover provisions, including the provisions of our prospective stockholder rights plan, could substantially impede the ability of public stockholders to benefit from a change in control and, as a
result, may adversely affect the market price of our common stock and your ability to realize any potential change of control premium.
Tax Risks
In addition to the following risk factors, you should read Tax ConsiderationsMarshall Islands Tax Considerations, Tax ConsiderationsLiberian Tax Considerations, and Tax ConsiderationsUnited States
Federal Income Tax Considerations for a more complete discussion of expected material Marshall Islands, Liberian and United States (or U.S.) Federal income tax consequences of owning and disposing of our
common stock.
We may earn United States source shipping income that will be subject to United States income tax, thereby reducing our cash available for distributions to you.
Under U.S. tax rules, our U.S. source shipping income (that is, income attributable to shipping transportation that begins and/or ends in the United States) will be subject to a 4% U.S. income tax (without
allowance for deductions). Our U.S. source shipping income may fluctuate, and we will not qualify for any exemption from this U.S. tax. Many of our charters contain provisions that obligate the charterers to
reimburse us for this 4% U.S. tax. To the extent we are not actually reimbursed by our charterers, the 4% U.S. tax will decrease our cash that is available for distributions to you.
For a more complete discussion, see the section entitled Tax ConsiderationsUnited States Federal Income Tax ConsiderationsTaxation of Our Shipping Income.
United States tax authorities could treat us as a passive foreign investment company, which could have adverse United States Federal income tax consequences to United States holders.
A foreign corporation will be treated as a passive foreign investment company, or PFIC, for U.S. income tax purposes if either (a) at least 75% of its gross income for any taxable year consists of
certain types of passive income or (b) at least 50% of the average value of the corporations assets produce or are held for the production of those types of passive income. For purposes of these tests, passive
income includes dividends, interest and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the
active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute passive income. U.S. stockholders of a PFIC are subject to a
disadvantageous U.S. income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their
shares in the PFIC.
Based on our operations as of the completion of this offering and our anticipated future operations, we believe that we should not be treated as a PFIC with respect to any taxable year. There are legal
uncertainties involved in this determination, and no assurance can be given that the U.S. Internal Revenue Service (IRS) will accept this position or that we would not constitute a PFIC for any future taxable
year if there were to be changes in our assets, income or operations.
If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. stockholders will face adverse U.S. tax consequences. See Tax ConsiderationsUnited States Federal Income Tax
ConsiderationsTaxation of United States Holders for a more comprehensive discussion of the U.S. Federal income tax consequences to U.S. stockholders if we are treated as a PFIC.
38
The enactment of proposed legislation could affect whether dividends paid by us constitute qualified dividend income eligible for a preferential rate of United States Federal income taxation.
Legislation has been introduced in the U.S. Senate that would deny the preferential rate of U.S. Federal income tax currently imposed on qualified dividend income with respect to dividends received from
a non-U.S. corporation, unless the non-U.S. corporation either is eligible for benefits of a comprehensive income tax treaty with the United States or is created or organized under the laws of a foreign country that
has a comprehensive income tax system. Because the Marshall Islands has not entered into a comprehensive income tax treaty with the United States and imposes only limited taxes on corporations organized under
its laws, it is unlikely that we could satisfy either of these requirements. Consequently, if this legislation were enacted, the preferential rate of U.S. Federal income tax discussed under Tax ConsiderationsUnited
States Federal Income Tax ConsiderationsTaxation of United States HoldersDistributions on Our Common Stock may no longer be applicable to dividends received from us. As of the date hereof, it is not possible
to predict with any certainty whether the proposed legislation will be enacted.
If the regulations regarding the exemption from Liberian taxation for non-resident corporations issued by the Liberian Ministry of Finance were found to be invalid, the net income and cash flows of our
Liberian Subsidiaries and therefore our net income and cash flows would be materially reduced.
All of our Subsidiaries are incorporated under the laws of the Republic of Liberia. The Republic of Liberia enacted a new income tax act effective as of January 1, 2001 (the New Act) which does not
distinguish between the taxation of non-resident Liberian corporations, such as our Subsidiaries, which conduct no business in Liberia and were wholly exempt from taxation under the income tax law previously
in effect since 1977, and resident Liberian corporations which conduct business in Liberia and are, and were under the prior law, subject to taxation.
In 2004, the Liberian Ministry of Finance issued regulations exempting non-resident corporations engaged in international shipping (and not exclusively within Liberia) such as our Subsidiaries, from
Liberian taxation under the New Act retroactive to January 1, 2001. It is unclear whether these regulations, which ostensibly conflict with the express terms of the New Act adopted by the Liberian legislature, are
valid. However, the Liberian Ministry of Justice issued an opinion that the new regulations are a valid exercise of the regulatory authority of the Ministry of Finance. The Liberian Ministry of Finance has not at
any time since January 1, 2001 sought to collect taxes from any of our Subsidiaries.
If our Subsidiaries were subject to Liberian income tax under the New Act, they would be subject to tax at a rate of 35% on their worldwide income. As a result, their, and subsequently our, net income
and cash flows would be materially reduced. In addition, as the ultimate stockholder of our Liberian Subsidiaries, we would be subject to Liberian withholding tax on dividends paid by our Subsidiaries at rates
ranging from 15% to 20%, which would limit our access to funds generated by the operations of our Subsidiaries and further reduce our income and cash flows.
39
All statements in this prospectus that are not statements of historical fact are forward-looking statements. The disclosure and analysis set forth in this prospectus includes assumptions, expectations,
projections, intentions and beliefs about future events in a number of places, particularly in relation to our operations, cash flows, financial position, plans, strategies, business prospects, changes and trends in our
business and the markets in which we operate. These statements are intended as forward-looking statements. In some cases, predictive, future-tense or forward-looking words such as believe, intend,
anticipate, estimate, project, forecast, plan, potential, may, should, and expect and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of
identifying such statements. In addition, we and our representatives may from time to time make other oral or written statements which are forward-looking statements, including in our periodic reports that we will
file with the SEC, other information sent to our security holders, and other written materials.
Forward-looking statements include, but are not limited to, such matters as:
future operating or financial results and future revenues and expenses;
future, pending or recent acquisitions, business strategy, areas of possible expansion and expected capital spending or operating expenses;
availability of crew, length and number of off-hire days, drydocking requirements and insurance costs;
general market conditions and shipping industry trends, including charter rates, vessel values and factors affecting supply and demand;
our financial condition and liquidity, including our ability to make required payments under our credit facilities and obtain additional financing in the future to fund capital expenditures,
acquisitions and other corporate activities;
our expectations about availability of vessels to purchase, the time that it may take to construct and deliver new vessels or the useful lives of our vessels;
our continued ability to enter into period time charters with our customers and secure profitable employment for our vessels in the spot market;
our expectations relating to dividend payments and ability to make such payments;
our ability to leverage to our advantage our Managers relationships and reputation within the drybulk shipping industry;
our anticipated general and administrative expenses;
environmental and regulatory conditions, including changes in laws and regulations or actions taken by regulatory authorities;
risks inherent in vessel operation, including discharge of pollutants;
potential liability from future litigation; and
other factors discussed in the section entitled Risk Factors.
We caution that the forward-looking statements included in this prospectus represent our estimates and assumptions only as of the date of this prospectus and are not intended to give any assurance as to
future results. Assumptions, expectations, projections, intentions and beliefs about future events may, and often do, vary from actual results and these differences can be material. The reasons for this include the
risks, uncertainties and factors described under the section of this prospectus entitled Risk Factors. As a result, the forward-looking events discussed in this prospectus might not occur and our actual results may
differ materially from those anticipated in the forward-looking statements. Accordingly, you should not unduly rely on any forward-looking statements.
We undertake no obligation to update or revise any forward-looking statements contained in this prospectus, whether as a result of new information, future events, a change in our views or expectations or
otherwise. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any
factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. We make no prediction or statement about the performance of our
common stock.
40
All of the shares of common stock offered by this prospectus are being sold by the selling stockholder. For information about the selling stockholder, see Principal and Selling Stockholders. We will not
receive any of the proceeds from the sale of the shares of common stock by the selling stockholder.
We intend to pay our stockholders quarterly dividends of $0.475 per share, or $1.90 per share per year, in February, May, August and November of each year. We expect to pay our initial dividend
following the completion of this offering in August 2008, calculated based on the pro rata amount of the quarterly dividend for the period from the closing of this offering until the end of the second quarter of
2008.
We expect that the dividend we intend to pay to stockholders following the completion of this offering will represent a significant portion of our cash flows from operations, however, we also expect to
retain a portion of our cash to help fund the future growth of our fleet. After giving pro forma effect to the removal of the Additional Companies (and the associated $112.4 million gain on their sale), the
activities of our Subsidiary Maxpente with respect to the
Pedhoulas Farmer
(a vessel sold on January 9, 2007 immediately following its acquisition by Maxpente) and to the other adjustments (see Unaudited Pro
Forma Combined Condensed Financial Statements) with respect to our combined statement of operations for the year ended December 31, 2007, our net income on a pro forma basis was $87.8 million for 2007.
This reflects, on a pro forma basis, the operations of fewer vessels than we anticipate having in our fleet in 2008, 2009 and 2010 and a daily TCE rate below the average rate for which we already had, as of
December 31, 2007, period time charter commitments for the following percentages of our fleets anticipated available days: 200875.9%, 200950.6% and 201036.1%. We therefore expect that our contracted
revenues when compared with our anticipated operating expenses and financing costs will provide the liquidity necessary to support our dividend policy and our growth. As of December 31, 2007, our contracted
period time charter arrangements for 2008 through 2010 were expected to provide revenues of $347.1 million. Additionally, the contracted revenue from period time charters entered into as of December 31, 2007
is expected to be $66.5 million for 2011, and $156.1 million from January 1, 2012 onwards. Overall, as of December 31, 2007, the contracted revenue for January 1, 2008 onwards was $569.6 million.
However, in the event our cash needs are greater than expected, or our actual revenues (for example, if a charterer were to default), or the available capacity under our credit facilities are less than we
expect, the amounts available to pay dividends would be reduced or we could be unable to pay dividends. In such event, our board of directors may change our dividend policy. For example, we may incur
expenses or liabilities, including unbudgeted or extraordinary expenses, or decreases in revenues, including as a result of unanticipated off-hire days or loss of a vessel, that could reduce or eliminate the amount of
cash that we have available for distribution as dividends. The drybulk shipping charter market is cyclical and volatile. We cannot predict with assurance of accuracy the amount of cash flows our operations will
generate in any given period. Factors beyond our control may affect the charter market for our vessels and our charterers ability to satisfy their contractual obligations to us, and we cannot assure you that
dividends will actually be declared or paid. We intend to raise $200.0 million of additional borrowing capacity. If we are unable to secure this additional borrowing, our ability to pay dividends will be adversely
affected. We cannot assure you that we will be able to pay regular quarterly dividends in the amounts stated above or elsewhere in this prospectus, and our ability to pay dividends will be subject to the limitations
set forth above and in the section of this prospectus entitled Risk Factors.
Following the settlement of intercompany balances with our Manager and with our owners and the payment of dividends prior to this offering to our current owners described under Dividend Payments
below, we expect to have approximately $16.0 million in available cash and $4.0 million in restricted cash in collateral accounts and aggregate indebtedness of $416.8 million plus the equivalent of ¥400 million in
U.S. dollars as of May 27, 2008 immediately after the closing of this offering.
We expect that any future debt agreements will have restrictions on us on the payment of dividends if an event of default has occurred and is continuing or would occur as a result of the payment of such
dividend. In addition, Marshall Islands law generally prohibits the payment of dividends other than
41
from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares) or when a company is insolvent or if the payment of the dividend would render the
company insolvent.
We are a holding company with no material assets other than the stock of our Subsidiaries. This means that our ability to make dividend payments will also depend on the ability of our Subsidiaries to
distribute funds to us. Under the terms of our Subsidiaries credit agreements,
following completion of this offering, our Subsidiaries will not be permitted
to pay dividends to us if an event of default has occurred and is continuing
or would occur as a result of the payment of such dividend. See Managements
Discussion and Analysis of Financial Condition and Results of OperationsCredit Facilities. In addition, the laws of the Republic of Liberia, where each of our Subsidiaries is incorporated, generally prohibit the
payment of dividends other than from surplus or when a company is insolvent or if the payment of the dividend would render the company insolvent.
We believe that, under current U.S. law (which is scheduled to expire after 2010), our dividend payments from earnings and profits will constitute qualified dividend income and, as such, non-corporate
U.S. stockholders will generally be subject to a 15% U.S. Federal income tax rate with respect to such dividend payments. Distributions in excess of our earnings and profits will be treated first as a non-taxable
return of capital to the extent of a U.S. stockholders tax basis in its common stock on a dollar-for-dollar basis and thereafter as capital gain. Please see the section of this prospectus entitled Tax Considerations
for additional information relating to the tax treatment of our dividend payments. Please also see the section entitled Risk FactorsTax Risks for a discussion of proposed legislation affecting the taxation of
dividends received from non-U.S. corporations.
Dividend Payments Prior to this Offering
We paid a dividend of $383.9 million to our current owners in December 2007, which represented our retained earnings as of June 30, 2007. In March and April 2008, we paid our current owners an
aggregate dividend of $147.8 million, which was funded using amounts due from our Manager. Of the aggregate dividend of $147.8 million, $56.9 million represented retained earnings as of December 31, 2007.
An estimated additional dividend of $31.0 million, which will be funded using amounts due from our Manager, reflecting a portion of estimated net income earned from January 1, 2008 until the date immediately
prior to the closing of this offering will also be declared and payable prior to the closing of this offering. Investors in this offering will not be entitled to receive any portion of this dividend.
42
The following table sets forth our cash and cash equivalents and combined capitalization as of December 31, 2007 on:
an actual combined basis for the Subsidiaries;
a pro forma as adjusted basis, giving effect to each of the following transactions which occurred (or will occur, in the case of the additional dividend) between January 2008 and the date of this
offering:
Borrowings of $120.0 million by our Subsidiaries Efragel, Marindou and Avstes under three new credit facilities, all of which have been fully drawn. Of the total borrowings of $120.0
million, $38.5 million was used to refinance an existing credit facility of Efragel and a bank loan of Marindou in the first quarter of 2008, resulting in net additional indebtedness of $81.5
million. Of the net additional indebtedness of $81.5 million, (i) $16.0 million was retained by the Subsidiaries, and (ii) $65.5 million was advanced to our Manager.
Declaration and payment of a dividend in the amount of $147.8 million to our current owners, funded from amounts Due from Manager.
Estimated additional dividend of $31.0 million to be declared and be payable to our current owners by our Manager on our behalf prior to the closing of this offering. This dividend reflects
a portion of estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering. Investors in this offering will not be entitled to receive any
portion of this dividend.
Settlement of the remaining Due from Manager balance in the amount of $4.0 million through the transfer of $4.0 million in Restricted cash in collateral accounts held by our Manager to
two new restricted cash collateral accounts of $2.0 million held by each of our Subsidiaries, Petra and Pemer, as security for their respective loan facilities.
There has been no material change in our capitalization, or expected capitalization, between December 31, 2007 and the date of this prospectus, except as adjusted and described above.
The information presented below should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations, our predecessor combined financial
statements and the related notes thereto and our pro forma combined condensed financial statements and notes thereto included elsewhere in this prospectus.
As of December 31, 2007
Actual
Pro Forma As
(In thousands,
Cash and cash equivalents
$
16,000
Restricted cash
4,000
Debt(1):
Current portion of long-term debt
$
16,620
$
16,620
Long-term debt, net of current portion
306,267
387,753
Total debt
322,887
404,373
Owners equity:
Owners capital, no par value (2)
Retained earnings/(deficit)
56,875
(121,895
)
Total owners equity/(deficit)
56,875
(121,895
)
Total capitalization
$
379,762
$
282,478
43
Adjusted
except share data)
(1)
All of our debt is secured, and all of the proposed credit facilities which we intend to enter prior to this offering will be secured, by mortgages on our vessels and other standard maritime liens. None of
our outstanding debt as of December 31, 2007 is guaranteed by any other party and is solely the corporate obligation of the relevant borrower. Following this offering, we will become the guarantor of
the reducing revolving credit facilities of our Subsidiaries Efragel Shipping Corporation, Marindou Shipping Corporation, Avstes Shipping Corporation, Eniaprohi Shipping Corporation and Eniadefhi
Shipping Corporation. By letter dated May 14, 2008, we have also agreed to become the guarantor of the reducing revolving credit facilities of our Subsidiaries Marathassa Shipping Corporation,
Marinouki Shipping Corporation, Kerasies Shipping Corporation and Soffive Shipping Corporation.
(2)
Our authorized capital stock consists of 200,000,000 shares of common stock, par value $0.001 per share; as of the date of this prospectus, no shares were issued and outstanding; following our
Reorganization, which will occur following the date of this prospectus and prior to the closing of this offering, there will be 54,500,000 shares issued and outstanding.
44
SELECTED COMBINED FINANCIAL AND OTHER DATA
The following table presents selected:
historical predecessor combined financial and operating data; and
pro forma combined financial and operating data.
The selected historical predecessor combined financial data set forth below as of December 31, 2006 and 2007 and for the years ended December 31, 2005, 2006 and 2007 have been derived from our
audited predecessor combined financial statements, which are included in this prospectus. The selected historical predecessor combined financial data set forth below as of December 31, 2005 have been derived
from our audited predecessor combined financial statements, which are not included in this prospectus.
We have not included our financial data for the years ended December 31, 2003 and 2004 due to the unreasonable effort and expense of preparing such information.
The unaudited pro forma combined financial and operating data are derived from our unaudited pro forma combined condensed financial statements, which are included in this prospectus, and give effect to
the following transactions which occurred (or will occur in the case of the additional dividend) between January 2008 and the date of this offering:
Borrowings of $120.0 million by our Subsidiaries Efragel, Marindou and Avstes under three new credit facilities, all of which have been fully drawn. Of the total borrowings of $120.0 million,
$38.5 million was used to refinance an existing credit facility of Efragel and a bank loan of Marindou in the first quarter of 2008, resulting in net additional indebtedness of $81.5 million. Of the
net additional indebtedness of $81.5 million, (i) $16.0 million was retained by the Subsidiaries, and (ii) $65.5 million was advanced to our Manager.
Additional interest expense with respect to the net additional indebtedness of $81.5 million described above.
Repayment of $10.1 million of Advances from Owners from amounts Due from Manager.
Declaration and payment of a dividend in the amount of $147.8 million to our current owners, funded from amounts Due from Manager.
Estimated additional dividend of $31.0 million will be declared and payable to our current owners by our Manager on our behalf prior to the closing of the initial public offering. This dividend
reflects a portion of estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering. Investors in this offering will not be entitled to receive any
portion of this dividend.
Settlement of the remaining Due from Manager balance in the amount of $4.0 million through the transfer of $4.0 million in Restricted cash in collateral accounts held by our Manager to two
new restricted cash collateral accounts of $2.0 million held by each of our Subsidiaries, Petra and Pemer, as security for their respective loan facilities.
Removal of all activities from the historical predecessor financial statements of the Additional Companies, which will not be owned by us following the completion of this offering, and the
activities of our Subsidiary Maxpente with respect to the
Pedhoulas Farmer
, a vessel sold on January 9, 2007 immediately following its acquisition by Maxpente. We did not generate any
operating revenues or operating expenses with respect to the
Pedhoulas Farmer
, and Maxpente is expected to own the newbuild Hull No. 1075 upon its delivery to us. The Additional Companies
have been included in our predecessor combined financial statements, along with the Subsidiaries, because together, the Additional Companies and the Subsidiaries constituted all the vessel
owning activities of Polys Hajioannou and Nicolaos Hadjioannou during the relevant period.
Increase of $2.6 million in general and administrative expenses due to the implementation of the amended management agreements, as of January 1, 2008.
Pro forma earnings per share gives retroactive effect to our Reorganization, which involves the issuance (following the date of the final prospectus and prior to the closing of this offering) of 54.5
million shares of our common stock to the selling stockholder, and resulting capital structure following the closing of this offering. This offering will not involve the issuance of additional shares
of our common stock, as all shares of common stock sold in this offering will be sold by the selling stockholder.
45
The pro forma adjustments do not reflect an estimate of general and administrative expenses to increase as a result of becoming a public company, as such costs are not considered to be factually
supportable. However, we currently expect an annual increase of approximately $2.2 million as a result of becoming a public company upon completion of this offering.
The unaudited pro forma predecessor combined condensed financial and operating data is provided for illustrative purposes only and does not represent what our financial position or results of operation
would actually have been if the transactions and other events reflected in such statements had occurred during the relevant periods, and is not representative of our results of operations or financial position for any
future periods. Investors are cautioned not to place undue reliance on this unaudited pro forma predecessor combined financial and operating data.
Share data in the table below gives effect to the issuance of 54,500,000 shares of common stock, which will occur following the date of the final prospectus and prior to the closing of this offering.
This information should be read together with, and is qualified in its entirety by, our predecessor combined financial statements and the notes thereto and our unaudited pro forma combined condensed
financial statements and notes thereto included elsewhere in this prospectus. You should also read Managements Discussion and Analysis of Financial Condition and Results of Operations.
46
As of December 31,
Pro Forma
As of
2005
2006
2007
BALANCE SHEET DATA
Total current assets
$
159,538
$
282,021
$
98,883
$
18,513
Total fixed assets
232,655
253,448
308,340
308,340
Other non-current assets
405
314
434
4,434
Total assets
392,598
535,783
407,657
331,287
Total current liabilities
111,271
172,275
41,507
62,421
Derivative liabilities
242
242
Long-term debt, net of current portion
149,500
134,457
306,267
387,753
Time charter discount
2,766
2,766
Total owners equity
131,827
229,051
56,875
(121,895
)
Total liabilities and owners equity
392,598
535,783
407,657
331,287
Year Ended December 31,
Pro Forma
Year Ended
2005
2006
2007
FLEET DATA
(4)
Average number of vessels
9.2
11.5
10.7
10.3
Ownership days
3,370
4,208
3,914
3,778
Available days
3,350
4,208
3,914
3,778
Operating days
3,343
4,205
3,913
3,777
Fleet utilization
99.21%
99.94%
99.98%
99.99%
Time charter equivalent rates
$
23,713
$
22,550
$
42,327
$
42,604
Daily vessel operating expenses
$
3,076
$
3,106
$
3,176
$
3,263
December 31,
2007
December 31,
2007
|
||||||||||||||||||||
(1) |
|
With respect to the periods presented based on our historical predecessor combined statements of operations, pro forma earnings per share gives retroactive effect to our Reorganization and resulting capital structure following the completion of this offering. With respect to the periods presented based on our pro forma combined statements of operations, pro forma earnings per share reflects earnings per share after giving retroactive effect to our Reorganization and the other pro forma events as set forth in our unaudited pro forma combined condensed financial statements and resulting capital structure following the completion of this offering. See the section entitled Managements Discussion and Analysis of Financial Condition and Results of OperationsOverview for more information on our Reorganization (as defined to such section) prior to this offering. This offering will not involve the issuance of additional shares of our common stock as all shares of common stock sold in this offering will be sold by the selling stockholder. |
||||||||||||||||||
|
||||||||||||||||||||
(2) |
|
EBITDA represents net income before interest, income tax expense, depreciation and amortization. EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or GAAP. EBITDA assists our management and investors by increasing the comparability of our fundamental performance from period to period and against the fundamental performance of other companies in our industry that provide EBITDA information. We believe that EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of EBITDA generally eliminates the effects of financings, income taxes and the accounting effects of capital expenditures and acquisitions, items which may vary for different companies for reasons unrelated to overall operating performance. EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. EBITDA should not be considered a substitute for net income and other operations data prepared in accordance with U.S. GAAP or as a measure of profitability. While EBITDA is frequently used as a measure of operating results and |
47
performance, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.
The following table sets forth a reconciliation of net income to EBITDA for the periods presented:
Year Ended December 31,
Pro Forma
Year Ended
2005
2006
2007
(In thousands of U.S. dollars)
Reconciliation of Net Income to EBITDA:
Net income
$
94,587
$
97,224
$
211,677
$
87,793
Depreciation
7,610
9,553
9,583
9,583
Interest expense
3,668
6,140
8,225
12,298
Interest income
(692
)
(775
)
(1,290
)
(1,195
)
Amortization and write-off of deferred finance charges
63
180
166
117
EBITDA
$
105,236
$
112,322
$
228,361
$
108,596
(3)
Adjusted EBITDA represents our EBITDA after giving effect to the removal of the gain on sale of assets for the relevant periods. Adjusted EBITDA is not a recognized measurement under GAAP.
Adjusted EBITDA assists our management and investors by increasing the comparability of our fundamental performance with respect to our vessel operation, without including the gains we have received
through the sale of assets during the relevant periods. We believe that this removal of the gain on sale of assets allows us to better illustrate the operating results of our vessels for the periods indicated.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Adjusted EBITDA should not be
considered a substitute for net income and other operations data prepared in accordance with U.S. GAAP or as a measure of profitability. While Adjusted EBITDA may also be used as a measure of
operating results and performance, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.
The following table sets forth a reconciliation of EBITDA to Adjusted EBITDA for the periods presented:
Year Ended December 31,
Pro Forma
Year Ended
2005
2006
2007
(In thousands of U.S. dollars)
Reconciliation of EBITDA to Adjusted EBITDA:
EBITDA
$
105,236
$
112,322
$
228,361
$
108,596
Gain on sale of assets
(26,785
)
(37,015
)
(112,360
)
Adjusted EBITDA
$
78,451
$
75,307
$
116,001
$
108,596
(4)
For a description of the items listed under this heading, see Managements Discussion and Analysis of Financial Condition and Results of OperationsFactors Affecting Our Results of Operations.
48
December 31,
2007
December 31,
2007
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed balance sheet and unaudited pro forma combined statement of operations presents our financial position as of December 31, 2007 and for the year
ended December 31, 2007 on a pro forma basis as if the transactions described below had occurred on December 31, 2007, in the case of the pro forma balance sheet, and January 1, 2007, in the case of the pro
forma statement of operations. The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to such transactions.
Certain adjustments are based on currently available information and estimates and assumptions; therefore, the actual adjustments may differ from the pro forma adjustments. However, management believes
that the assumptions used provide a reasonable basis for presenting the transactions described below and that the pro forma adjustments give appropriate effect to the assumptions and are properly applied in the
unaudited pro forma combined condensed balance sheet and unaudited pro forma combined statements of operations.
These unaudited pro forma combined condensed balance sheet and unaudited pro forma combined statements of operations do not purport to represent what our financial position would actually have been
had the completion of this offering and the related transactions in fact occurred on the dates described below and only for the unaudited pro forma combined statement of operations, if our company did not include
the Additional Companies or the activities of the vessel sold by Maxpente during the relevant periods in the predecessor financial statements. Nor do they purport to project our financial position at any future date.
Investors are cautioned not to place undue reliance on this unaudited pro forma predecessor combined financial and operating data.
This information should be read together with our predecessor combined financial statements and the notes thereto included elsewhere in this prospectus. The table should also be read together with
Managements Discussion and Analysis of Financial Condition and Results of Operations.
The unaudited pro forma combined condensed balance sheet assumes the following transactions occurred on December 31, 2007:
Carve-out of Additional Companies
As of December 31, 2007, all of the vessels of the Additional Companies have been sold and the remaining net assets distributed as a dividend. As a result, there are no remaining accounts of
the Additional Companies to be removed from the predecessor combined balance sheet.
Other adjustments
Borrowings of $120.0 million by our Subsidiaries Efragel, Marindou and Avstes under three new credit facilities, all of which have been fully drawn. Of the total borrowings of $120.0 million,
$38.5 million was used to refinance an existing credit facility of Efragel and a bank loan of Marindou in the first quarter of 2008, resulting in net additional indebtedness of $81.5 million. Of the
net additional indebtedness of $81.5 million, (i) $16.0 million was retained by the Subsidiaries, and (ii) $65.5 million was advanced to our Manager.
Repayment of $10.1 million of Advances from Owners from amounts Due from Manager.
Declaration and payment of a dividend in the amount of $147.8 million to our current owners, funded from amounts Due from Manager.
Estimated additional dividend of $31.0 million will be declared and payable to our current owners by our Manager on our behalf prior to the closing of this offering. This dividend reflects a
portion of estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering. Investors in this offering will not be entitled to receive any portion of
this dividend.
Settlement of the remaining Due from Manager balance in the amount of $4.0 million through the transfer of $4.0 million in Restricted cash in collateral accounts held by our Manager to two
new restricted cash collateral accounts of $2.0 million held by each of our Subsidiaries, Petra and Pemer, as security for their respective loan facilities.
49
The following unaudited pro forma combined statements of operations for the year ended December 31, 2007 give effect to the following events as if they had occurred on January 1, 2007:
Carve-out of Additional Companies
Removal of all activities from the historical predecessor financial statements of the Additional Companies, which will not be owned by us following the completion of this offering, and the
activities of our Subsidiary Maxpente with respect to the
Pedhoulas Farmer
, a vessel sold on January 9, 2007 immediately following its acquisition by Maxpente. We did not generate any
operating revenues or operating expenses with respect to the
Pedhoulas Farmer
, and Maxpente is expected to own the newbuild Hull No. 1075 upon its delivery to us. The Additional Companies
have been included in our predecessor combined financial statements, along with the Subsidiaries, because together, the Additional Companies and the Subsidiaries constituted all the vessel
owning activities of Polys Hajioannou and Nicolaos Hadjioannou during the relevant period.
Pro forma earnings per share gives retroactive effect to our Reorganization, which involves the issuance (following the date of the final prospectus and prior to the closing of this offering) of 54.5
million shares of our common stock to the selling stockholder, and resulting capital structure following the closing of this offering. This offering will not involve the issuance of additional shares
of our common stock, as all shares of common stock sold in this offering will be sold by the selling stockholder.
Other Adjustments
Additional interest expense of $4.2 million with respect to borrowings of $120.0 million by our Subsidiaries Efragel, Marindou and Avstes under three new credit facilities, all of which have been
fully drawn. Of the total borrowings of $120.0 million, $38.5 million was used to refinance an existing credit facility of Efragel and a bank loan of Marindou in the first quarter of 2008, resulting
in net additional indebtedness of $81.5 million.
Increase of $2.6 million in general and administrative expenses due to the implementation of the amended management agreements as of January 1, 2008.
The pro forma adjustments do not reflect an estimate of general and administrative expenses to increase as a result of becoming a public company, as such costs are not considered to be factually
supportable. However, we currently expect an annual increase of approximately $2.2 million as a result of becoming a public company upon completion of this offering.
50
PRO FORMA PREDECESSOR COMBINED BALANCE SHEET
ASSETS
Historical
Other
Notes
Pro Forma
CURRENT ASSETS
120,000
(2
)
Cash and cash equivalents
(38,514
)
(2
)
16,000
(65,486
)
(3
)
Accounts receivable trade, net
1,717
1,717
65,486
(3
)
Due from Manager
(10,086
)
(4
)
(147,770
)
(5
)
96,370
(4,000
)
(7
)
Inventories
792
792
Prepaid expenses and other current assets
4
4
Total current assets
98,883
(80,370
)
18,513
FIXED ASSETS
Vessels, net
254,817
254,817
Advances for vessel acquisitions and vessels under construction
53,272
53,272
Other fixed assets, net
251
251
Total fixed assets
308,340
308,340
OTHER NON-CURRENT ASSETS:
Restricted cash
$
4,000
(7
)
$
4,000
Deferred finance charges, net
434
434
Total assets
407,657
(76,370
)
331,287
LIABILITIES AND OWNERS EQUITY/(DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt
16,620
16,620
Unearned revenue
4,127
4,127
Trade accounts payable
1,202
1,202
Accrued liabilities
9,472
9,472
Advances from owners
10,086
(10,086
)
(4
)
Dividend Payable
31,000
(6
)
31,000
Total current liabilities
41,507
20,914
62,421
Long-term debt, net of current portion
306,267
120,000
(2
)
387,753
(38,514
)
(2
)
Derivatives liabilities
242
242
Time charter discount
2,766
2,766
OWNERS EQUITY/(DEFICIT)
Retained earnings/(deficit)
56,875
(147,770
)
(5
)
(121,895
)
(31,000
)
(6
)
Total owners equity/(deficit)
56,875
(178,770
)
(121,895
)
Total liabilities and owners equity/(deficit)
407,657
(76,370
)
331,287
51
FOR THE YEAR ENDED DECEMBER 31, 2007
(In thousands of U.S. dollars)
Predecessor
Adjustments
PRO FORMA PREDECESSOR COMBINED STATEMENT OF OPERATIONS
Historical
Carve-out of
Notes
Subtotal
Other
Notes
Pro forma
REVENUES:
Revenues
172,057
(4,907
)
(1
)
167,150
167,150
Commissions
(6,209
)
182
(1
)
(6,027
)
(6,027
)
Net revenues
165,848
(4,725
)
161,123
161,123
EXPENSES:
Voyage expenses
(179
)
13
(1
)
(166
)
(166
)
Vessel operating expenses
(12,429
)
102
(1
)
(12,327
)
(12,327
)
Depreciation
(9,583
)
(9,583
)
(9,583
)
General and administrative expensesManagement fee to related party
(1,177
)
35
(1
)
(1,142
)
(2,617
)
(9
)
(3,759
)
Early redelivery cost
(21,438
)
(21,438
)
(21,438
)
Gain on sale of assets
112,360
(112,360
)
(1
)
Operating income
233,402
(116,935
)
116,467
(2,617
)
113,850
OTHER (EXPENSE)/INCOME:
Interest expense
(8,225
)
135
(1
)
(8,090
)
(4,208
)
(8
)
(12,298
)
Other finance costs
(161
)
(6
)
(1
)
(167
)
(167
)
Interest income
1,290
(95
)
(1
)
1,195
1,195
Loss on derivatives
(704
)
(704
)
(704
)
Foreign currency (loss)/gain
(13,759
)
(207
)
(1
)
(13,966
)
(13,966
)
Amortization and write-off of deferred finance charges
(166
)
49
(1
)
(117
)
(117
)
Net income
211,677
(117,059
)
94,618
(6,825
)
87,793
Pro forma earnings per share, basic and diluted
3.88
(10
)
1.74
(10
)
1.61
Pro forma weighted average number of shares, basic and diluted
54,500,000
(10
)
54,500,000
(10
)
54,500,000
Notes to Adjustments to Pro Forma Combined Condensed Financial Statements
(1)
Reflects the removal of all activities from the historical predecessor financial statements of the Additional Companies, which will not be owned by us following the completion of this offering, and
the activities of our Subsidiary Maxpente with respect to the
Pedhoulas Farmer
, a vessel sold on January 9, 2007 immediately following its acquisition by Maxpente. We did not generate any
operating revenues or operating expenses with respect to the
Pedhoulas Farmer
, and Maxpente is expected to own the newbuild Hull No. 1075 upon its delivery to us.
The predecessor combined financial statements include the financial statements of the Subsidiaries and those of six Additional Companies, whose principal activity was the ownership of drybulk
vessels and that, from inception through December 31, 2007, were under the common control of Polys Hajioannou and Nicolaos Hadjioannou. All vessels owned by the Additional Companies were
sold prior to December 31, 2007, and none of the Additional Companies will be owned by us following this offering. Maxpente also owned a vessel, the
Pedhoulas Farmer
, which was sold on
January 9, 2007, however, Maxpente is one of the 19 companies that will be contributed to us following the date of the final prospectus and prior to the closing of this offering and is included as a
Subsidiary. Maxpente is expected to own the newbuild Hull No. 1075 upon its delivery to us.
52
FOR THE YEAR ENDED DECEMBER 31, 2007
(In thousands of U.S. dollars)
Predecessor
Additional
Companies
adjustments
(2)
Reflects borrowings of $120.0 million under our three new credit facilities with our three Subsidiaries, Efragel, Marindou and Avstes, all of which have been fully drawn. Of the total borrowings of
$120.0 million, $38.5 million was used to refinance an existing credit facility of Efragel and a bank loan of Marindou, resulting in net additional indebtedness of $81.5 million and a consequent
increase in Cash and cash equivalents.
(3)
Reflects the advance of Cash and cash equivalents to our Manager in the amount of $65.5 million from net additional indebtedness of $81.5 million, resulting in a consequent increase in Due from
Manager. The remaining cash from net additional indebtedness of $16.0 million will be retained by the Subsidiaries.
(4)
Reflects the repayment by our Manager on our behalf of Advances from owners in the amount of $10.1 million and a consequent decrease in Due from Manager.
(5)
Reflects the declaration and payment of a dividend in the amount of $147.8 million to our current owners by our Manager on our behalf and a consequent decrease in Due from Manager.
(6)
The estimated additional dividend of $31.0 million will be declared and payable to our current owners by our Manager on our behalf prior to the closing of the initial public offering. This dividend
reflects a portion of estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering. Investors in this offering will not be entitled to receive any
portion of this dividend.
(7)
Reflects settlement of the remaining Due from Manager balance in the amount of $4.0 million in Restricted cash transferred from cash collateral account held by our Manager to two restricted cash
collateral accounts of $2.0 million held by each of our Subsidiaries Petra and Pemer as security for their respective loan facilities.
(8)
Reflects assumed additional interest expense with respect to borrowings of $120.0 million under our new credit facilities with our Subsidiaries Efragel, Marindou and Avstes. Of the total borrowings
of $120.0 million, $38.5 million was used to refinance an existing credit facility of Efragel and a bank loan of Marindou, resulting in net additional indebtedness of $81.5 million.
Name
New Debt (a)
New Debt
New Debt
Historical Debt
Historical
Incremental
Efragel
$
42,000
4.30
%*
$
1,831
$
24,630
$
874
$
957
Marindou
$
42,000
4.60
%*
$
1,959
$
13,884
$
420
$
1,539
Avstes
$
36,000
4.69
%*
$
1,712
$
0
$
0
$
1,712
Total
$
120,000
$
5,502
$
38,514
$
1,294
$
4,208
*
Represents the fixed five-year SWAP rate entered into in 2008 relevant to the specific new debt, plus the respective credit facility margin.
To illustrate sensitivity to fluctuations in the rate, an increase of 0.125% in the rate would have increased the assumed net interest expense with respect to these borrowings by $152,083 during the year
ended December 31, 2007.
Reflects assumed increase of $2.6 million due to the implementation of the amended management agreements as of January 1, 2008. Under our amended management agreements, as well as the new
management agreements to be implemented prior to this offering, the Manager receives a daily fee of $575 per vessel plus 1.0% on gross freight, charter hire, ballast bonus, and demurrage from each
of the vessel owning companies in exchange for their management services. The total management fee for the year ended December 31, 2007 in the amount of $3.8 million, according to the amended
management agreements, is calculated based on the 3,889 aggregate vessel days outstanding and the aggregate gross freight, charter hire, ballast bonus, and demurrage of $152.3
53
As
of December 31, 2007, all of the vessels of the Additional Companies
have been sold and the remaining net assets distributed as a dividend.
As a result, there are no remaining accounts of the Additional Companies
to be removed from the predecessor combined balance sheet.
(In thousands)
Interest
Rate
(b)
Interest Cost
(c) = (a) x (b)
(In thousands)
Refinanced (d)
(In thousands)
Interest Cost
(e)
(In thousands)
Interest Cost
(c) - (e)
(In thousands)
(9)
million. The assumed increase of $2.6 million in the management fee is calculated as the difference between (i) the management fee as calculated under the amended management agreements of $3.8
million, and (ii) the management fee actually recorded for the year ended December 31, 2007 of $1.2 million.
(10)
Pro forma earnings per share gives retroactive effect to our Reorganization, which involves the issuance (following the date of the final prospectus and prior to the closing of this offering) of 54.5
million shares of our common stock to the selling stockholder, and resulting capital structure following the closing of this offering. This offering will not involve the issuance of additional shares of
our common stock as all shares of common stock sold in this offering will be sold by the selling stockholder.
Sources and Uses of Funds
The following table sets forth the sources and uses of funds used to effect the transactions described above:
Sources of Funds:
(in millions)
Settlement of intercompany balances with our Manager
$
96.4
Additional indebtedness
$
120.0
Total
$
216.4
Uses of Funds:
Refinancing of existing debt
$
38.5
Restricted cash
$
4.0
Cash retained by Subsidiaries
$
16.0
Repayment of advances from owners
$
10.1
Declaration and payment of dividend (a)
$
147.8
Estimated additional dividend to be declared (b)
$
31.0
Total
$
247.4
Net (Sources of Funds less Uses of Funds) (b)
$
(31.0
)
(a)
Of the total dividend of $147.8 million paid to our current owners, $56.9 million represented retained earnings as at December 31, 2007.
(b)
The estimated additional dividend of $31.0 million will be declared and payable to our current owners by our Manager on our behalf prior to the closing this offering. This dividend reflects a portion of
estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering. Investors in this offering will not be entitled to receive any portion of this dividend.
54
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our predecessor combined financial statements and the related notes, and the financial and
other information included elsewhere in this prospectus. Among other things, those financial statements include more detailed information regarding the basis of presentation for the following information. The
financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, and are presented in U.S. dollars.
This discussion contains forward-looking statements based on assumptions about our future business. Our actual results may differ from those contained in the forward-looking statements, and such
differences may be material. Please read
Forward-Looking Statements.
Overview
We are an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly grain, iron ore and coal, along worldwide shipping routes. We were incorporated on
December 11, 2007, under the laws of the Marshall Islands for the purpose of acquiring ownership of 19 Subsidiaries, each incorporated under the laws of the Republic of Liberia, that either currently own vessels
or are scheduled to own vessels and that, since inception, have been under the common control of Polys Hajioannou and Nicolaos Hadjioannou.
Following the date of the final prospectus, and prior to the closing of this offering, the shares of the Subsidiaries will be contributed by Vorini Holdings, on behalf of its shareholders Polys Hajioannou and
Nicolaos Hadjioannou, to Safe Bulkers, Inc., in exchange for the issuance of 100% of the outstanding shares of Safe Bulkers, Inc. to Vorini Holdings. Immediately after this exchange, Polys Hajioannou will enter
into share sale and purchase agreements to effect the transfer of 1.5% of the outstanding shares in Vorini Holdings to each of Maria Hajioannou and Eleni Hajioannou, from Polys Hajioannous 90% shareholding
in Vorini Holdings. Nicolaos Hadjioannou will hold the remaining 10% of the outstanding shares in Vorini Holdings. These transactions are collectively referred to herein as the Reorganization. Following the
Reorganization, Safe Bulkers, Inc. will own each of the Subsidiaries and Vorini Holdings will be the sole stockholder of Safe Bulkers, Inc.
The predecessor combined financial statements included in this prospectus include the financial statements of the Subsidiaries and those of six Additional Companies, each incorporated under the laws of
the Republic of Liberia, whose principal activity was the ownership of drybulk vessels and that, from inception through December 31, 2007, were under the common control of Polys Hajioannou and Nicolaos
Hadjioannou. The Additional Companies have been included in our predecessor combined financial statements, along with the Subsidiaries, because together, the Additional Companies and the Subsidiaries
constituted all the vessel owning activities of Polys Hajioannou and Nicolaos Hadjioannou during the relevant periods. However, all vessels owned by the Additional Companies were sold prior to December 31,
2007, and none of the Additional Companies will be owned by us following this offering. Maxpente also owned a vessel, the
Pedhoulas Farmer
, which was sold on January 9, 2007. However Maxpente is one of
the 19 companies that will be contributed to Safe Bulkers, Inc. following the date of the final prospectus, and prior to the closing of this offering and is included as a Subsidiary, because Maxpente is expected to
own the newbuild Hull No. 1075 upon its delivery to us.
In March and April 2008 we settled all intercompany balances as of December 31, 2007 with our Manager and with our owners. In connection with this, in January 2008, our Manager repaid on our
behalf prior advances from owners in the amount of $10.1 million, resulting in a corresponding decrease in amounts due from our Manager. In March and April 2008, we paid a dividend of $147.8 million to Polys
Hajionnou and Nicolaos Hadjioannou, our current owners, which was funded from amounts due from our Manager. Finally, in order to settle the remaining amount of $4.0 million due from our Manager, $4.0
million in restricted cash in collateral accounts held by our Manager was transferred in April 2008 to two new restricted cash collateral accounts of $2.0 million held by each of our Subsidiaries, Petra and Pemer.
In addition to the dividend of $147.8 million paid to our current owners in March and April 2008, an estimated additional dividend of $31.0 million, which will be funded using amounts due from our
55
Manager, reflecting a portion of estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering will also be declared prior to the closing of this offering. Investors
in this offering will not be entitled to receive any portion of this dividend.
In March 2008, we paid $7.7 million as advances for vessels under construction funded by advances from our current owners. On May 27, 2008, we will be required to pay an additional ¥400 million as
advances for a vessel under construction funded by advances from our current owners. These advances will be paid back to our current owners from either surpluses from operations or from future credit facilities.
Immediately after the closing of this offering, we expect to have $20.0 million in cash held by our Subsidiaries of which $16.0 million comprises cash and cash equivalents and $4.0 million comprises restricted
cash, aggregate indebtedness of $416.8 million plus the equivalent of ¥400 million in U.S. dollars as of May 27, 2008, and available borrowing capacity of $90.0 million under our two additional credit facilities for
which we have accepted commitment letters of $45.0 million each, to be entered into by the Subsidiaries Eniaprohi and Eniadefhi.
Our unaudited pro forma condensed financial statements, as reflected in the section entitled Unaudited Pro Forma Combined Condensed Financial Statements, gives effect to (a) the removal of the
activities of all Additional Companies and the activities of Maxpente in connection with the sold vessel, the
Pedhoulas Farmer
; such removal affects only the predecessor combined statement of operations and not
the predecessor combined balance sheet, as all of the vessels of the Additional Companies have been sold and an amount equal to our retained earnings declared as a dividend. As a result there are no remaining
activities of the Additional Companies to be removed from the predecessor combined balance sheet, (b) the expected settlement of intercompany balances and advances from owners, payment of dividends and
incurrence of indebtedness described above and (c) our expected cash on hand and restricted cash of $20.0 million immediately after the closing of this offering. Our unaudited pro forma condensed financial
statements have been provided in order to reflect only the activities of the vessels in our fleet immediately following this offering, and the effects of these transactions on our company.
As of December 31, 2007 and as of the date of this prospectus, we own a fleet of 11 Japanese-built drybulk vessels, comprised of five Panamax, three Kamsarmax and three Post-Panamax class vessels,
with a total aggregate carrying capacity of 887,900 dwt. As of December 31, 2007, the vessels in our fleet had an average age of approximately 2.6 years.
We have contracted to acquire eight newbuilds, comprised of the following vessels: (a) four Post-Panamax class vessels, scheduled for delivery in the fourth quarter of 2008, first quarter of 2009, third
quarter of 2009 and first quarter of 2010, respectively; (b) two Capesize class vessels scheduled for delivery in the first quarter of 2010; and (c) two Kamsarmax class vessels scheduled for delivery in the first and
second quarters of 2010. Following delivery of the last of these newbuilds in May 2010, our fleet will consist of 19 vessels, with a total aggregate carrying capacity of 1,759,900 dwt and an average age of
approximately 3.2 years.
The average number of drybulk vessels in our fleet and the average age of the vessels in our fleet as of the end of the applicable period for the three years ended December 31, 2007 are set forth in the
table below.
Average Number and Average Age of Drybulk Vessels in Our Fleet
Year Ended
Pro Forma
Year Ended
2005
2006
2007
Average number of vessels
9.2
11.5
10.7
10.3
Average age of vessels
2.5
2.5
2.6
2.6
References in this Managements Discussion and Analysis of Financial Condition and Results of Operations to Safe Bulkers, the Company, us, we, our or similar terms when used in a historical
context refer to Safe Bulkers, Inc., the Subsidiaries, the Additional Companies, or to such entities collectively, and when used in the present tense or prospectively refer to Safe Bulkers, Inc. or any one or more of
its subsidiaries, including the Subsidiaries, or to such entities collectively.
56
December 31,
December 31,
2007
Our Charters
We, through our Manager, actively manage the employment of our fleet between period time charters, which can last several years, and spot charters, which generally last up to three months. As of
December 31, 2007, 74.32% (on a dwt basis) of our fleet was deployed on period time charters with large consumers of marine drybulk transportation services, including Bunge, Cargill and Daiichi or their
respective affiliates. We have arranged to place six of our current vessels and two of our newbuilds under five-year period time charters commencing in late 2008, 2009 and 2010 and one of our newbuilds under a
20-year period time charter commencing in 2011. By chartering these vessels in advance, we have been able to take advantage of the recent strong market conditions, while at the same time, reducing our exposure
to charter rate fluctuations in late 2008, 2009 and 2010 when all of our newbuilds are delivered. In addition, as of December 31, 2007, we had arranged one- to three-year period time charters commencing in 2008
for the three vessels in our fleet which were deployed on spot charters as of December 31, 2007. Period time charters and trip time charters, which are a type of spot charter, are contracts for the use of a vessel
for a specific period of time during which the charterer pays substantially all the voyage expenses, such as port, canal and fuel costs, agents fees, extra war risks insurance and any other expenses related to the
cargoes, but the vessel owner pays the vessel operating expenses, which include costs for crewing, insurance, lubricants, spare parts, provisions, stores, maintenance and repairs, statutory and classification expense,
drydocking and intermediate and special surveys and other miscellaneous items. We have rarely deployed the vessels in our fleet on voyage charters, which is another type of spot charter, under which the vessel
owner typically pays for both voyage expenses and vessel operating expenses. As a result, generally, references to spot charters in this prospectus are to trip time charters.
Our Manager
Our operations are managed by our Manager, Safety Management Overseas S.A., under the supervision of our executive officers and our board of directors. Under our management agreement, our Manager
will provide us and our Subsidiaries with technical, administrative and commercial services for an initial term expiring two years following the completion of this offering, with automatic one-year renewals for an
additional eight years, at our option. Our Manager is ultimately owned by Machairiotissa Holdings, which is a corporation wholly owned by Polys Hajioannou.
Factors Affecting Our Results of Operations
Our financial results are largely driven by the following factors:
Ownership days.
We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size
of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.
Available days.
We define available days (also referred to as voyage days) as the total number of days in a period during which each vessel in our fleet was in our possession net of off-hire days
associated with scheduled maintenance, which includes major repairs, drydockings, vessel upgrades or special or intermediate surveys. Available days are used to measure the number of days in a
period during which vessels should be capable of generating revenues.
Operating days.
We define operating days as the number of our available days in a period less the aggregate number of days that our vessels are off-hire due to any reason, excluding scheduled
maintenance. Operating days are used to measure the aggregate number of days in a period during which vessels actually generate revenues.
Fleet utilization.
We calculate fleet utilization by dividing the number of our operating days during a period by the number of our ownership days during that period. During the three years
ending December 31, 2007, our average annual fleet utilization rate was approximately 99.74%. However, an increase in annual off-hire days could reduce our operating days, and therefore, our
fleet utilization. Fleet utilization is used to measure a companys ability to efficiently find suitable employment for its vessels and minimizing the number of days that its vessels are off-hire for
reasons such as scheduled repairs, vessel upgrades, drydockings or special surveys.
57
Time charter equivalent rates.
We define time charter equivalent rates, or TCE rates, as our charter revenues less commissions and voyage expenses during a period divided by the number of our
available days during the period. TCE rate is a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels on period time charters and trip
time charters with daily earnings generated by vessels on voyage charters, because charter rates for vessels on voyage charters are generally not expressed in per day amounts, while charter rates
for vessels on period time charters and trip time charters generally are expressed in such amounts. We have only rarely employed our vessels on voyage charter and, as a result, generally our
TCE rates equal our time charter rates.
Daily vessel operating expenses.
We define daily vessel operating expenses to include the costs for crewing, insurance, lubricants, spare parts, provisions, stores, repairs, maintenance, statutory and
classification expense, drydocking, intermediate and special surveys and other miscellaneous items. Daily vessel operating expenses are calculated by dividing vessel operating expenses by
ownership days for the relevant period. Our ability to control our fixed and variable expenses, including our daily vessel operating expenses also affects our financial results. In addition, factors
beyond our control, such as developments relating to market premiums for insurance and the value of the U.S. dollar compared to currencies in which certain of our expenses, including certain
crew wages, are denominated can cause our vessel operating expenses to increase.
The following table reflects our ownership days, available days, operating days, fleet utilization, TCE rates and daily vessel operating expenses for the periods indicated:
Year Ended
Pro Forma
Year Ended
2005
2006
2007
Ownership days
3,370
4,208
3,914
3,778
Available days
3,350
4,208
3,914
3,778
Operating days
3,343
4,205
3,913
3,777
Fleet utilization
99.21%
99.94%
99.98%
99.99%
TCE rates
$
23,713
$
22,550
$
42,327
$
42,604
Daily vessel operating expenses
$
3,076
$
3,106
$
3,176
$
3,263
Revenues
Our revenues are driven primarily by the number of vessels in our fleet, the number of days during which our vessels operate and the amount of daily charter rates that our vessels earn under our charters,
which, in turn, are affected by a number of factors, including:
levels of demand and supply in the drybulk shipping industry;
the age, condition and specifications of our vessels;
the duration of our charters;
our decisions relating to vessel acquisitions and disposals;
the amount of time that we spend positioning our vessels;
the availability of our vessels, which is related to the amount of time that our vessels spend in drydock undergoing repairs and the amount of time required to perform necessary maintenance or
upgrade work; and
other factors affecting charter rates for drybulk vessels.
Revenues from our period time charters comprised 47.8% of our charter revenues for the year ended December 31, 2006 and 48.9% of our charter revenues for the year ended December 31, 2007. The
revenues from our spot charters comprised 52.2% of our charter revenues for the year ended December 31, 2006 and 51.1% of our charter revenues for the year ended December 31, 2007.
After giving effect to the removal of the Additional Companies and the activities of the sold vessel
Pedhoulas Farmer
from our company, our pro forma revenues from our period time charters comprised
49.3% of our charter revenues for the year ended December 31, 2006 and 50.1% of our charter revenues
58
December 31,
December 31,
2007
for the year ended December 31, 2007, and our pro forma revenues from our spot charters comprised 50.7% of our charter revenues for the year ended December 31, 2006 and 49.9% of our charter revenues for
the year ended December 31, 2007.
Our expected revenues, based on contracted charter rates, from our current period time charter arrangements for our drybulk vessels are shown for the periods indicated in the table below. Although these
expected revenues are based on contracted charter rates, any contract is subject to performance by the counterparties. If the charterers are unable to make charter payments to us, our results of operations and
financial condition will be materially adversely affected.
Contracted Revenues From Period Time Charters and Contracted Period Time Charter Days
2008
2009
2010
2011
On and After
Total
Contracted Revenues (2), (3), (4), (5), (6)
$
149,571
$
105,611
$
91,869
$
66,508
$
156,081
$
569,640
Fleets Contracted Period Time Charter Days
3,062
2,459
2,369
1,890
4,527
14,307
Percentage of anticipated available days (7)
75.9%
50.6%
36.1%
27.4%
18.6%
32.3%
(1)
Annual revenue calculations are based on an assumed 365 revenue days per annum and include scheduled drydocking days.
(2)
Does not include the five-year period time charter with Kawasaki Kisen Kaisha, Ltd, or K-Line, entered into on March 5, 2008 pursuant to which K-Line will charter the
Marina
or a sister ship
commencing in the third or fourth quarter of 2008. The gross daily charter rates under this charter are $61,500, $51,500, $41,500, $31,500 and $21,500 during the first, second, third, fourth and fifth
years, respectively, subject to a 2.5% commission.
(3)
Does not include the 20-year period time charter with Eastern Energy Pte. Ltd. entered into on February 7, 2008 pursuant to which Eastern Energy Pte. Ltd. will charter the vessel to be named
Kanaris
commencing in the third or fourth quarter of 2011. The gross daily charter rate under this charter is $25,928 subject to a 2.5% commission.
(4)
Does not include the five-year period time charter with Shinwa entered into on March 13, 2008 pursuant to which Shinwa will charter the
Maritsa
or a sister ship commencing in the first quarter of 2010.
Pursuant to the charter, Shinwa may choose from among three charter rate structures, and must select among them prior to the commencement of the charter. Under the first option, the gross daily charter
rates under this charter are $32,000 during the first and second years, $28,000 during the third year and $24,000 during the fourth and fifth years; under the second option, the gross daily charter rates
under this charter are $32,500 during the first, second and third years and $21,250 during the fourth and fifth years; and under the third option, the gross daily charter rate under this contract is $28,000
during all five years. In each case, gross daily charter rates under this charter are subject to a 1.25% commission.
(5)
Does not include the five-year period time charter with K-Line,
entered into in April 2008, pursuant to which K-Line will charter the
Pedhoulas Trader
commencing in July 2008. The gross daily charter
rates under this charter are $69,000, $56,500, $42,000, $20,000 and $20,000 during the first, second, third, fourth and fifth years, respectively, subject to a 1.00% commission.
(6)
Does not include the period time charter with Daiichi, entered into on April 17, 2008, pursuant to which Daiichi will charter the
Eleni
commencing in November 2008 through October 2009. The gross
daily charter rate under this charter is $77,000 per day, subject to a 1.25% commission.
(7)
Percentage of anticipated available days on and after January 1, 2012 is from January 1, 2012 to March 15, 2015.
59
as of December 31, 2007 (1)
(U.S. dollar amounts in thousands)
January 1, 2012
Vessels operating on period time charters provide more predictable cash flows, but can yield lower profit margins than vessels operating in the spot market during periods characterized by favorable market
conditions. Vessels operating in the spot market generate revenues that are less predictable than those on period time charters, but may enable us to capture increased profit margins during periods of high drybulk
charter rates, although we are exposed to the risk of low drybulk charter rates, which may have a materially adverse impact on our financial performance. If we fix vessels on period time charters, future spot
market rates may be higher or lower than those rates at which we have time chartered our vessels. We are constantly evaluating opportunities to increase the number of our drybulk vessels employed on period
time charters, but only expect to enter into additional period time charters if we can obtain contract terms that satisfy our criteria.
Commissions
We pay (through our Manager) commissions ranging from 1.25% to 5.0% on our period time and trip time charters, which are a type of spot charter, to unaffiliated ship brokers, other brokers associated
with our charterers and to our charterers. These commissions are directly related to our revenues, from which they are deducted. We expect that the amount of our total commissions to unaffiliated ship brokers and
unaffiliated in-house brokers will continue to grow as the size of our fleet grows and revenues increase following delivery of our eight contracted newbuilds and as a result of additional vessel acquisitions. These
commissions do not include fees we pay to our Manager, which are described under General and Administrative Expenses.
Voyage Expenses
We charter our vessels primarily through period time charters and trip time charters under which the charterer is responsible for most voyage expenses, such as the cost of bunkers, port expenses, agents
fees, canal dues, extra war risks insurance and any other expenses related to the cargo. We are responsible for the remaining voyage expenses such as draft surveys, hold cleaning, postage and other minor
miscellaneous expenses related to the voyage. We generally do not employ our vessels on voyage charters under which we would be responsible for all voyage expenses, therefore we have not experienced during
the relevant periods, and do not expect to experience, material changes to our voyage expenses.
Vessel Operating Expenses
Vessel operating expenses include costs for crewing, insurance, lubricants, spare parts, provisions, stores, repairs, maintenance, statutory and classification expense, drydocking, intermediate and special
surveys and other minor miscellaneous items. Due to the young age of our vessels, our main vessel operating expenses are costs for crewing, insurance, spares, stores and provisions, lubricants, taxes and other
miscellaneous items. We expect that crewing costs will continue to increase in the future due to the shortage in the supply of qualified personnel. In addition, we expect that insurance costs, drydocking and
maintenance costs will increase as our vessels age. Our total vessel operating expenses, which generally represent fixed costs, have historically increased as a result of the enlargement of our fleet. We expect these
expenses to increase further as a result of the acquisition of our eight contracted newbuilds in late 2008, 2009 and 2010 and as we further grow our fleet. Other factors beyond our control, some of which may
affect the shipping industry in general, including changes in the market price of lubricants due to increases in oil prices, may also cause these expenses to increase. In addition, a portion of our vessel operating
expenses, primarily crew wages to our Greek crew members, are in currencies other than the U.S. dollar. These expenses may increase or decrease as a result of fluctuation of the U.S. dollar against these
currencies.
Depreciation
We depreciate our drybulk vessels on a straight-line basis over the expected useful life of each vessel. Depreciation is based on the cost of the vessel less its estimated residual value. We estimate the
useful life of our vessels to be 25 years from the date of delivery from the shipyard. Furthermore, we estimate the residual value of our vessels to be $182 per light-weight ton.
We do not amortize special survey and drydocking costs, but expense such costs as incurred.
60
Vessels, Net
Vessels are recorded at their historical cost, which consists of the contract purchase price, any direct material expenses incurred upon acquisition (including improvements, on-site supervision expenses
incurred during the construction period, commissions paid, delivery expenses and other expenditures to prepare the vessel for her initial voyage) and financing costs incurred during the construction of the vessel.
Subsequent expenditures for conversions and major improvements are also capitalized when it is determined that they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of
the vessels. If such factors are not met, such expenditures are not capitalized and, instead, are charged to expenses as incurred.
Our predecessor combined financial statements do not include any capitalized interest costs. We financed vessel construction through owners advances during the relevant periods and utilize the specific
loan method of accounting. As a result, no interest was capitalized as a component of vessel cost for our current vessels. Capitalized interest may be a component of vessel cost in the future, as we expect to
finance future vessel construction with additional bank debt instead of owners advances.
Since January 1, 2005, our Manager has received a commission of 1.0% of the contract price of vessel purchases upon delivery of our acquired vessels through separate arrangements with Itochu
Corporation, a trading house that has facilitated such purchases and which is also the counterparty in the applicable newbuild contracts. Itochu Corporation has also agreed to pay our Manager a 1.0% commission
on the contract prices of the
Eleni
and
Martine
, two of our newbuilds, payable upon each of our installment payments, including upon delivery, for these newbuilds. Under our management agreement with our
Manager, which will be entered into prior to the closing of this offering, for purchases of vessels including with respect to each of our contracted newbuilds, other than the
Eleni
and
Martine
, we will pay our
Manager a commission of 1.0% on the contract price of the relevant vessel for our Managers services in connection with finalizing the contract, arranging for various regulatory approvals and bank financing and
other administrative services. In addition, we will pay our Manager a flat fee of $375,000 per newbuild, for the on-premises supervision of all newbuilds we have agreed to acquire pursuant to shipbuilding
contracts, memoranda of agreement, or otherwise. These amounts payable to our Manager will be included as part of the vessel cost.
General and Administrative Expenses
During the period from January 1, 2005 to December 31, 2007, we paid our Manager a management fee of $50,000 per year for each vessel in our fleet and a fee of 0.4% on gross freight, charter hire,
ballast bonus and demurrage, excluding any amortization of time charter discount to revenue. The management fee has been recorded as a general and administrative expense. We have amended the existing vessel
management agreements, and from January 1, 2008 we are now required to pay to our Manager a management fee of $575 per day per vessel and a fee of 1.0% on gross freight, charter hire, ballast bonus and
demurrage.
Following the date of this offering, and in addition to the fees described above, we will pay our Manager the commissions and fees with respect to vessel purchases and newbuilds described above in
Vessels, Net and the commissions with respect to vessel sales described below under Gain on Sale of Assets. Although we have not, within the past five years, deployed our vessels on bareboat charter and do
not currently have any plans to deploy our vessels on bareboat charter, under our management agreement, we will also provide our Manager with a fee of $250 per day per vessel deployed on bareboat charter for
providing commercial, technical and administrative services. We expect that the amount of our total management fees will increase following the delivery of our eight contracted newbuilds and as a result of
additional vessel acquisitions.
Our predecessor combined financial statements for prior periods show our results of operations as a private company when we did not pay any compensation to our directors and officers. After the
completion of this offering we will be a public company, and we expect to incur additional general and administrative expenses as a public company. We expect that the primary components of general and
administrative expenses, other than the management fees described above, will consist of expenses associated with being a public company, which include the preparation of disclosure documents, legal and
accounting costs,
61
incremental director and officer liability insurance costs, director compensation and costs related to compliance with the Sarbanes-Oxley Act of 2002.
After giving effect to the removal of the Additional Companies and the sold vessel
Pedhoulas Farmer
from our company, the increase of $2.6 million in fees payable to our Manager effective as of
January 1, 2008, together with our projected public company-related expenses and director remuneration of $2.2 million, our general and administrative expenses will increase by an estimated $4.8 million per year.
Interest Expense and Other Finance Costs
We incur interest expense on outstanding indebtedness under our existing credit facilities, which we include in interest expenses. We also incurred financing costs in connection with establishing those
facilities, which is included in our finance costs and amortization and write-off of deferred finance charges. Since December 31, 2007, we have incurred, and will incur in the future, additional interest expense on
our outstanding borrowings and future borrowings, including financing costs in connection with establishing our new credit facilities for our Subsidiaries Avstes, Efragel and Marindou, and two additional credit
facilities for which we have accepted commitment letters of $45.0 million each, to be entered into by the Subsidiaries Eniaprohi and Eniadefhi, respectively. For a description of our existing credit facilities, and
our proposed new credit facilities, please read Credit Facilities and Description of Indebtedness.
Inflation
Inflation has only a moderate effect on our expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating,
voyage, administrative and financing costs.
Gain on Sale of Assets
The Additional Companies and the Subsidiary Maxpente each owned vessels that were sold prior to December 31, 2007. Below is a table listing the vessels, their classes, the name of the owning entities
prior to disposal and dates of disposal.
Vessel Name
Class
Owner
Disposal Date
Marina (
the
Old Marina) (1)
Panamax
Maripol Shipping Corporation
June 8, 2005
Pelopidas
Panamax
Pelodimous Shipping Corporation
November 30, 2006
Sophia (
the
Old Sophia) (1)
Panamax
Sofikal Shipping Corporation
April 11, 2006
Pedhoulas Farmer
Kamsarmax
Maxpente Shipping Corporation
January 9, 2007
Pedhoulas Fighter
Kamsarmax
Maxtria Shipping Corporation
January 26, 2007
Kanaris (the Old Kanaris) (1)
Panamax
Kanastro Shipping Corporation
February 20, 2007
Eleni (
the
Old Eleni) (1)
Panamax
Eleoussa Shipping Corporation
March 26, 2007
(1)
Certain of the sold vessels have the same name as certain vessels in our current fleet, and we refer to these sold vessels as the
Old Marina
,
Old Sophia, Old Kanaris
and
Old Eleni
, as applicable.
The aggregate gains on the sale of these assets were as follows:
Year Ended December 31,
2005
2006
2007
$
26.8 million
$
37.0 million
$
112.4 million
In connection with each of these asset sales, we have in the past paid our Manager, and will continue to pay our Manager under our management agreement, a commission of 1.0% of the sale price of the
vessel. We expect that revenue from vessel sales will decrease in the future as we do not expect to sell vessels at the same rate as vessels have been sold between January 1, 2005 and December 31, 2007. We
expect that commissions payable to our Manager on vessel sales will decrease for the same reason.
62
Early Redelivery Cost
Early redelivery cost reflects amounts payable to charterers for early termination of a period time charter resulting from our request for early redelivery of a vessel. We generally request such early
redelivery when we would like to take advantage of a strong period time charter market environment and believe that an opportunity to enter into a similarly priced period time charter is not likely to be available
when the relevant vessel is originally scheduled to be redelivered.
We have entered into such arrangements for early redelivery and incurred such costs in the past, and we may continue to do so in the future, depending on market conditions. On March 9, 2007, we
agreed with the charterers of the
Stalo
to terminate the then-existing period time charter on the vessel. The period time charter had commenced on January 18, 2006, at a daily gross charter rate of $13,500, and
was contractually due to expire in May 2011. We desired to terminate the charter because the contracted charter rate was significantly lower than the charter rates that we could receive for the vessel in March
2007. Under the new agreement with the charterer, (a) we were required to pay the charterer $3.4 million upon termination of the old period time charter and redelivery of the vessel and (b) the charterer was
offered the opportunity to charter the
Marina
,
Sophia
and
Pedhoulas Leader
under period time charters for periods of up to 5 to 14 months at below-market rates. The effect of chartering these three vessels at
below-market rates for the agreed periods was determined to be $11.0 million and was recorded as a cost of terminating the existing period time charter on the
Stalo
. We also recognized a period time charter
discount for the same amount, which will be released to charter revenue over the period of the respective below-market rate period time charters. The total cost of the early termination of the
Stalo
period time
charter amounted to $14.4 million. The
Stalo
was subsequently fixed on two spot charters, at daily charter rates of $47,500 and $50,000, prior to entering into a two-year period time charter from July 2007 until
July 2009, at a daily charter rate of $48,500. These, together, are expected to generate revenues of $40.0 million, which is greater than the total cost of $14.4 million attributable to the early termination of the
Stalo
period time charter. We anticipate that additional revenues will be obtained from chartering the
Stalo
from July 2009 to May 2011, which is when the
Stalo
had originally been scheduled to be redelivered.
On September 20, 2007, we entered into an agreement, at our request, with the then-current charterer of the
Katerina
to terminate the charter earlier than the originally scheduled termination date of
November 9, 2007. That charter had commenced on August 9, 2006 at a daily gross charter rate of $23,125, which was significantly lower than the charter rates that we could receive for the vessel in September
2007. As compensation for early redelivery, we agreed to pay the charterers an amount equal to $1.1 million. The vessel was redelivered on September 30, 2007 and was subsequently fixed on a spot charter until
December 2007 at a daily charter rate of $78,000. The revenue earned by this subseqent charter during the period from September 30, 2007 until November 9, 2007 was $3.1 million, which was higher than the
$1.1 million cost of early redelivery of the
Katerina.
On October 17, 2007, we entered into an agreement, at our request, with the then-current charterer of the
Marina
to terminate the charter earlier than the originally scheduled termination date of May 22,
2008 in connection with the redelivery of the
Stalo
, as described above. The charter had commenced on March 26, 2007 at a daily gross charter rate of $25,000. The
Marina
was redelivered on January 30, 2008,
and the actual compensation payable to the charterer amounted to $6.5 million, compared to $6.7 million, which was the estimated amount as of December 31, 2007. The early redelivery costs recorded with the
predecessor combined statement of operations for the year ended December 31, 2007 with respect to the
Marina
amounted to $5.5 million. This amount was comprised of the estimated compensation payable of
$6.7 million, which was offset in part by the remaining unamortized portion of the
Marinas
time charter discount of $1.2 million in connection with the
Stalo
redelivery transaction. The vessel was fixed on a spot
charter until April 23, 2008 at a daily rate of $56,500 and has been subsequently fixed on another spot charter until June 30, 2008.
The remaining early redelivery cost of $0.5 million for the year ended December 31, 2007 and $0.2 million for the year ended December 31, 2006 represents cash compensation owed to various charterers
for agreeing to redeliver their respective chartered vessels for up to fifteen days earlier than the contractual expiry of the relevant period time charters. These costs are expensed in the periods incurred because no
replacement charter agreements were secured at the time of the applicable redelivery agreement.
63
On March 7, 2008, Petra agreed with the charterers of the
Pedhoulas Trader
to terminate the $54,000 daily fixed rate time charter which had commenced on February 9, 2008, and was due to expire by
July 24, 2008. We estimate that the compensation payable to the charterer for early redelivery of the vessel, which is expected to occur on May 30, 2008, will be approximately $800,000.
Results of Operations
Year ended December 31, 2007 compared to the year ended December 31, 2006
During the year ended December 31, 2007, we had an average of 10.7 drybulk vessels in our fleet. During the year ended December 31, 2006, we had an average of 11.5 drybulk vessels in our fleet.
During the year ended December 31, 2007, we acquired the following vessels:
Pedhoulas Leader
, a Kamsarmax class vessel and
Sophia
, a Post-Panamax class vessel.
During the year ended December 31, 2007, we sold the following vessels:
Old Kanaris
, a Panamax class vessel and
Old Eleni
, a Panamax class vessel. During this period, we also sold two Kamsarmax
class vessels, the
Pedhoulas Farmer
and the
Pedhoulas Fighter
, immediately upon their delivery to us from the shipyard during the same period, pursuant to agreements with the purchasers of these vessels.
During the year ended December 31, 2006, we acquired the following vessels:
Stalo
, a Post-Panamax class vessel;
Marina
, a Post-Panamax class vessel;
Pedhoulas Merchant
, a Kamsarmax class vessel;
and
Pedhoulas Trader
, a Kamsarmax class vessel.
During the year ended December 31, 2006, we sold the following vessels:
Pelopidas
, a Panamax class vessel and
Old Sophia
, a Panamax class vessel.
Revenues
Revenues increased by 73.8% or $73.1 million to $172.1 million during the year ended December 31, 2007, from $99.0 million during the year ended December 31, 2006. This increase is attributable
primarily to an increase in the daily charter rates payable under our charters. Revenues were also affected by a decrease in the number of operating days due to sales of the
Kanaris
and the
Old Eleni,
which were
not offset by the deliveries of the
Pedhoulas Leader
and the
Sophia
. During the year ended December 31, 2007, our operating days decreased by 6.9% to 3,913 days, compared to 4,205 operating days for the year
ended December 31, 2006.
Commissions
Commissions to unaffiliated ship brokers, other brokers associated with our charterers and our charterers during the year ended December 31, 2007 amounted to $6.2 million, an increase of $2.5 million, or
67.6%, compared to $3.7 million during the year ended December 31, 2006 and were 3.74% and 3.60% of revenues during the year ended December 31, 2006 and 2007, respectively. The increase in such
commissions resulted primarily from the increase in daily charter rates and was similarly affected by the decrease in operating days due to vessel sales.
Vessel operating expenses
Vessel operating expenses decreased by 5.3%, or $0.7 million to $12.4 million during the year ended December 31, 2007, from $13.1 million during the year ended December 31, 2006. The decrease is
primarily attributable to the 6.9% decrease in operating days during the year ended December 31, 2007 as compared to the year ended December 31, 2006 resulting from vessel sales. The primary components of
our vessel operating expenses such as costs for crewing, and insurances, were moderately increased, while all other cost components decreased. During the year ended December 31, 2007 costs for crewing
increased by 3.0%, or $0.2 million, to $6.8 million, compared to $6.6 million during the year ended December 31, 2006. This increase was primarily due to the rising cost of crew salaries, in particular for our
Greek crew members who are paid in euros, as a result of the rising strength of the euro compared to the U.S. dollar since December 31, 2006. During the year ended December 31, 2007 the cost for insurance
increased by 7.7%, or $0.1 million, to $1.4 million, compared to $1.3 million during the year ended December 31, 2006, and the cost for lubricants during this period remained stable. Daily operating expenses
remained relatively
64
constant during the year ended December 31, 2007, at $3,176 per day, compared to $3,106 per day during the year ended December 31, 2006.
Depreciation
Depreciation expense remained constant during the year ended December 31, 2007, at $9.6 million compared to $9.6 million during the year ended December 31, 2006. This reflects the relatively constant
number of ownership days as a result of vessel acquisition and vessel sales.
General and administrative expensesManagement fee to related party
General and administrative expenses, which consisted of management fees paid to our Manager, increased 20.0%, or $0.2 million, to $1.2 million during the year ended December 31, 2007, from
$1.0 million during the year ended December 31, 2006 due to an increase in our revenues.
Interest expense
Interest expense increased $2.1 million, or 34.4%, to $8.2 million during the year ended December 31, 2007 from $6.1 million during the year ended December 31, 2006. The increase in interest expense
was due to the increase in the weighted average amount of loans outstanding to $241.9 million during the year ended December 31, 2007, compared to $183.0 million during the year ended December 31, 2006, as
well as the increase in the weighted average interest rate during the year ended December 31, 2007 to 3.35% from 3.27% during the year ended December 31, 2006. See Credit Facilities.
Loss on derivatives
Loss on derivatives decreased $1.3 million, or 64.14%, to a loss of $0.7 million during the year ended December 31, 2007, from a loss of $2.0 million during the year ended December 31, 2006. The
decrease of $1.3 million includes the effect from foreign exchange derivatives as well as from interest rate derivatives. The effect from foreign exchange derivatives, which amounts to a decrease of $1.5 million in
losses, was due to the declining volume of derivatives contracts in the periods under comparison, as on December 31, 2007 there were no derivative contracts outstanding, versus a notional amount of $13.5 million
of such contracts on December 31, 2006. The effect of the interest rate swap concluded on the Kerasies loan amounted to a loss of $0.2 million, representing the negative fair value as of December 31, 2007. No
interest rate derivatives were outstanding as of December 31, 2006.
Foreign currency (loss)/gain
Foreign currency (loss)/gain was $(13.8) million during the year ended December 31, 2007, compared to $(3.3) million during the year ended December 31, 2006, representing a change of $10.5 million
resulting primarily from more unfavorable currency translation between the U.S. dollar against the Japanese yen and the Swiss franc. As two loans in foreign currencies were converted during 2007 to the U.S.
dollar, the outstanding percentage of principal in foreign currencies was reduced to 47.3% as of December 31, 2007, reducing the possibility of foreign currency differences in the future.
Gain on sale of assets
Gain on sale of assets for the year ended December 31, 2007 reflects the sale of the
Old Kanaris
,
Old Eleni
,
Pedhoulas Farmer
and
Pedhoulas Fighter
to third party drybulk operators for an aggregate
contract price of $220.2 million, representing a gain of $112.4 million over the net book value of such vessels at the time of sale. In connection with these sales, we paid our Manager an aggregate of $2.2 million
in commissions. Gain on sale of assets for the year ended December 31, 2006 reflects the sale of the
Pelopidas
and the
Old Sophia
to third party drybulk operators for an aggregate contract price of $78.1 million,
representing a gain of $37.0 million over the net book value of such vessels at the time of sale. In connection with these sales, we paid our Manager an aggregate of $0.8 million in commissions.
65
Year ended December 31, 2006 compared to year ended December 31, 2005
During the year ended December 31, 2006, we had an average of 11.5 drybulk vessels in our fleet. During the year ended December 31, 2005, we had an average of 9.2 drybulk vessels in our fleet.
During the year ended December 31, 2006, we acquired the following vessels:
Stalo
, a Post-Panamax class vessel;
Marina
, a Post-Panamax class vessel;
Pedhoulas Merchant
, a Kamsarmax class vessel;
and
Pedhoulas Trader
, a Kamsarmax class vessel.
During the year ended December 31, 2006, we sold the following vessels:
Pelopidas
, a Panamax class vessel and
Old Sophia
, a Panamax class vessel.
During the year ended December 31, 2005, we acquired the following vessels:
Maritsa
, a Panamax class vessel and
Old Eleni
, a Panamax class vessel.
During the year ended December 31, 2005, we sold the following vessel:
Old Marina
, a Panamax class vessel.
Revenues
Revenues increased 19.4%, or $16.1 million, to $99.0 million during the year ended December 31, 2006, from $82.9 million during the year ended December 31, 2005. This increase is attributable
primarily to an increase in the number of operating days resulting from vessel acquisitions. During the year ended December 31, 2006, we had a total of 4,205 operating days, compared to 3,343 operating days
during the year ended December 31, 2005, representing an increase of 25.8%. Revenues were also affected by a decrease in average daily charter rates throughout the drybulk shipping industry during the year
ended December 31, 2006. For example, the average one-year daily period time charter rates for Panamax class vessels was $22,475 during 2006 compared to $27,854 during 2005. Please see the section of this
prospectus entitled The International Drybulk Shipping Industry for a discussion of the historical market for time charter rates.
Commissions
Commissions to unaffiliated ship brokers, other brokers associated with our charterers and our charterers during the year ended December 31, 2006 amounted to $3.7 million, an increase of $0.5 million, or
15.6%, compared to $3.2 million during the year ended December 31, 2005, and comprised 3.7% of revenues during the year ended December 31, 2006 and 3.9% of revenues during the year ended December 31,
2005. The increase in such commissions resulted primarily from the increase in the number of operating days resulting from vessel acquisitions and was offset in part by the decrease in our average daily charter
rates.
Vessel operating expenses
Vessel operating expenses increased 26.0%, or $2.7 million, to $13.1 million during the year ended December 31, 2006, from $10.4 million during the year ended December 31, 2005. The increase is
primarily attributable to the 25.8% increase in operating days due to vessel acquisitions. During the year ended December 31, 2006, the primary components of our vessel operating expenses, costs for crewing,
increased by 22.2% to $6.6 million during the year ended December 31, 2006 from $5.4 million during the year ended December 31, 2005, and for lubricants increased by 50.0% to $1.5 million during the year
ended December 31, 2006 from $1.0 million during the year ended December 31, 2005. Daily operating expenses remained relatively constant at $3,106 per day during the year ended December 31, 2006 and
$3,076 per day during the year ended December 31, 2005.
Depreciation
Depreciation expense increased 26.3%, or $2.0 million, to $9.6 million during the year ended December 31, 2006, from $7.6 million during the year ended December 31, 2005. The increase was primarily
the result of an increase in the number of our vessels, the higher cost of our new vessels and an increase in the number of ownership days during the year ended December 31, 2006.
66
General and administrative expensesManagement fee to related party
General and administrative expenses, which consisted of management fees paid to our Manager, increased 25.0%, or $0.2 million, to $1.0 million during the year ended December 31, 2006, from
$0.8 million during the year ended December 31, 2005 due to the increase in the number of vessels in our fleet and an increase in our revenues.
Interest expense
Interest expense increased $2.4 million, or 64.9%, to $6.1 million during the year ended December 31, 2006 from $3.7 million during the year ended December 31, 2005. The increase in interest expense
was due to the higher interest rates of our loans as well as the increase in the amounts outstanding under our credit facilities during the relevant periods. The weighted average interest rate during the year ended
December 31, 2006 was 3.27% compared to 2.30% during the year ended December 31, 2005. The weighted average amount of loans outstanding during the year ended December 31, 2006 was $183.0 million,
while during the year ended December 31, 2005, the weighted average was $157.0 million. See Credit Facilities.
Loss on derivatives
Loss on derivatives decreased $1.2 million, or 37.5% to a loss of $2.0 million during the year ended December 31, 2006, from a loss of $3.2 million during the year ended December 31, 2005. The
decrease of $1.2 million was due to the declining volume of derivatives contracts in the periods under comparison, as on December 31, 2006 there were outstanding derivatives contracts of notional amount of
$13.5 million versus notional amount $38.3 million on December 31, 2005.
Foreign currency (loss)/gain
Foreign currency (loss)/gain decreased $16.8 million, or 124.4%, to a loss of $3.3 million during the year ended December 31, 2006, from a gain of $13.5 million during the year ended December 31, 2005
primarily as a result of unfavorable currency translation between the U.S. dollar and the Japanese yen and the Swiss franc.
Gain on sale of assets
Gain on sale of assets during the year ended December 31, 2006 reflects the sale of the
Pelopidas
and the
Old Sophia
to third party drybulk operators for an aggregate contract price of $78.1 million,
representing a gain of $37.0 million over the net book value of such vessels at the time of sale. In connection with these sales, we paid our Manager an aggregate of $0.8 million in commissions. Gain on sale of
assets during the year ended December 31, 2005 reflects the sale of the
Old Marina
to a third party drybulk operator for an aggregate contract price of $46.6 million, representing a gain of $26.8 million over the
net book value of this vessel at the time of sale. In connection with this sale, we paid our Manager $0.5 million in commissions.
Liquidity and Capital Resources
Historically, our principal source of funds has been advances provided by our owners, operating cash held on our behalf by our Manager, long-term bank borrowings of the Subsidiaries and the Additional
Companies and cash from vessel sales held on our behalf by our Manager. In the past, our principal use of funds has been capital expenditures to establish, grow and maintain our fleet, comply with international
shipping standards, environmental laws and regulations, fund working capital requirements, make repayments of bank loans and owners advances and, more recently, pay dividends.
As of December 31, 2007, we, through the Subsidiaries, had an aggregate of $322.9 million (based on prevailing exchange rates as of that date) outstanding under various credit agreements to finance the
purchase of the vessels owned by such entities, comprised of outstanding amounts in U.S. dollars, Japanese yen and Swiss francs. As of December 31, 2007, none of the Additional Companies had any borrowings
outstanding. In connection with this indebtedness, we are currently exposed to currency fluctuations. As of December 31, 2007, of our aggregate indebtedness, CHF86.5 million (the equivalent of $76.7 million,
based
67
on an exchange rate of CHF1.1267:$1.00 on December 31, 2007) was denominated in Swiss francs and ¥8.5 billion (the equivalent of $75.8 million, based on an exchange rate of ¥112.35:$1.00 on December 31,
2007) was denominated in Japanese yen. We have historically borrowed amounts under our credit facilities in currencies other than the U.S. dollar due to the lower interest rates applicable to borrowings in such
currencies. However, since January 1, 2008, we have converted a significant portion of the outstanding amounts under our credit facilities in currencies other than the U.S. dollar into U.S. dollar amounts, resulting
in a further reduction of the percentage of outstanding principal amount denominated in foreign currencies from 47.3% on December 31, 2007 to approximately 3.5% as of March 31, 2008, reducing our exposure
to currency fluctuations. We intend to convert the amount of CHF12.9 million (the equivalent of $12.99 million) that was outstanding as of March 31, 2008 under the loan agreement into the U.S. dollar at a time
when we deem market conditions to be more favorable. We have not hedged our currency exposure and, as a result, prior to the conversion of our loan to the U.S. dollar, our available funds may be affected by
changes in the value of the U.S. dollar relative to the Swiss franc. Following the conversion, we will still be exposed to currency fluctuations with respect to the Japanese yen and the euro in connection with
certain of our newbuild contracts, two of which are denominated in Japanese yen, and certain of our vessel operating expenses, such as crew wages to our Greek crew members, which are denominated in euros.
Since December 31, 2007, we, through three of our Subsidiaries, have entered into three new credit agreements, under which we have borrowed an aggregate of $120.0 million. We have used these
borrowings to refinance $38.5 million of our existing debt, repay advances from owners and pay dividends. We are also intending to enter into a proposed new credit facility of $200.0 million before the end of
2009, part of which will be used to finance capital expenditures, including a portion of the contract prices of our eight contracted newbuilds,
payment of advances to current owners, compliance with international
shipping standards, environmental laws and regulations and working capital. In addition, we have accepted commitment letters to enter into two additional credit facilities for $45.0 million each to finance capital
expenditures, including newbuild contracts, and to provide working capital with respect to two of our newbuilds scheduled for delivery in late 2008 and early 2009. For more details on the two new credit facilities,
see New Credit Facilities and Description of Indebtedness.
We will require capital to fund ongoing operations, including expenses we incur as a public company following the completion of this offering, the payment of dividends and the construction and
acquisition of new vessels and to service existing indebtedness and any other indebtedness that we may incur in the future. Following the completion of this offering and taking into account generally expected
market conditions, we anticipate that internally generated cash flow and borrowings under our credit facilities, including our two new credit facilities of $45.0 million each with respect to our newbuilds, will be
sufficient to fund the operations of our fleet, including our working capital requirements, and the payment of dividends until the end of 2009. At that time, we expect to require additional indebtedness to partially
fund our remaining commitments of an estimated $180.6 million with respect to our newbuilds.
In March and April 2008 we settled all intercompany balances as of December 31, 2007 with our Manager and with our owners. In connection with this, in January 2008, our Manager repaid on our
behalf prior advances from owners in the amount of $10.1 million, resulting in a corresponding decrease in amounts due from our Manager. In March and April 2008, we paid a dividend of $147.8 million to Polys
Hajionnou and Nicolaos Hadjioannou, our current owners, which was funded from amounts due from our Manager. Finally, in order to settle the remaining amount of $4.0 million due from our Manager, $4.0
million in restricted cash in collateral accounts held by our Manager was transferred in April 2008 to two new restricted cash collateral accounts of $2.0 million held by each of our Subsidiaries, Petra and Pemer.
In addition to the $147.8 milllion dividend paid to our current owners in March and April 2008, an estimated additional dividend of $31.0 million, which will be funded using amounts due from our
Manager, reflecting a portion of estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering will also be declared prior to the closing of this offering. Investors
in this offering will not be entitled to receive any portion of either of this dividend.
In March 2008, we paid $7.7 million as advances for vessels under construction funded by advances from our current owners. On May 27, 2008, we will be required to pay an additional ¥400 million as
advances for a vessel under construction funded by advances from our current owners. These advances will be paid back to our current owners from either surpluses from operations or from future
68
credit facilities. Immediately after the closing of this offering, we expect to have $20.0 million in cash held by our Subsidiaries of which $16.0 million comprises cash and cash equivalents and $4.0 million
comprises restricted cash, aggregate indebtedness of $416.8 million plus the equivalent of ¥400 million in U.S. dollars as of May 27, 2008, and available borrowing capacity of $90.0 million under our two additional
credit facilities for which we have accepted commitment letters of $45.0 million each, to be entered into by the Subsidiaries Eniaprohi and Eniadefhi.
We intend, following the completion of this offering, to pay a quarterly dividend of $0.475 per share, or $1.90 per share per year and expect to pay our first dividend following this offering in August
2008, calculated based on the pro rata amount of the quarterly dividend for the period from the closing of this offering until the end of the second quarter of 2008. We expect that the dividend we intend to pay to
stockholders following the completion of this offering will represent a significant portion of our cash flows from operations. We intend to raise $200.0 million of additional borrowing capacity. If we are unable to
secure this additional borrowing, our ability to pay dividends will be adversely affected.
We also expect to retain a portion of our cash to help fund the future growth of our fleet, other capital expenditures and debt repayments, as determined by our board of directors. After giving pro forma
effect to the removal of the Additional Companies (and the associated $112.4 million gain on their sale), the activities of our Subsidiary Maxpente with respect to the
Pedhoulas Farmer
(a vessel sold on January
9, 2007 immediately following its acquisition by Maxpente) and to the other adjustments (see Unaudited Pro Forma Combined Condensed Financial Statements) with respect to our combined statement of
operations for the year ended December 31, 2007, our net income on a pro forma basis was $87.8 million for 2007. This reflects, on a pro forma basis, the operations of fewer vessels than we anticipate having in
our fleet in 2008, 2009 and 2010 and a daily TCE rate below the average rate for which we already had, as of December 31, 2007, period time charter commitments for the following percentages of our fleets
anticipated available days: 200875.9%, 200950.6% and 201036.1%. We therefore expect that our contracted revenues when compared with our anticipated operating expenses and financing costs will provide the
liquidity necessary to support our dividend policy and our growth. As of December 31, 2007, our contracted period time charter arrangements for 2008 through 2010 were expected to provide revenues of $347.1
million. Additionally, the contracted revenue from period time charters is expected to be $66.5 million for 2011 and $156.1 million from January 1, 2012 onwards. Overall, as of December 31, 2007, the contracted
revenue for these years is $569.6 million. However, in the event our future liquidity needs are greater than expected, it could reduce or eliminate the cash available for distributions as dividends. In such event, our
board of directors may change our dividend policy.
Our Subsidiaries are incorporated under the laws of the Republic of Liberia, which generally prohibit the payment of dividends other than from surplus or net profits, or while a company is insolvent or
would be rendered insolvent by the payment of such a dividend. Additionally, under the terms of certain of our existing credit facilities, our Subsidiaries are not permitted to pay dividends if an event of default
has occurred and is continuing or would occur as a result of the payment of such dividends.
Cash Flows
Net Cash (Used in)/Provided by Operating Activities
The cash we generate from operating activities is reflected as cash used in operating activities for all periods presented, mainly as a result of our arrangements with our Manager. Under our arrangements
with our Manager, our Manager undertakes the execution of all financial transactions on our behalf with respect to third parties and our owners. As a result, all of our cash from a period, including cash from
operating activities, investing activities and financing activities, is maintained in the name of our Manager and is reflected as amounts Due from Manager in the predecessor combined statements of cash flows for
such period.
For the year ended December 31, 2007, amounts Due from Manager decreased by $143.0 million (which includes the $88.4 million of net cash provided by investing activities shown below in the section
Net Cash (Used in)/Provided by Investing Activities and the $366.9 million of net cash used in financing activities shown below in the section Net Cash (Used in)/Provided by Financing Activities) compared
to an increase of $83.0 million (which includes the $33.8 million of net cash used in investing
69
activities shown below in the section Net Cash (Used in)/Provided by Investing Activities and the $46.6 million of net cash provided by financing activities shown below in the section Net Cash (Used
in)/Provided by Financing Activities) for the year ended December 31, 2006. This decrease of $143.0 million during the year ended December 31, 2007, was mainly due to settlement of intercompany accounts
with our Manager and our owners, including dividend payments of $383.9 million, partially offset by increased proceeds from long term debt. The increase in amounts Due from Manager for the years ended
December 31, 2006 and 2005, remained relatively steady at $83.0 million (which includes the $33.8 million of net cash used in investing activities shown below in the section Net Cash (Used in)/Provided by
Investing Activities and the $46.6 million of net cash provided by financing activities shown below in the section Net Cash (Used in)/Provided by Financing Activities) for the year ended December 31, 2006,
compared to $80.5 million (which includes the $6.1 million of net cash used in investing activities shown below in the section Net Cash (Used in)/Provided by Investing Activities and the $28.4 million of net
cash provided by financing activities shown below in the section Net Cash (Used in)/Provided by Financing Activities) for the year ended December 31, 2005.
Following this offering, our cash will be maintained in bank accounts in our name and monthly transfers will be made to our Manager in order for our Manager to pay the operating and voyage expenses
of our vessels.
Net Cash (Used in)/Provided by Investing Activities
Net cash flows provided by investing activities were $88.4 million for the year ended December 31, 2007 compared to net cash flows used in investing activities of $(33.8) million for the year ended
December 31, 2006. This increase of $122.2 million from 2006 is attributable to an increase in proceeds from the sale of vessels, as during the year ended December 31, 2007, we sold four vessels, while during
the year ended December 31, 2006, we sold two vessels. The increase of $27.7 million in net cash flows used by investing activities to $(33.8) million during the year ended December 31, 2006 as compared to
$(6.1) million during the year ended December 31, 2005 is attributable to the increase in payments related to vessel acquisitions, and vessel construction and the increase in proceeds from the sale of vessels.
During the year ended December 31, 2006, we paid $110.2 million with respect to vessel acquisitions, and received $76.4 million from the sale of assets compared to payments of $52.2 million and receipt of
proceeds from the sale of vessels of $46.1 million during the year ended December 31, 2005.
Net Cash (Used in)/Provided by Financing Activities
Net cash flows (used in) financing activities were $(366.9) million for the year ended December 31, 2007 compared to net cash flows provided by financing activities of $46.6 million for the year ended
December 31, 2006. This decrease is largely attributable to a $144.1 million increase in our repayment of owners advances compared to 2006 and dividend payments of $383.9 million, partially offset by a
$138.6 million increase in proceeds from long-term debt compared to 2006. Net cash flows from financing activities increased 64.1%, or $18.2 million, to $46.6 million during the year ended December 31, 2006,
from $28.4 million during the year ended December 31, 2005. The increase is largely due to a net increase in advances from owners (after repayment) of $44.5 million to $44.8 million during the year ended
December 31, 2006, compared to $0.3 million during the year ended December 31, 2005. It is also attributable to a decrease in the net proceeds from long-term debt of $26.4 million to $1.9 million during the
year ended December 31, 2006, compared to $28.3 million during the year ended December 31, 2005.
Credit Facilities
We, through the Subsidiaries, have entered into a number of credit facilities in connection with financing the acquisition of our vessels. The table below summarizes certain terms of our existing credit
facilities in effect as of December 31, 2007. As of that date, none of the Additional Companies had any existing credit facilities.
70
Lender
Subsidiary Party
Outstanding
Interest
Maturity
Remaining Repayment
DEN NORSKE BANK
Marindou
CHF15.3 million
($13.6 million)
LIBOR plus
0.75% per annum
May 14, 2013
11 semi-annual installments: CHF
700,000 for the first through third
installments; CHF 800,000 for the
fourth through 10th; and CHF
7,600,000 for the 11th installment
THE ROYAL BANK OF SCOTLAND PLC (5)
Kerasies
$40.0 million
LIBOR plus
0.575% per
annum
Dec. 13, 2019
24 semi-annual installments:
$800,000 for each of the first six
installments; $1.1 million for each
of the seventh to 18th installments;
$1.3 million for each of the 19th
to 23rd installments and $15.7
million for the 24th installment
DNB NOR BANK ASA (6)
Efragel
CHF16.6 million
and ¥1.0 billion
(together, $23.8
million)
LIBOR plus
0.75% per annum
Nov. 15, 2014
14 semi-annual installments: CHF
721,050 and JPY 44,420,000 for
the first and second installments;
CHF 650,000 and JPY 39,978,000
for the third through 13th
installments; and CHF 7,991,360
and JPY 493,062,000 for the 14th
installment
THE ROYAL BANK OF SCOTLAND PLC (7)
Marathassa
(
Maritsa)
$11.6 million and
CHF13.5 million
(together, $23.6
million)
LIBOR plus
0.675% per
annum
Feb. 18, 2017
19 semi-annual installments:
$477,500 and CHF 550,000 for the
first installment; $407,500 and
CHF 470,000 for each of the
second to 18th installments; and
$4.2 million and CHF 4,941,600
for the 19th installment
THE ROYAL BANK OF SCOTLAND PLC (8)
Marinouki
(
Marina
)
¥3.4 billion ($30.4
million)
LIBOR plus
0.675% per
annum
Mar. 4, 2018
21 semi-annual installments: JPY
52,000,000 for each of the first
three installments; JPY 78,000,000
for each of the fourth to ninth
installments; JPY 92,000,000 for
each of the 10th to the 20th
installments; and JPY
1,783,059,940 million on the 21st
installment
DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT (9)
Staloudi (
Stalo
)
$30.4 million
LIBOR plus
0.65% per annum
May 30, 2016
Tranche A: 17 semi-annual
installments: $687,500 each with
an additional balloon payment of
$14.6 million due with the last
installment
BAYERISCHE HYPO-UND VEREINSBANK AKTIENGESELLSCHAFT (10)
Petra
$2.0 million and
CHF41.1 million
(together, $38.4
million)
LIBOR plus
0.65% per annum
Jan. 18, 2019
23 semi-annual installments: CHF
1,250,000 for each of the first 22
installments; and $2.0 million and
CHF 13,563,000 for the 23rd
installment
BAYERISCHE HYPO-UND VEREINSBANK AKTIENGESELLSCHAFT (11)
Pemer
¥4.1 billion ($36.2
million)
LIBOR plus
0.65% per annum
Mar. 7, 2019
23 semi-annual installments: JPY
116,400,000 for each of the first
22 installments; and JPY
1,513,200,000 million for the 23rd
installment
DNB NOR BANK ASA (12)
Pelea
$41.4 million
LIBOR plus
0.575% per
annum
June 14, 2019
23 semi-annual installments:
$650,000 for each of the first five
installments; $750,000 for the sixth
through to the 11th installment;
$1.19 million for the 12th through
to the 22nd installment; and $19.32
million for the 23rd installment
THE ROYAL BANK OF SCOTLAND PLC (13)
Soffive
$45.0 million
LIBOR plus
0.575% per
annum
Nov. 17, 2019
24 semi-annual installments:
$900,000 for each of the first six
installments; $1.2 million for each
of the seventh to 18th installments;
$1.5 million for each of the 19th
to the 23rd installments; and $17.7
million for the final installment.
(Encumbered
Vessel) (1)
Principal
Amount (2)
Rate
Installments as of
December 31, 2007 (3)
ASA (4)
(
Maria)
(
Katerina
)
(
Efrossini
)
Tranche B: 17 semi-annual
installments: $112,500 each with
an additional balloon payment of
$2.3 million due with the last
installment (9)
(
Pedhoulas
Trader
)
(
Pedhoulas
Merchant
)
(
Pedhoulas
Leader
)
(
Sophia
)
|
||||||||||||||||||||
(1) |
|
As of December 31, 2007, the Vassos , owned by Avstes, was unencumbered. We entered into a new credit facility in the amount of $36.0 million with DnB NOR Bank ASA on April 17, 2008, under which we have mortgaged the Vassos .
|
71
(2)
Swiss franc, or CHF, amounts translated to U.S. dollars have been translated at a rate of CHF1.1267:$1.00, and Japanese yen, or ¥, amounts translated to U.S. dollars have been translated at a rate of
¥112.35:$1.00, the exchange rates in effect on December 31, 2007. We have converted a significant portion of the outstanding amounts under our current credit facilities denominated in currencies other
than the U.S. dollar as of December 31, 2007 and intend to convert the remainder in the future. See Subsequent EventsConversion of Certain Outstanding Borrowings to U.S. Dollar Amounts.
(3)
Remaining installment payments listed based on U.S. dollar amounts set forth in credit agreement and may be payable in the equivalent amount in the relevant optional currency if amounts are
outstanding in an optional currency. Actual amounts payable in U.S. dollars may differ from contract repayment amounts based on fluctuations of the optional currency-to-U.S. dollar exchange rate.
(4)
Loan Agreement between Den Norske Bank ASA and Marindou, dated May 12, 2003 (the Old Marindou loan). The Old Marindou loan was refinanced on January 14, 2008, as described in more detail
in New Credit Facilities below.
(5)
Loan Agreement between RBS and Kerasies, dated December 13, 2007.
(6)
Loan Agreement between DnB NOR BANK ASA and Efragel, dated November 11, 2004 (the Old Efragel loan). The Old Efragel loan was refinanced on January 17, 2008, as described in more detail
in New Credit Facilities below.
(7)
Loan Agreement between RBS and Marathassa, dated February 16, 2005.
(8)
Loan Agreement between RBS and Marinouki, dated March 1, 2006. On March 19, 2008, amounts outstanding in Japanese yen under the Marinouki credit facility were converted into U.S. dollar amounts
and the total amount outstanding was increased by $4.0 million as a result of currency exchange losses to the lender from the conversion, so that following the conversion and increase, the remaining
balance of the credit facility was $32.6 million.
(9)
Loan Agreement between Deutsche Schiffsbank Aktiengesellschaft and Staloudi, dated May 29, 2006, as amended December 3, 2007 and May 13, 2008.
(10)
Loan Agreement between Bayerische Hypo-Und Vereinsbank Aktiengesellschaft, or Bayerische, and Petra, dated January 11, 2007. On January 18, 2008, amounts outstanding in Swiss francs under the
Petra credit facility were converted into U.S. dollar amounts so that following the conversion the remaining balance of the credit facility was $38.2 million.
(11)
Loan Agreement between Bayerische and Pemer, dated March 7, 2007. On March 7, 2008, amounts outstanding in Japanese yen under the Pemer credit facility were converted into U.S. dollar amounts so
that following the conversion the remaining balance of the credit facility was $38.2 million.
(12)
Loan Agreement between DnB NOR BANK ASA and Pelea, dated June 12, 2007.
(13)
Loan Agreement between RBS and Soffive, dated November 19, 2007.
The credit facilities are secured as follows:
first priority mortgages over the vessels owned by the respective borrowers; and
first priority assignment of all earnings and insurances from the mortgaged vessels.
The credit facilities also impose operating and financial restrictions on us. These restrictions in our existing credit facilities generally limit our Subsidiaries ability to, among other things:
pay dividends if an event of default has occurred and is continuing or would occur as a result of the payment of such dividend;
enter into long-term charters for more than 13 months;
incur additional indebtedness, including through the issuance of guarantees;
change the flag, class or management of the vessel mortgaged under such facility or terminate or materially amend the management agreement relating to such vessel;
create liens on their assets;
make loans;
72
make investments;
make capital expenditures;
undergo a change in ownership; and
sell the vessel mortgaged under such facility.
Our existing credit facilities also require certain of our Subsidiaries to maintain specified financial ratios and satisfy financial covenants. Depending on the credit facility, certain of our Subsidiaries are
subject to financial ratios and covenants requiring that these Subsidiaries:
ensure that the value of the vessel mortgaged under the applicable credit facility not fall below 100% to 120%, as applicable, of the outstanding amount of the loan; and
ensure that outstanding amounts in currencies other than the U.S. dollar do not exceed 100% or 110%, as applicable, of the U.S. dollar equivalent amount specified in the relevant credit
agreement for the applicable period by, if necessary, providing cash collateral security in an amount necessary for the outstanding amounts to meet this threshold.
As of December 31, 2006, we were in compliance with all debt covenants. Although we were in breach of certain covenants as of December 31, 2007 prohibiting the entry into charters for a term longer
than the maximum specified duration, which resulted in the payment of dividends to shareholders being a breach of covenant under the applicable loan agreements, all of these breaches were subsequently waived
in writing by the relevant lenders in February 2008.
The covenants described above are those contained in our existing credit facilities.
Based on the terms of the commitment letters to enter into two new credit facilities of $45.0 million each that we have accepted from DnB NOR Bank ASA, the new credit facilities will contain covenants
substantially similar to the covenants described above. Pursuant to those commitment letters, we will also guarantee the obligations of our Subsidiaries under those credit facilities and certain financial covenants
will apply to us, including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition, these credit facilities will
contain a covenant that the Hajioannou family maintain its majority interest in us. By letter dated May 14, 2008, we have also agreed to become the guarantor of the reducing revolving credit facilities of our
subsidiaries Marathassa Shipping Corporation, Marinouki Shipping Corporation, Kerasies Shipping Corporation and Soffive Shipping Corporation. Under the supplemental agreements we have agreed to enter into
with RBS in respect of the Marathassa, Marinouki, Kerasies and Soffive loan agreements, the margin applicable to such loans will in each case increase to 0.75% from 0.675%, 0.675%, 0.575% and 0.575%,
respectively. In connection with our intended guarantee of the loans of Efragel Shipping Corporation, Marindou Shipping Corporation and Pelea Shipping Corporation, we expect that the margins applicable to those
loan obligations will also increase.
The covenants that may be contained in any new credit facility, however, may differ from the covenants described above. In addition, we intend to enter into supplemental agreements with respect to
certain of our Subsidiaries existing credit facilities (see the section entitled Description of IndebtednessOur Credit Facilities). Although the relevant lender has proposed, and we agree with, certain key terms to
be included in the supplemental agreements (such as the margin and covenants to apply following the offering), the lenders proposal is subject to agreement on all relevant terms of the supplemental agreements.
Accordingly, the final terms of these supplemental agreements may differ from the proposed terms and could be more onerous, which my require us to seek alternative financing.
For additional information regarding our existing credit facilities see Description of Indebtedness.
73
New Credit Facilities
New Marindou Credit Facility
In January 2008, our Subsidiary Marindou entered into a ten-year, $42.0 million multi-currency reducing revolving credit facility with DnB NOR Bank ASA, which we refer to as the New Marindou
credit facility, to refinance existing indebtedness and provide working capital. We borrowed $42.0 million on January 14, 2008 under the New Marindou credit facility. Subject to certain requirements, borrowings
may be made and outstanding amounts may be converted into the following optional currencies in addition to the U.S. dollar: Swiss francs, Japanese yen and euros.
The interest rate under the New Marindou credit facility is LIBOR plus a margin of 0.65% per annum. The facility amount will be reduced by semi-annual reductions starting July 14, 2008. The amount of
each of the first to sixth reductions will be each $750,000; the amount of the seventh to 12th reductions will be each $1.0 million; the amount of the thirteenth through 20th reductions will be each $1.7 million;
and a final reduction of $18.0 million will occur together with the 20th scheduled reduction.
Our obligations under the New Marindou credit facility are secured by a first-priority mortgage over the
Maria
and by a first-priority assignment of our earnings related to the vessel, including charter
revenues and any insurance proceeds. In addition, following this offering, we will guarantee the obligations of our Subsidiary Marindou under this credit facility and certain financial covenants will apply to us,
including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition, there will be a covenant that the Hajioannou
family maintain its majority interest in us.
New Efragel Credit Facility
In January 2008, our Subsidiary Efragel entered into a ten-year, $42.0 million multi-currency reducing revolving credit facility with DnB NOR Bank ASA, which we refer to as the New Efragel credit
facility, to refinance existing indebtedness and provide working capital. We borrowed $42.0 million on January 17, 2008 under the New Efragel credit facility. Subject to certain requirements, borrowings may be
made and outstanding amounts may be converted into the following optional currencies in addition to the U.S. dollar: Swiss francs, Japanese yen and euros.
The interest rate under the New Efragel credit facility is LIBOR plus a margin of 0.65% per annum. The facility amount will be reduced by semi-annual reductions starting July 17, 2008. The amount of
each of the first to sixth reductions will be each $750,000; the amount of the seventh to 12th reductions will be each $1.0 million; the amount of the thirteenth through 20th reductions will be each $1.7 million;
and a final reduction of $18.0 million will occur together with the 20th scheduled reduction.
Our obligations under the New Efragel credit facility are secured by a first-priority mortgage over the
Efrossini
and by a first-priority assignment of our earnings related to the vessel, including charter
revenues and any insurance proceeds. In addition, following this offering, we will guarantee the obligations of our Subsidiary Efragel under this credit facility and certain financial covenants will apply to us,
including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition, there will be a covenant that the Hajioannou
family maintain its majority interest in us.
Avstes Credit Facility
On April 17, 2008, our Subsidiary Avstes entered into a ten-year, $36.0 million multi-currency reducing revolving credit facility with DnB NOR Bank ASA, which we refer to as the Avstes credit
facility. We drew down the full amount of $36.0 million on April 18, 2008 under the Avstes credit facility and advanced this amount to our Manager, so that our Manager could pay dividends to our current
owners on our behalf. Subject to certain requirements, borrowings may be made and outstanding amounts may be converted into the following optional currencies in addition to the U.S. dollar: Swiss francs,
Japanese yen and euros.
The interest rate under the Avstes credit facility is LIBOR plus a margin of 0.80%, and the margin that will apply following this offering will be agreed prior to the closing of this offering. We will incur
a
74
commitment fee on any unused portion of the amount available under the Avstes credit facility at a rate of 0.20% per year.
The facility amount will be reduced by 20 semi-annual reductions starting on October 18, 2008. The amount of each reduction will be $0.9 million and a balloon reduction of $18.0 million will occur
together with the final scheduled reduction.
Our obligations under the Avstes credit facility are secured by a first-priority mortgage over the
Vassos
and by a first-priority assignment of our earnings related to the vessel, including charter revenues
and any insurance proceeds. In addition, upon or prior to this offering, we intend to enter into a supplemental agreement pursuant to which we will guarantee the obligations of our Subsidiary Avstes under this
credit facility and certain financial covenants will apply to us, including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net
worth. In addition, there will be a covenant that the Hajioannou family maintain its majority interest in us.
Eniaprohi Credit Facility
We accepted a commitment letter from DnB NOR Bank ASA on April 3, 2008 to enter into a 10-year multi-currency reducing revolving credit facility pursuant to which we will borrow, through our
subsidiary Eniaprohi, $45.0 million and which we refer to in this prospectus as the Eniaprohi credit facility. Borrowings under this credit facility will be used to finance construction of our newbuild
Eleni
upon
its delivery from the shipyard.
The commitment letter provides that the Eniaprohi credit facility will initially bear interest at LIBOR plus a margin of 0.90%, and the margin that will apply following this offering will be agreed prior to
the closing of this offering. We will incur a commitment fee on the unused portion of the amount available under the Eniaprohi credit facility at a rate of 0.20% per year.
The facility amount will be reduced by 20 semi-annual reductions starting six months from the date of the delivery of the vessel. The amount of each reduction will be $1.125 million and a balloon
reduction of $22.5 million will occur together with the final scheduled reduction.
The obligations under the Eniaprohi credit facility will be initially secured by a first-priority mortgage over the
Eleni
and by a first-priority assignment of our earnings related to the vessel, including
charter revenue and any insurance proceeds. In addition, the commitment letter provides that following this offering, we will guarantee the obligations of our subsidiary Eniaprohi under this credit facility and
certain financial covenants will apply to us, including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition,
there will be a covenant that the Hajioannou family maintain its majority interest in us.
Eniadefhi Credit Facility
We accepted a commitment letter from DnB NOR Bank ASA on April 3, 2008 to enter into a 10-year multi-currency reducing revolving credit facility pursuant to which we will borrow, through our
subsidiary Eniadefhi, $45.0 million and which we refer to in this prospectus as the Eniadefhi credit facility. Borrowings under this credit facility will be used to finance construction of our newbuild
Martine
upon its delivery from the shipyard.
The commitment letter provides that the Eniadefhi credit facility will initially bear interest at LIBOR plus a margin of 0.90%, and the margin that will apply following this offering will be agreed prior to
the closing of this offering. We will incur a commitment fee on the unused portion of the amount available under the Eniadefhi credit facility at a rate of 0.20% per year.
The facility amount will be reduced by 20 semi-annual reductions starting six months from the date of the delivery of the vessel. The amount of each reduction will be $1.125 million and a balloon
reduction of $22.5 million will occur together with the final scheduled reduction.
The obligations under the Eniadefhi credit facility will be initially secured by a first-priority mortgage over the
Martine
and by a first-priority assignment of our earnings related to the vessel, including
charter revenue and any insurance proceeds. In addition, the commitment letter provides that following this offering, we will guarantee the obligations of our subsidiary Eniadefhi under this credit facility and
certain
75
financial covenants will apply to us, including a consolidated leverage ratio, and debt-to-EBITDA ratios, and minimum tangible net worth. In addition, there will be a covenant that the Hajioannou family maintain
their majority interest in us.
Contractual Obligations
Our contractual obligations as of December 31, 2007 were:
Payments Due by Period
Total
Less than
1-3 years
3-5 years
More than
(Dollars in thousands)
Long-term debt obligations (1)
$
322,887
$
16,620
$
51,856
$
42,636
$
211,775
Interest payments (1) (2)
96,571
12,284
32,975
18,601
32,711
Payments to our manager (3)
30,883
3,577
11,857
8,186
7,264
Newbuild contracts
434,650
76,334
358,316
Total
$
884,991
$
108,815
$
455,004
$
69,423
$
251,750
(1)
Amounts include obligations under the Old Efragel credit facility and Old Marindou facility, which were repaid in full using funds received from the New Efragel credit facility and New Marindou credit
facility. See Credit FacilitiesNew Credit Facilities.
the New Efragel credit facility, dated January 11, 2008, under which we borrowed $42.0 million on January 17, 2008;
(b)
the New Marindou credit facility, dated January 11, 2008, under which we borrowed $42.0 million on January 14, 2008; and
(c)
the Avstes credit facility, dated April 17, 2008, under which we borrowed $36.0 million on April 18, 2008.
The payments due by period for the New Efragel facility are expected to be $0.8 million to December 2008, $4.8 million from January 2009 to December 2011, $4.0 million from January 2012 to
December 2013 and $32.5 million after January 1, 2014.
The
payments due by period for the New Marindou facility are expected to
be $0.8 million to December 2008, $4.8 million from January 2009 to December
2011, $4.0 million from January 2012 to December 2013 and $32.5 million
after January 1, 2014.
The
payments due by period for the Avstes facility are expected to be $0.9
million to December 2008, $5.4 million from January 2009 to December
2011, $3.6 million from January 2012 to December 2013 and $26.1 million
after January 1, 2014.
(2)
Amounts shown reflect estimated interest payments we expect to make with respect to our long-term debt obligations. The interest payments reflect an assumed LIBOR-based applicable interest rate of
4.1875% for amounts outstanding in U.S. dollars, 1.05125% for amounts outstanding in Japanese yen and 2.975% for amounts outstanding in Swiss francs with respect to our existing credit facilities, plus
the relevant margin of the applicable credit facility. Additionally, in calculating the interest payments for the first three years of the Kerasies credit facility we have used the fixed swap rate of 4.0925%
plus the applicable loan margin. See Interest Rate Risk. We have converted a substantial portion of our outstanding amounts under our credit facilities in currencies other than the U.S. dollar into U.S.
dollar amounts and we intend to convert the remaining outstanding amounts into U.S. dollar amounts at a time when we deem market conditions to be more favorable. See Credit Facilities and
Description of Indebtedness.
(3)
The amounts presented in the table above as contractual obligations to the Manager have been calculated on the basis of the management agreement with our Manager that will be effective prior to the
closing of this offering. No interest is payable with respect to these obligations if paid on a timely basis; therefore, no interest payments are included in these amounts. Under these management
76
1 year
(To December
2008)
(January 2009
December 2011)
(January 2012
December 2013)
5 years
(After
January 1,
2014)
Amounts
do not include obligations under the following credit facilities entered
into after December 31, 2007:
(a)
arrangements, from January 1, 2008 through the second anniversary of the completion of this offering, we will pay our Manager $575 per vessel per day, per vessel for certain commercial, technical and
administrative services, a fee of 1.0% of the gross freight, charter hire, ballast bonus and demurrage collected from the employment of our ships and a commission 1.0% of the contract price of any
vessels sold on our behalf. In addition, under our management agreement, for the two year period following completion of our offering, we will pay our Manager a commission of 1.0% of the contract
price of any vessels bought on our behalf (other than the
Eleni
and the
Martine
) and $375,000 per newbuild for the on-premises supervision of newbuilds we have agreed to acquire pursuant to
shipbuilding contracts, memoranda of agreement, or otherwise.
Capital Expenditures
We make capital expenditures from time to time in connection with our newbuild program. During the year ended December 31, 2006, we acquired two Kamsarmax class vessels and two Post-Panamax
class vessels, and during the year ended December 31, 2007, we acquired one Kamsarmax class vessel and one Post-Panamax class vessel. During the year ended December 31, 2006 and the year ended December
31, 2007, we funded $72.5 million and $46.3 million, respectively, of the remaining installment payments on these vessels with owners advances. Subsequently, we repaid these owners advances through bank
loans.
Our current commitments for capital expenditures are related to our eight contracted newbuilds, which have a total contract price of $404.2 million and ¥8.5 billion (together, the equivalent of $479.7 million,
based on a ¥112.35/$1.00 exchange rate in effect on December 31, 2007). During the year ended December 31, 2006 we funded ¥1.1 billion (the equivalent of $9.4 million, based on a average ¥116.77/$1.00 exchange
rate in effect at the time of payment in August 31, 2006), of the contract prices of these newbuilds with advances from owners. Of this amount we repaid $5.4 million in 2007 from bank loans, and we repaid the
remaining balance in January 2008, from the two new credit facilities. During the year ended December 31, 2007 we paid an additional $43.8 million which was funded from surplus of operations. We paid on
March 4, 2008, ¥800 million (the equivalent of $7.7 million based on a ¥104.15/$1.00 exchange rate) funded by advances from owners, which will be repaid from either surpluses from operations or future credit
facilities, in relation to newbuilds of Subsidiaries Eniaprohi and Eniadefhi. We will also be required to pay, on May 27, 2008, an additional amount of ¥400 million in relation to the newbuild of Eniaprohi funded
by advances from owners, which will be repaid from either surpluses from operations or future credit facilities. In addition, we expect to pay $32.2 million funded from surplus of operations during 2008, in
relation to newbuilds of Subsidiaries Maxpente and Eptaprohi. Simultaneously with this payment, Maxpente and Eptaprohi are required to provide the relevant shipyard with bank performance guarantees in the
aggregate amount of $32.2 million covering the payment of the subsequent installments under the respective newbuild contracts. The security for such bank guarantees will be provided by our current owners, and
following this offering it will be provided by Maxpente and Eptaprohi.
We are scheduled to take delivery of these eight newbuilds in late 2008, 2009 and 2010. The remaining balance of the contract prices are $368.2 million and ¥7.5 billion as of December 31, 2007, including
certain additional amounts for adjustments (together, the equivalent of $434.7 million, based on a ¥112.35/$1.00 exchange rate in effect on December 31, 2007), as provided under our newbuild contracts, including
certain third party seller interest expenses and adjustments for early delivery. With respect to the delivery of the
Eleni
, which the shipyard has agreed to deliver in the fourth quarter of 2008, earlier than the
originally scheduled delivery date of January 31, 2009, we are required to pay an additional amount of ¥591,500 (the equivalent of $5,265, based on ¥112.35/$1.00 exchange rate in effect on December 31, 2007) per
day for each day between the actual delivery of the
Eleni
and January 31, 2009. We expect that the
Eleni
will be delivered on or around November 10, 2008, and the amount payable, assuming delivery on such
date, would be ¥48.5 million (the equivalent of $0.4 million, based on a ¥112.35/$1.00 exchange rate in effect on December 31, 2007).
We intend to fund these commitments with available cash, borrowings under
our two credit facilities for which we have accepted commitment letters of $45.0 million each to be entered into by the Subsidiaries Eniaprohi and Eniadefhi and a portion of available borrowings under an
additional proposed secured facility of $200.0 million which we intend to obtain before the end of 2009.
We may incur additional capital expenditures as the remaining price for two newbuilds is denominated in Japanese yen. As of December 31, 2007, the remaining purchase price for these newbuilds was ¥7.4
billion (the equivalent of $65.9 million, based on a ¥112.35/$1.00 exchange rate in effect on
77
December 31, 2007). The amount described above with respect to the early delivery of the
Eleni
is also denominated in Japanese yen. We have not hedged this currency exposure and, as a result, changes in the
value of the U.S. dollar relative to the Japanese yen may lead to fluctuations in the amount of actual capital necessary to make the installment payments under such contracts. To the extent we require additional
capital to make installment payments under these contracts due to currency fluctuations, we intend to fund such payments with borrowings described above.
To the extent that we are unable to enter into the two credit facilities for which we have accepted commitment letters of $45.0 million each to be entered into by the Subsidiaries Eniaprohi and Eniadefhi
or enter into the additional secured facility before the end of 2009 as decribed above on terms acceptable to us, we will need to find alternative financing. If we are unable to find alternative financing, we will not
be capable of funding all of our commitments for capital expenditures relating to our eight contracted newbuilds, which could adversely impact the dividends we intend to pay following this offering, and materially
adversely affect our results of operations and financial condition.
Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We are subject to market risks relating to changes in interest rates because we, through the Subsidiaries, have floating rate debt outstanding. During the years ended December 31, 2006 and 2007, we paid
interest under our existing credit facilities based on LIBOR applicable to deposits in the currency of the outstanding amounts (or in the case of outstanding amounts in euros, EURIBOR) plus a margin. As an
indication of the extent of our sensitivity to interest rate changes:
with respect to our borrowings in U.S. dollars, a one percent increase in LIBOR applicable to the U.S. dollar would have increased our interest expense for the year ended December 31, 2007
from $3.8 million to $4.4 million, and a one percent increase in LIBOR applicable to the U.S. dollar would have increased our interest expense for the year ended December 31, 2006 from $3.9
million to $4.5 million;
with respect to our borrowings in Japanese yen, a one percent increase in LIBOR applicable to Japanese yen would have increased our interest expense for the year ended December 31, 2007
from $1.1 million to $1.8 million, and a one percent increase in LIBOR applicable to Japanese yen would have increased our interest expense for the year ended December 31, 2006 from $0.3
million to $0.6 million;
with respect to our borrowings in Swiss francs, a one percent increase in LIBOR applicable to Swiss francs would have increased our interest expense for the year ended December 31, 2007 from
$3.2 million to $4.3 million, and a one percent increase in LIBOR applicable to Swiss francs would have increased our interest expense for the year ended December 31, 2006 from $1.7 million
to $2.4 million; and
with respect to our borrowings in euros, a one percent increase in EURIBOR would have no effect on our interest expense for the year ended December 31, 2007, as there were no loan
outstandings in Euros on December 31, 2007 and as for the year ended December 31, 2006, would have increased our interest expense by $0.3 million.
The following table sets forth the sensitivity of our existing loans in U.S. dollars as of December 31, 2007, assuming that all amounts outstanding in currencies other than the U.S. dollar are converted into
U.S. dollar amounts by the end of December 31, 2007 as to a 100 basis point increase in LIBOR during the next five years on the same basis, and reflects the additional interest expense.
Year
Amount
2008
$
3.2 million
2009
$
3.1 million
2010
$
2.9 million
2011
$
2.7 million
2012
$
2.5 million
We expect to have sensitivity to interest rate changes with respect to future credit facilities.
78
Prior to December 14, 2007, we had not entered into any interest rate swap arrangements. Set forth below is our interest rate swap arrangement as of December 31, 2007:
Loan Facility
Counter party
Initial notional
Inception
Expiry
Swap rate
New Kerasies
RBS
$40.0 million
December 14, 2007
December 14, 2010
4.0925
%
The initial notional amount of the swap arrangement is equal to the principal amount. The interest rate swap does not meet hedge accounting criteria under SFAS 133 Accounting for Derivative
Instruments and Hedging Activities and as such is accounted for as a trading derivative. In addition, we entered into six additional swap agreements after December 31, 2007, which are described in the section
Subsequent EventsInterest Rate Swap Agreements. We may determine to employ similar financial instruments from time to time in the future in order to minimize our interest rate exposure.
Foreign Currency Exchange Risk
We generate all of our revenues in U.S. dollars, but for the year ended December 31, 2006 and the year ended December 31, 2007 we incurred approximately 17.7% and 19.1%, respectively, of our
expenses in currencies other than the U.S. dollar. As of December 31, 2007, approximately 8.3% of our outstanding accounts payable were denominated in currencies other than the U.S. dollar (mainly in euro,
Japanese yen and Swiss francs). In addition, as of December 31, 2007, $76.7 million (based on a currency exchange rate of CHF1.1267:$1.00 in effect as of that date), or 23.8%, of our outstanding borrowings
under our credit facilities were in Swiss francs and $75.8 million (based on a currency exchange rate of ¥112.35:$1.00 in effect as of that date), or 23.5%, of our outstanding borrowings under our credit facilities
were in Japanese yen. Our borrowings denominated in foreign currencies are subject to exchange rate risk and their value fluctuates with changes in exchange rates. A hypothetical 10% immediate and uniform
adverse move in all currency exchange rates affecting our borrowings from the rates in effect as of December 31, 2007, would have increased the fair value of our borrowings by approximately 5.2% and the U.S.
dollar equivalent of outstanding indebtedness by $16.9 million.
However, since December 31, 2007, we have converted all of the indebtedness in foreign currencies into U.S. dollars except for CHF 12.9 million (the equivalent of $12.99 million) which remained
outstanding as of March 31, 2008. As a result, only 3.5% of our loans that were outstanding as of March 31, 2008 were denominated in foreign currencies.
While, from time to time, we have in the past used financial derivatives in the form of foreign exchange forward agreements to mitigate the risk associated with exchange rate fluctuations, currently, no
such instruments are in place.
With respect to our outstanding accounts payable, as of December 31, 2007, we had approximately $0.1 million in currencies other than U.S. dollars, primarily Japanese yen. Our accounts payable
denominated in foreign currency are subject to exchange rate risk and their value fluctuates with changes in exchange rates. A hypothetical 10% immediate and uniform adverse move in all currency exchange rates
affecting our accounts payable from the rates in effect as of December 31, 2007, would have increased the fair value of our accounts payable by approximately $13,853.
Off-Balance Sheet Arrangements
We do not have any other transactions, obligations or relationships that could be considered material off-balance sheet arrangements.
Critical Accounting Policies
We have prepared our predecessor combined financial statements in accordance with U.S. GAAP, which requires us to make estimates in the application of our accounting policies based on our best
assumptions, judgments and opinions. We base these estimates on the information currently available to us and on various other assumptions we believe are reasonable under the circumstances. Actual results may
differ from these estimates under different assumptions or conditions. Following is a discussion of the accounting policies that involve a high degree of judgment and the methods of their application. For a further
description of our material accounting policies, please read Note 2 to our predecessor combined financial statements included elsewhere in this prospectus.
79
amount
Revenue and Related Expense Recognition
We generate revenues from charterers for the charter hire of our vessels. Vessels are chartered mainly under time charters, where a contract is entered into for the use of a vessel for a specific voyage or a
specific period of time and at a specified daily charter rate. Time charter revenues are recorded over the term of the charter as service is provided. Revenues from a time charter may also include ballast bonus,
which is an amount paid by the charterer for repositioning the vessel at the charterers disposal (delivery point) that is recognized as revenue over the term of the charter, and other miscellaneous revenues from
vessel operations. Expenses relating to our time charters are vessel operating expenses and certain voyage expenses, which are paid for by us. These expenses are recognized as incurred. Vessel operating expenses
that we pay for include costs for crewing, insurance, lubricants, spare parts, provisions, stores, repairs, maintenance, statutory and classification expense, drydocking, intermediate and special surveys and other minor
miscellaneous items. Voyage expenses that we pay for include costs for draft surveys, hold cleaning, postage and other minor miscellaneous expenses related to the voyage and recognize as incurred. The charterer
is responsible for paying the cost of bunkers and other voyage expenses (e.g., port expenses, agents fees, canal dues, extra war risks insurance and any other expenses related to the cargo).
Vessels can also be chartered under voyage charter, where a contract is made for the use of a vessel under which we are paid freight on the basis of moving cargo from a loading port to a discharge port.
During the periods presented, there was only one instance where a vessel was employed under voyage charter. Under a voyage charter, revenues are recognized on a pro-rata basis over the duration of the voyage
from load port to discharge port. Probable losses on voyages are provided for in full at the time such losses can be estimated. Related expenses are operating expenses, bunkers and voyage expenses, which are
recognized as incurred and are all paid for by us. Demurrage income represents payments by the charterer to us when loading or discharging time exceeds the stipulated time in the voyage charter and is
recognized when earned and collection is reasonably assured. Dispatch expense represents payments by us to the charterer when loading or discharging time is less then the stipulated time in the voyage charter and
is recognized as incurred.
Revenue is recognized when a charter agreement exists, the vessel is made available to the charterer and collection of the related revenue is reasonably assured. Unearned revenue represents revenue
received prior to the balance sheet date relating to services to be rendered after the balance sheet date. Commissions (address and brokerage), regardless of charter type, are always paid by us and are deferred and
amortized over the related charter period and are presented as a separate line item in revenues to arrive at net revenues in the accompanying predecessor combined statements of operations.
Accounting for Special Survey and Drydocking Costs
Special survey and drydocking costs are expensed in the period incurred and are included in vessel operating expenses in our predecessor combined statements of operations.
Vessels, Net
Vessels are stated at their historical cost, which consists of the contracted purchase price and any direct material expenses incurred upon acquisition (including improvements, on site supervision expenses
incurred during the construction period, commissions paid, delivery expenses and other expenditures to prepare the vessel for her initial voyage) less accumulated depreciation. Financing costs incurred during the
construction period of the vessels are also capitalized and included in vessels cost based on the specific loan method. No interest was capitalized in any of the periods presented in our predecessor combined
financial statements. Certain subsequent expenditures for conversions and major improvements are also capitalized if it is determined that they appreciably extend the life, increase the earning capacity or improve
the efficiency or safety of the vessels.
Vessels Depreciation
Depreciation is computed using the straight-line method over the estimated useful life of a vessel, after considering the estimated residual value. Management estimates the useful life of our vessels to be
25 years from the date of initial delivery from the shipyard.
80
Impairment of Long-lived Assets
We apply SFAS No. 144,
Accounting for the Impairment or Disposal of Long-lived Assets
(SFAS 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived
assets. The standard requires that long-lived assets and certain identifiable intangibles held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable. When the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its carrying
amount, we are required to evaluate the asset for an impairment loss. Measurement of the impairment loss is based on the fair value of the asset as provided by third parties. In this respect, management regularly
reviews the carrying amount of our vessels in connection with the estimated recoverable amount for each of our vessels. No impairment loss was recorded for any of the periods presented.
Subsequent Events
New Credit Facilities
Between January and April 2008, we incurred additional debt of $120.0 million.
Below is a list of new credit facilities for which we have entered into credit agreements since December 31, 2007:
We, through our Subsidiary Marindou, have entered into a new reducing revolving credit facility under which we borrowed an aggregate of $42.0 million on January 14, 2008 of which $13.9
million was used to refinance Marindous existing loans.
We, through our Subsidiary Efragel, have entered into a new reducing revolving credit facility under which we borrowed an aggregate of $42.0 million on January 17, 2008, of which
$24.6 million was used to refinance Efragels existing loans.
We, through our Subsidiary Avstes, have entered into a new reducing revolving credit facility under which we borrowed an aggregate of $36.0 million on April 18, 2008, all of which was
advanced to our Manager to pay dividends to our current owners on our behalf.
We have used the amounts borrowed under our new credit facilities to refinance loans, as described above, repay advances to owners and pay dividends to our current owners prior to this offering. The
remaining $16.0 million is held by our subsidiaries and will be used to fund working capital, in addition to the two cash collateral accounts of $2.0 million each that are held in the names of Petra and Pemer.
New Interest Rate Swap Transactions
Subsequent to December 31, 2007, we entered into the following interest rate swap transactions with respect to the various credit facilities in order to manage interest costs and the risk associated with
changing interest rates with respect to these loans.
Loan Facility
Counter Party
Initial notional
Inception
Expiry
Swap rate
(in thousands)
New Marindou
DnB NOR Bank ASA
$
42,000
January 14, 2008
January 14, 2013
3.95
%
New Efragel
DnB NOR Bank ASA
$
42,000
January 17, 2008
January 17, 2013
3.65
%
Petra
Bayerische
$
38,171
February 19, 2008
January 18, 2013
2.885
%
Pemer
Bayerische
$
38,168
March 7, 2008
March 7, 2013
2.745
%
Marinouki
RBS
$
32,620
March 19, 2008
March 5, 2013
2.73
%
Avstes
DnB NOR Bank ASA
$
36,000
April 25, 2008
April 18, 2013
3.89
%
The initial notional amounts of all the above transactions are equal to the principal amounts of the respective loans and are reduced during the term of the relevant swap transaction based on the expected
principal outstanding under the respective facility. Under all the swap transactions, the counterparty will make semi-annual floating-rate payments to us for the relevant amount based on the six month USD LIBOR,
and we will make semi-annual payments to the counterparty on the relevant amount at the respective fixed swap rates set out in the table above. In the Petra and Pemer transactions, Bayerische has
81
amount
the right to cancel each swap on January 18, 2011 and March 7, 2011, respectively, and on six-month intervals thereafter. In the Marinouki transaction, RBS has the right to cancel the swap on March 5, 2011 and
on six-month intervals thereafter.
We entered into these interest rate swap agreements to mitigate our exposure to interest rate fluctuations and at a time when we believed long-term interest rates were reasonably low. No interest rate swap
meets hedge accounting criteria under SFAS 133. Although we are exposed to credit-related losses in the event of non-performance in connection with such swap agreements, because the counterparties, DNB NOR
Bank ASA, Bayerische and RBS are major financial institutions, we consider the risk of loss due to their nonperformance to be minimal.
Conversion of Certain Outstanding Borrowings to U.S. Dollar Amounts
We have converted or refinanced certain outstanding amounts under our credit facilities in currencies other than the U.S. dollar into U.S. dollar amounts since January 1, 2008 according to the schedule
below:
Subsidiary
Amount outstanding as of
Conversion/refinancing date
Marindou (2)
CHF15,300,000
January 14, 2008
Efragel (2)
¥1,021,660,000;
January 17, 2008
CHF16,583,460
Petra
CHF39,813,000
January 18, 2008
Pemer
¥3,957,600,000
March 7, 2008
Marinouki
¥3,419,059,940
March 19, 2008
(1)
Amounts include only the amounts in currencies other than the U.S. dollar and do not include amounts under the applicable credit facility already outstanding in U.S. dollars.
(2)
These amounts were repaid using funds borrowed under new credit facilities. Borrowings under new credit facilities are in U.S. dollars.
The following credit facility remains outstanding in currencies other than US dollars as of March 31, 2008 and will be converted in the future:
Subsidiary
Amount outstanding
Marathassa
CHF12,931,600
Settlement of Intercompany Balances, Owners Advances and Payment of Dividend.
In March and April 2008 we settled all intercompany balances as of December 31, 2007 with our Manager and with our owners. In connection with this, in January 2008, our Manager repaid on our
behalf prior advances from owners in the amount of $10.1 million, resulting in a corresponding decrease in amounts due from our Manager. In March and April 2008, we paid a dividend of $147.8 million to Polys
Hajionnou and Nicolaos Hadjioannou, our current owners, which was funded from amounts due from our Manager. Finally, in order to settle the remaining amount of $4.0 million due from our Manager, $4.0
million in restricted cash in collateral accounts held by our Manager was transferred in April 2008 to two new restricted cash collateral accounts of $2.0 million held by each of our Subsidiaries, Petra and Pemer.
In addition to the $147.8 milllion dividend paid to our current owners in March and April 2008, an estimated additional dividend of $31.0 million, which will be funded using amounts due from our
Manager, reflecting a portion of estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering will also be declared prior to the closing of this offering. Investors
in this offering will not be entitled to receive any portion of this dividend.
On March 4, 2008, our Subsidiaries Eniaprohi and Eniadefhi paid ¥800 million ($7.7 million based on the exchange rate of ¥104.15/$1.00 in effect on the day of the payment) in relation to newbuilds
ordered, which was funded by current owners advances. On May 27, 2008, we will be required to pay an additional ¥400 million in relation to the newbuild ordered by Eniaprohi, to be funded by current owners
advances. After this offering we expect to pay back to our current owners these amounts from either surpluses from operations or future credit facilities.
82
conversion/refinancing date (1)
Following these transactions, and immediately after the completion of this offering, we expect to have $20.0 million of cash held by our Subsidiaries, of which $16.0 million comprises cash and cash
equivalents and $4.0 million comprises restricted cash.
Recent Accounting Pronouncements
In May 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections, a Replacement of APB Opinion No. 20 and SFAS 3
(SFAS 154). SFAS 154 requires retrospective
application to prior periods financial statements of a voluntary change in accounting principle unless it is impracticable. Accounting Principles Board (APB) Opinion No. 20,
Accounting Changes,
previously
required most voluntary changes in accounting principles be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS 154 was
effective for us as of December 31, 2006, and has not had a material impact on our predecessor combined financial statements.
In June 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
(FIN 48), which supplements SFAS No. 109,
Accounting for Income Taxes,
by defining the
confidence level that a tax position must meet in order to be recognized in the financial statements. FIN 48 requires that the tax effects of a position be recognized only if it is more-likely-than-not to be
sustained based solely on its technical merits as of the reporting date. The more-likely-than-not threshold represents a positive assertion by management that a company is entitled to the economic benefits of a tax
position. If a tax position is not considered more-likely-than-not to be sustained based solely on its technical merits, no benefits of the position are to be recognized.
Moreover, the more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of a benefit. At adoption, companies must adjust their financial statements to
reflect only those tax positions that are more-likely-than-not to be sustained as of the adoption date. Any necessary adjustment would be recorded directly to retained earnings in the period of adoption and reported
as a change in accounting principle. FIN 48 is effective as of the beginning of the first fiscal year beginning after December 15, 2006. The adoption of FIN 48 did not have a material impact on our financial
position, results of operations or cash flows.
In September 2006, the FASB issued SFAS 157,
Fair Value Measurements (SFAS 157)
. SFAS 157 addresses standardizing the measurement of fair value for companies that are required to use a fair
value measure of recognition for recognition or disclosure purposes. The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measure date. SFAS 157 is effective for us for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS 157 did not have any effect on our
results of operations, financial position or cash flows.
In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements
(SAB 108). SAB 108 provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the
purpose of a materiality assessment. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of each of the companys balance sheet and statement of
operations and the related financial statement disclosures. SAB 108 permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15,
2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained
earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how
and when it arose. The adoption of SAB 108 did not have any effect on our predecessor combined financial statements.
In September 2006, the FASB Staff issued Financial Statement Position (FSP) No. AUG AIR-1,
Accounting for Planned Major Maintenance Activities
, (FSP No. AUG AIR-1). FSP No. AUG AIR-1
prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities in annual and interim financial reporting periods, if no liability is required to be recorded for an asset
83
retirement obligation based on a legal obligation for which the event obligating the entity has occurred. FSP No. AUG AIR-1 also requires disclosures regarding the method of accounting for planned major
maintenance activities and the effects of implementing the FSP. The guidance in FSP No. AUG AIR-1 was effective for us as of January 1, 2007. The adoption of FSP No. AUG AIR-1 did not have any effect on
our predecessor combined financial statements as we do not utilize the accrue-in-advance method.
In February 2007, the FASB issued SFAS No. 159
The Fair Value Option for Financial Assets and Financial Liabilities
(SFAS 159), which permits entities to choose to measure many financial
instruments and certain other items at fair value. SFAS 159 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. The adoption of SFAS 159 did not have any effect
on our results of operations, financial position or cash flows.
In December 2007, the FASB issued SFAS No. 141 (revised),
Business Combinations
(SFAS 141 (revised)). SFAS No. 141 (revised) relates to business combinations and requires the acquirer to
recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS No. 141 (revised) applies
prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before
that date. We must adopt this standard as of January 1, 2009. We are currently evaluating the impact, if any, of the adoption of SFAS No. 141 (revised) on our financial position, results of operations and cash
flows.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statementsan amendment of Accounting Research Bulletin No. 51
(SFAS 160), which establishes
accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest,
changes in a parents ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective as of the beginning of an entitys fiscal year that begins after
December 15, 2008, which will be our fiscal year beginning January 1, 2009. We are currently evaluating the impact, if any, of the adoption of SFAS 160 on our financial position, results of operations and cash
flows.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities
(SFAS 161) which requires enhanced disclosures in respect of derivative instruments
and hedging activities. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We are currently evaluating the
impact, if any, of the adoption of SFAS 161 on our financial statements.
84
THE INTERNATIONAL DRYBULK SHIPPING INDUSTRY
All the information and data presented in this section, including the analysis of the various sectors of the drybulk shipping industry, has been provided by Drewry. Drewry has advised that the statistical and
graphical information contained herein is drawn from its database and other sources. In connection therewith, Drewry has advised that: (a) certain information in Drewrys database is derived from estimates or
subjective judgments; (b) the information in the databases of other maritime data collection agencies may differ from the information in Drewrys database; (c) while Drewry has taken reasonable care in the
compilation of the statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures.
Industry Overview
The marine transportation industry provides the only practicable and cost-effective means of transporting large volumes of basic commodities and finished products over long distances. In 2007,
approximately 3.0 billion tons of drybulk cargo were transported by sea, comprising more than one-third of all international seaborne trade. The breakdown of all seaborne trade by main commodity type is shown
below.
World Seaborne Trade: 2001 & 2007
TradeMillion Tons
CAGR(1) 200107
% Total Trade
2001
2007P
%
2001
2007
Dry Cargo
Major Bulks
1,251
1,815
6.4%
Coal
565
761
5.1%
8.7
8.5
Iron Ore
452
785
9.6%
6.9
8.8
Grain
235
269
2.3%
3.6
3.0
Minor Bulks
890
1,161
4.5%
13.6
13.0
Total Dry Bulk
2,141
2,976
5.6%
Container Cargo
646
1,272
12.0%
9.9
14.2
Non Container/General Cargo
644
820
4.1%
9.9
9.2
Total Dry Cargo
3,431
5,068
6.7%
52.6
56.6
Liquid Cargo
3,092
3,881
3.9%
47.4
43.4
(1)
Compound annual growth rate.
Source: Drewry.
Drybulk cargo is cargo that is shipped in large quantities and can be easily stowed in a single hold with little risk of cargo damage. Drybulk cargoes consist primarily of the major (iron ore, coal and
grain) and minor bulk commodities, and the following is an overview of the major and minor bulk cargoes:
Iron Ore.
Until the start of the 1990s, when it was overtaken by the combined steam and coking coal sectors, iron ore was the largest sector of the drybulk trade. It remains, however, the
primary cargo of the largest vessels in the drybulk fleet. Used principally as the primary raw material in steel making, iron ore imports are dominated by Europe, Japan, China, South Korea and
the United States. The primary exporters of iron ore are Brazil, Australia and India. Other significant exporters include Canada, Sweden, South Africa, Venezuela, Mauritania, Peru and Chile.
Coal.
There are two principal types of coal: steam (or thermal) coal and coking (or metallurgical) coal. The main exporters of coal are Australia, South Africa, Russia, Indonesia, United States,
Colombia and Canada. The main importers of coal are Europe, Japan, South Korea, Taiwan, India and China. The coking coal market is closely linked to demand from integrated steel makers
who use coking coal in blast furnaces to make pig iron which, in turn, is
85
converted into steel. Steam coal is mainly used in the production of electricity, and the transportation of steam coal is the backbone of the Capesize and Panamax markets. Increases in steam coal
demand have been significant, as both developed and developing nations require increasing amounts of electric power.
Grain.
Grains include wheat, coarse grains (corn, barley, oats, rye and sorghum), and oil seeds extracted from different crops such as soybeans and cottonseeds. In general, wheat is used for
human consumption, while coarse grains are used as feed for livestock. Oil seeds are used to manufacture vegetable oil for human consumption or industrial use, while their protein-rich residue is
used as raw material in animal feed. The principal exporters of grain are Canada, United States, Europe, Australia and South America. The principal importers are Japan, South Korea, China,
South East Asia, the Middle East, North Africa and Europe. Grain production and trade volumes are subject to both growing conditions and natural disasters, which affect crop yields and demand
patterns, and grain trade volumes are also affected by population growth, rising per capita income, price volatility and government regulations.
Minor Bulk Cargoes.
Minor bulk cargoes include steel products, forest products, agricultural products, bauxite and alumina, phosphates, petcoke, cement, sugar, salt, minerals, scrap metal and pig
iron. Minor drybulk cargoes are not a major component of Capesize or Panamax class vessel demand, although Panamax class vessels also transport cargoes such as bauxite, phosphate rock,
sulphur, some fertilizers, various other ores and minerals and a few agribulks.
Demand for Drybulk Vessels
The drybulk trade is influenced by the underlying demand for the drybulk commodities which, in turn, is influenced by the level of worldwide economic activity. Generally, growth in gross domestic
product, or GDP, and industrial production correlate with peaks in demand for marine drybulk transportation services. The following chart demonstrates a steady increase in world dry cargo trade since 2001.
Source: Drewry.
86
Drybulk Seaborne Trade: 2001 to 2007
2001
2002
2003
2004
2005
2006
2007
CAGR(1)
Coal
565
570
619
650
675
701
761
5.1%
Iron Ore
452
484
524
587
660
722
785
9.6%
Grain
235
245
240
248
253
262
269
2.3%
Minor Bulks
890
920
957
1,025
1,049
1,086
1,161
4.5%
Total
2,142
2,219
2,340
2,510
2,637
2,771
2,976
5.6%
Annual
1.61
3.59
5.45
7.26
5.06
5.08
7.40
(1)
Compound annual growth rate.
Source: Drewry.
Moreover, the drybulk shipping market over the last two years has displayed strong industry fundamentals, driven primarily by:
economic growth and urbanization in China, Russia, Brazil, India and the Far East, with attendant increases in steel production, power generation and grain consumption, leading to greater
demand for marine drybulk transportation services; and
inefficient transportation bottlenecks due to long-term under-investment in global transportation infrastructure and high demand for drybulk commodities.
Globally, total seaborne trade in all drybulk commodities increased from 2.1 billion tons in 2001 to 3.0 billion tons in 2007, representing a CAGR (compound average growth rate) of 5.6%. Another
industry measure of vessel demand is ton-miles, which is calculated by multiplying the volume of cargo moved on each route by the distance of such voyage. Between 2001 and 2007, ton-mile demand in the
drybulk sector increased by 49.9% to 15.8 billion ton-miles, equivalent to a CAGR of 7.0%. The following table illustrates this measure.
Drybulk Vessel Demand (1): 2001 to 2007
2001
2002
2003
2004
2005
2006
2007
CAGR
Coal
2,583
2,583
2,910
3,386
3,638
3,831
4,186
8.4%
Iron Ore
2,580
2,741
3,050
3,463
3,858
4,259
4,632
10.2%
Grain
1,360
1,256
1,290
1,317
1,341
1,389
1,424
0.8%
Minor Bulks
3,991
4,215
4,366
4,689
4,794
5,143
5,514
5.5%
Total
10,514
10,795
11,616
12,854
13,632
14,621
15,756
7.0%
(1)
Includes vessel demand for bulk carriers below 10,000 dwt
Source: Drewry
Historically, certain economies have acted as the primary drivers of drybulk trade. In the 1990s, Japan was the driving force of increases in ton-miles when buoyant Japanese industrial production stimulated
demand for imported drybulk commodities. More recently, China and, to a lesser extent India, have been the main drivers behind the recent increase in seaborne drybulk trade as high levels of economic growth
have generated increased demand for imported raw materials. Chinese imports of coal, iron ore and, more recently, steel products (China used to be an exporter of steel products but, due to its own high demand,
now needs to import steel products) have also increased sharply in the last five years, thereby creating additional demand for drybulk vessels. Chinese imports of iron ore alone increased from 55.3 million tons in
1999 to more than 370 million tons in 2007. Elsewhere, rising demand for imported coal to support the power generation sector in India has stimulated additional demand for bulk carriers, especially in the
panamax sector.
87
(Million Tons)
2001/2007 %
Change %
(Billion Ton-Miles)
2001/2007 %
The following table illustrates Chinas and Indias gross domestic product growth rates compared to those of the United States, Europe, Japan and the world during the periods indicated.
Real GDP Growth: 2001 to 2007
GNP
2001
2002
2003
2004
2005
2006
2007P
Global
2.4
3.0
4.1
5.3
4.7
5.2
5.1
USA
0.3
1.6
2.7
3.9
3.2
3.3
2.2
Europe
1.7
1.1
1.1
2.1
1.6
2.8
2.7
Japan
0.4
-0.3
1.8
2.7
1.9
2.2
1.8
China
7.5
8.3
10.0
10.1
10.4
10.7
11.3
India
4.4
4.7
7.4
7.0
8.7
9.2
8.8
P = provisional
Source: Drewry
Demand for drybulk vessel capacity is also affected by the operating efficiency of the global fleet, with port congestion, which has been a feature of the market since 2004, absorbing fleet capacity and
therefore leading to a tighter balance between supply and demand.
In evaluating demand factors for drybulk vessel capacity, it is important to bear in mind that drybulk vessels can be the most versatile element of the global shipping fleets in terms of employment
alternatives. Drybulk vessels seldom operate on round trip voyages. Rather, the norm is triangular or multi-leg voyages. Hence, trade distances assume greater importance in the demand equation. As an example,
the vessel demand arising from shipping one ton of iron ore from Brazil to China is three times the demand arising from transporting one ton of iron ore from Australia to China, due to the difference in voyage
lengths.
The following map represents the major global drybulk trade routes:
88
(Percent Change Previous Period)
Economy
Seasonality
Two of the three largest commodity drivers of the drybulk industry, coal and grains, are affected by seasonal demand fluctuations. Thermal coal is linked to the energy markets and in general encounters
upswings towards the end of the year in anticipation of the forthcoming winter period as power supply companies try to increase their stocks, or during hot summer periods when increased electricity demand is
required for air conditioning and refrigeration purposes. Grain production is also seasonal and is driven by the harvest cycle of the northern and southern hemispheres. However, with four nations and the European
Union representing the largest grain producers (the United States, Canada and the European Union in the northern hemisphere and Argentina and Australia in the southern hemisphere), harvests and crops reach
seaborne markets throughout the year. Taken as a whole, seasonal factors mean that the market for drybulk vessels is often stronger during the winter months.
Supply of Drybulk Vessels
The global drybulk vessel fleet is divided into four categories, based on a vessels carrying capacity. These categories consist of:
VLOC.
Very large ore carriers are in excess of 200,000 deadweight tons (dwt) and are a comparatively new sector of the fleet, with the vessels built to exploit economies of scale on long haul
iron ore routes.
Capesize.
Capesize vessels have carrying capacities of more than 110,000 (dwt). These vessels generally operate along long haul iron ore and coal trade routes. Only the largest ports around the
world possess the infrastructure to accommodate vessels of this size.
Panamax.
Panamax class vessels have a carrying capacity of between 60,000 and 110,000 dwt. These vessels were initially designed to meet the physical restrictions of the Panama Canal locks
(hence their name Panamax - the largest vessels able to transit the Canal), making them more versatile than larger vessels. Panamax class vessels carry coal, grains, and, to a lesser extent,
minerals such as bauxite/ alumina and phosphate rock. As the availability of Capesize class vessels has dwindled, Panamax class vessels have also been used to haul iron ore cargoes. Panamax
class vessels are regarded as the workhorses of the drybulk sector, with the ability to carry a wide range of different types of cargo and to trade in ports around the world. Within the Panamax
sector there are also certain sub-groups referred to as Kamsarmax and Post-Panamax. Kamsarmax class vessels are typically between 80,000 and 90,000 dwt and are built with a higher cubic
capacity than the standard Panamax class vessels. The Kamsarmax class vessel is ideally placed to take advantage of the current high demand for iron ore and associated minerals. They combine
the versatility of the Panamax build, with the economies of scale advantage of a greater lift, which should enhance trading flexibility. Post-Panamax class vessels refer to drybulk vessels
between 60,000 and 110,000 dwt, but with design specifications that prevent them from transiting the Panama Canal. Most Panamax, Kamsarmax and Post-Panamax class vessels are gearless;
and therefore must be served by shore based cargo handling equipment. However, there are a small number of vessels with onboard cranes, a feature which enhances the trading flexibility of the
ship, as they can operate in ports which have poor infrastructure in terms of loading and unloading facilities.
Handymax/Supramax.
Handymax vessels have a carrying capacity of between 40,000 and 60,000 dwt. These vessels operate on a large number of geographically dispersed global trade routes,
carrying primarily grains and minor bulks. Vessels below 60,000 dwt are sometimes built with on-board cranes enabling them to load and discharge cargo in countries and ports with limited
infrastructure. Generally, this type of vessel offers good trading flexibility and can therefore be used in a wide variety of trades. Supramax bulk carriers can be defined as ships between 50,000 to
60,000 dwt, normally offering cargo loading and unloading flexibility with on-board cranes, while at the same time possessing the cargo carrying capability approaching conventional panamax
bulk carriers.
Handysize.
Handysize vessels have a carrying capacity of up to 40,000 dwt. These vessels are almost exclusively carrying minor bulk cargo. Increasingly, ships of this type operate on regional
trading routes, and may serve as trans-shipment feeders for larger vessels. Handysize vessels are
89
well suited for small ports with length and draft restrictions. Their cargo gear enables them to service ports lacking the infrastructure for cargo loading and unloading.
Drybulk Vessels Indicative Deployment by Size Category
Cargo
Handysize
Handymax
Supramax
Panamax
Kamsarmax
Capesize
Vloc
Iron Ore
X
X
Coal
X
X
X
X
X
Grains
X
X
X
Alumina, Bauxite
X
X
X
Steel Products
X
X
X
X
Forest Products
X
X
Fertilizers
X
X
X
Minerals
X
X
X
Minor Bulks-Other
X
X
X
X
Source: Drewry
The supply of drybulk shipping capacity, measured by the amount of suitable vessel tonnage available to carry cargo, is determined by the size of the existing worldwide drybulk fleet, the number of new
vessels on order, the scrapping of older vessels and the number of vessels out of active service (i.e., laid up or otherwise not available for hire). In addition to prevailing and anticipated freight rates, factors that
affect the rate of newbuild, scrapping and laying-up include newbuild prices, second-hand vessel values in relation to scrap prices, costs of bunkers and other voyage expenses, costs associated with classification
society surveys, normal maintenance and insurance coverage, the efficiency and age profile of the existing fleets in the market and government and industry regulation of marine transportation practices.
The supply of drybulk vessels is not only a result of the number of vessels in service, but also the operating efficiency of the fleet. For example, during times of very heavy commodity demand,
bottlenecks develop in the form of port congestion, which absorbs fleet capacity through delays in loading and discharging of cargo. A particularly extreme example occurred during the steam coal demand boom in
1980, when enormous queues developed at the main coal loading ports in the United States and Australia. In recent years a similar situation has developed in Australia, where port delays at the main exporting
terminals have reduced fleet supply.
As of January 31, 2008, the world fleet of drybulk vessels consisted of 6,767 vessels, totaling 394.9 million dwt in capacity. As of January 31, 2008, the average age of drybulk vessels in service was
approximately 15.2 years. These figures are, however, based on pure drybulk vessels and exclude a small number of combination vessels.
The following table presents the world drybulk vessel fleet by size as of January 31, 2008.
Drybulk Vessel Fleet: January 2008
Size Category
Deadweight
Number of
% of Total
Total
% of Total
Handysize
1039,999
2,915
43.1
77.8
19.7
Handymax
4059,999
1,594
23.6
76.7
19.4
Panamax
6079,999
1,330
19.7
95.2
24.1
Kamsarmax
80109,999
168
2.5
14.7
3.7
Capesize
110199,999
661
9.8
108.5
27.5
Vloc
200,000+
99
1.5
22.0
5.6
Total
6,767
100.0
394.9
100.0
Source: Drewry
90
Type
Tonnes
Vessels
Fleet
(number)
Capacity
(million dwt)
Fleet
(dwt)
The following table illustrates the age profile of the global drybulk vessel fleet as of January 31, 2008.
Drybulk Vessel Fleet Age Profile: January 2008
Age (Years)
Handysize
Handymax
Panamax
Kamsarmax
Capesize
Vloc
Total Fleet
% of
05
10.2
27.3
25.2
10.3
35.2
10.3
118.5
30.0%
610
8.9
15.9
26.6
1.6
22.3
1.5
76.8
19.5%
1115
6.5
11.4
13.9
0.8
23.2
1.6
57.4
14.5%
1620
3.8
5.4
8.2
0.4
10.6
4.7
33.1
8.4%
2125
22.3
12.5
13.8
0.9
12.8
3.7
66.0
16.7%
26+
26.0
4.2
7.5
0.7
4.5
0.2
43.1
10.9%
Total
77.7
76.7
95.2
14.7
108.6
22.0
394.9
100.0%
Average Age
20.4
11.4
12.2
5.5
11
9.6
15.2
Source: Drewry
There are over 1,400 different owners of drybulk vessels and ownership of the fleet is therefore quite fragmented. In the Panamax sector alone there are nearly 500 different owners of Panamax bulk
carriers. The following table lists the leading players in the Panamax drybulk vessel fleet as of January 1, 2008.
Top 20 Owners of Panamax Bulk Carriers: January 1, 2008
Company
No. of
Dwt
COSCO (Hong Kong)
30
2,129,905
COSCO Bulk Carrier
29
2,019,940
DryShips Inc.
29
2,130,646
K-Line
28
2,306,658
Quintana Maritime
25
1,967,385
MOL Mitsui OSK Lines
22
1,793,161
NYK Line
22
1,914,852
Pacific Carriers
20
1,615,854
Marmaras Nav. Ltd.
14
1,149,317
Cido Shipping
13
997,942
Diana Shipping Inc.
13
968,242
IRISL
13
953,907
Shoei Kisen K.K.
13
989,252
Enterprises Shpg.
11
808,878
Excel Maritime Carr.
11
787,242
Fukujin Shipping
11
845,627
Nissen Kaiun K.K.
11
843,570
Safety Management
11
887,900
Augustea Ship Mngt
10
744,795
Golden Union
10
682,867
Source: Drewry.
NB:
The above fleets are owned vessels only and do not include vessels operated pursuant to long-term time charter agreements. Quintana Maritime and Excel Maritime Carriers have subsequently merged.
Following the Reorganization, the reference in the table above to Safety Management should be read as a reference to Safe Bulkers, Inc..
91
(Millions of Dwt)
1039,999
4059,999
6079,999
80109,999
110199,999
200,000+
Total
*(years)
Vessels
The supply of drybulk vessels is dependent on the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or loss. As of January 31, 2008, the global drybulk
orderbook amounted to 224.5 million dwt, or 55.2% of the existing drybulk fleet. Although the orderbook is large by historical standards it should be remembered that there is 109 million dwt of dry bulk carrier
tonnage that is more than twenty years of age.
Drybulk Vessel Orderbook: January 2008
Size
Deadweight
Number of
Orderbook as
Total Capacity
Orderbook as
Handysize
1039,999
598
23.4
18.5
23.8
Handymax
4059,999
760
29.7
42.4
55.3
Panamax
6079,999
205
8.0
15.0
15.8
Kamsarmax
80109,999
398
15.5
34.4
234.7
Capesize
110199,999
491
19.2
83.6
77.1
Vloc
200,000+
109
4.3
28.5
129.4
Total
2,561
100.0
222.4
56.4
Source: Drewry
The following table provides information with respect to expected delivery dates for the drybulk vessels on order as of January 31, 2008.
92
Category
Tonnes
Vessels
% of Existing
FleetNo
Million Dwt
% of Existing
FleetDwt
The level of scrapping activity is generally a function of scrapping prices in relation to current and prospective charter market conditions, as well as operating, repair and survey costs. Given the recent
strong chartering environment, there has been minimal scrapping activity in the drybulk sector and the average age at which vessels are scrapped has increased. The following table illustrates the scrapping rates of
drybulk vessels for the periods indicated.
Drybulk Vessel Scrapping: 2001 to 2007
2001
2002
2003
2004
2005
2006
2007
Handysize
No
62
64
25
5
4
21
9
Dwt
1,408,000
1,556,000
597,000
113,000
109,000
474,843
198,792
Handymax
No
40
25
29
0
4
10
1
Dwt
1,492,000
938,000
1,103,000
0
165,000
380,439
33,527
Panamax
No
28
18
7
1
3
8
2
Dwt
1,870,000
1,200,000
465,000
95,000
202,000
538,785
141,346
Capesize
No
3
8
2
1
2
2
0
Dwt
401,000
997,000
248,000
123,000
247,000
296,000
0
Total
No
133
115
63
7
13
41
12
Dwt
5,171,000
4,691,000
2,413,000
331,000
723,000
1,690,067
373,665
Source: Drewry.
Charter Market
Drybulk vessels are employed in the market through a number of different chartering options. The general terms typically found in these types of contracts are described below.
Time Charters.
A time charter involves the use of the vessel for a number of months or years or for a trip between specific delivery and redelivery positions (also known as a trip time charter).
The charterer pays all voyage-related costs. The owner of the vessel receives semi-monthly charter hire payments on a U.S. dollar-per-day basis and is responsible for the payment of all vessel
operating expenses and capital costs of the vessel.
Voyage Charter.
A voyage charter involves the carriage of a specific amount and type of cargo on a load port-to-discharge port basis, subject to various cargo handling terms. Most of these
charters are of a single voyage nature, as trading patterns do not encourage round voyage trading. The owner of the vessel receives one payment derived by multiplying the tonnage of cargo
loaded on board by the agreed upon freight rate expressed on a U.S. dollar-per-ton basis. The owner is responsible for the payment of all voyage and operating expenses, as well as the capital
costs of the vessel.
Spot Charter.
Spot chartering activity involves chartering either on a single voyage or a trip time charter.
Contract of Affreightment.
A contract of affreightment, or CoA, relates to the carriage of multiple cargoes over the same route and enables the CoA holder to nominate different vessels to
perform the individual voyages. Essentially, it constitutes a series of voyage charters to carry a specified amount of cargo during the term of the CoA, which usually spans a number of years. All
of the ships operating expenses, voyage expenses and capital costs are borne by the ship owner. Freight normally is agreed on a U.S. dollar-per-ton basis.
Bareboat Charter.
A bareboat charter involves the use of a vessel usually over longer periods of time ranging over several years. In this case, all voyage related costs, mainly vessel fuel and port
dues, as well as all vessel-operating expenses, such as day-to-day operations, maintenance, crewing and insurance, are for the charterers account. The owner of the vessel receives monthly charter
hire payments on a U.S. dollar per day basis and is responsible only for the payment of capital costs related to the vessel.
93
(Millions of Dwt)
Charter Rates
Charter (or hire) rates paid for drybulk vessels are generally a function of the underlying balance between vessel supply and demand. Over the past 25 years, drybulk cargo charter rates have passed
through cyclical phases and changes in vessel supply and demand have created a pattern of rate peaks and troughs. In 2003 and 2004, rates for all sizes of drybulk vessels strengthened to what was then the
highest rates ever and in 2007 rates for all sizes of drybulk vessels strengthened to their highest levels ever. In December 2007 and January 2008, charter rates for drybulk vessels decreased from their highs. The
most important driver of this upsurge in charter rates was the high level of demand for raw materials imported by China. After 2004, although exhibiting volatility, rates remained at comparatively high levels but
were volatile.
In the time charter market, rates vary depending on the length of the charter period as well as vessel specific factors, such as age, speed and fuel consumption. Generally, short-term time charter rates are
higher than long-term charter rates. The market benchmark tends to be a 12-month time charter rate, based on a modern vessel. The following charts show one-year time charter rates for Capesize, Panamax,
Handymax and Handysize class vessels between 1996 and January 2008. As indicated in these charts, during the period from January 2005 to January 2008, the Panamax time charter average daily rates for one
year period time charters experienced a low of $25,000 and a high of $81,000.
Source: Drewry.
94
Drybulk VesselsOne Year Time Charter Rates: 2001 to 2008
Size Category
Handysize
Handymax
Panamax
Capesize
2001
5,629
8,472
9,543
14,431
2002
4,829
7,442
9,102
13,608
2003
8,289
13,736
17,781
30,021
2004
14,413
31,313
36,708
55,917
2005
12,021
23,038
27,854
49,333
2006
12,558
21,800
22,475
45,646
2007
23,021
43,946
52,229
102,875
January 2008
29,500
60,100
73,000
164,000
Source: Drewry.
The Baltic Exchange, an independent organization comprised of shipbrokers, shipping companies and other shipping players, provides daily independent shipping market information and has created freight
rate indices reflecting the average freight rates (that incorporate actual business concluded as well as daily assessments provided to the exchange by a panel of independent shipbrokers) for the major bulk vessel
trading routes. These indices include the Baltic Panamax Index, or BPI, the index with the longest history and, more recently, the Baltic Capesize Index, or BCI.
The following chart details the movement of the BPI, BCI and Baltic Handymax Index from 1999 to the end of January 2008:
95
(Period AveragesU.S. Dollars per Day)
DWT
2628,000
1015 years old
5055,000
15 years old
7075,000
15 years old
170,000+
15 years old
Vessel Prices
The recent strength in each of the main shipping sectors, tankers, drybulk and containers, has triggered an upsurge in newbuild activity. In addition, newbuild demand is also strong for Liquefied Natural
Gas, or LNG, vessels and other specialized vessels. This is significant because the near term availability of newbuild berths for vessel delivery before the end of 2010 is scarce, which directly impacts the supply of
new vessels to the market. Thus, the combination of shortage of berth space, rising demand for vessels and rising raw material costs (especially the price of steel), has greatly increased newbuild prices. The
following chart indicates the change in newbuild prices for drybulk vessels for the period indicated.
Source: Drewry.
96
In the secondhand market, the steep increase in newbuild prices and the strength in the charter market have also affected vessel prices. With vessel earnings running at relatively high levels and a limited
availability of newbuild berths, the ability to deliver a vessel early has resulted in increases in secondhand prices, especially for modern tonnage. Consequently, secondhand prices of five year old Panamax and
Capesize class vessels have reached higher levels than those of comparably sized newbuilds.
*
Modern vessels of 1-5 years age, except Handysize which includes vessels that are 10-15 years old.
Source: Drewry.
The above newbuild prices are for forward delivery (usually 18-24 months) while the secondhand prices are for immediate delivery, which places upward pressure on secondhand prices.
97
Overview
We are an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly grain, iron ore and coal, along worldwide shipping routes for some of the worlds largest
consumers of marine drybulk transportation services. Our current fleet of 11 Japanese-built drybulk vessels, with an aggregate carrying capacity of 887,900 dwt and an average age of 2.6 years as of December 31,
2007, is one of the worlds youngest fleets of Panamax, Kamsarmax and Post-Panamax class vessels. Our current fleet is comprised of five Panamax, three Kamsarmax and three Post-Panamax class vessels. Our
fleet is expected to almost double (on a dwt basis) by May 2010 as the result of the delivery of eight contracted newbuilds, comprised of two Kamsarmax, four Post-Panamax and two Capesize class vessels. Upon
delivery of the last of our eight contracted newbuilds in May 2010, our fleet will be comprised of 19 vessels, having an aggregate carrying capacity of 1,759,900 dwt and an average age of 3.2 years.
We employ our vessels on both period time charters and spot charters with some of the worlds largest consumers of marine drybulk transportation services, including Bunge, Cargill and Daiichi or their
affiliates, which together accounted for 69.2% of our revenues for the year ended December 31, 2007. Bunge, Cargill and Daiichi accounted for 29.9%, 21.1% and 18.2%, respectively, of our revenues during that
period. We believe our customers, some of which have been chartering our vessels or vessels of our affiliates for over 20 years, enter into period time and spot charters with us because of the quality of our young,
modern vessels and our record of safe, efficient operations. We intend to deploy our vessels on a mix of period time and spot charters according to our assessment of market conditions. We rarely place our vessels
on voyage charters and, consequently, when we trade our vessels in the spot market, we employ them under trip time charters, with a duration of three months or less. The vessels we deploy on period time
charters provide us with relatively stable cash flow and high utilization rates, while the vessels we deploy in the spot market allow us to take advantage of attractive spot charter rates during periods of strong
charter market conditions.
We have recently entered into five-year period time charters, which are scheduled to commence in late 2008, 2009 and 2010, for six vessels in our current fleet, and two of our newbuilds, and have
entered into a 20-year period time charter commencing in 2011 for one of our newbuilds. By chartering these vessels in advance, we have been able to take advantage of the recent strong market conditions, while
at the same time, reducing our exposure to charter rate fluctuations in late 2008, 2009 and 2010 when all of our newbuilds are delivered. In addition, as of December 31, 2007, we had arranged one- to three-year
period time charters commencing in 2008 for the three vessels in our fleet which were deployed on spot charters as of December 31, 2007. As a result, as of December 31, 2007, we have period time charter
commitments for approximately 75.9%, 50.6% and 36.1% of our fleets anticipated available days in 2008, 2009 and 2010, respectively, and our contracted period time charter arrangements for 2008 through 2010
are expected to provide revenues of $347.1 million.
During 2006 and 2007, we had fleet utilization of 99.94% and 99.98%, respectively, our vessels achieved daily time charter equivalent rates of $22,550 and $42,327, respectively, and we generated
revenues of $99.0 million and $172.1 million, respectively. In addition, during 2006 and 2007, our gain on sale of assets was $37.0 million and $112.4 million, respectively, and our net income was $97.2 million
and $211.7 million, respectively.
We are controlled by the Hajioannou family, which has a long history of operating and investing in the international shipping industry, including a long history of vessel ownership. Vassos Hajioannou, the
late father of Polys Hajioannou, our chief executive officer, and Nicolaos Hadjioannou, our chief operating officer, first invested in shipping in 1958. Since that time, the Hajioannou familys presence within the
drybulk shipping industry has become well-established and continues to grow. Polys Hajioannou has been actively involved in the industry since 1987, when he joined the predecessor of our affiliated management
company, Safety Management Overseas S.A., which we refer to as Safety Management or our Manager. Nicolaos Hadjioannou joined Safety Management in 1999. Over the past 13 years, under the leadership
of Polys Hajioannou and Nicolaos Hadjioannou, we have renewed our fleet by selling ten drybulk vessels during periods of what we viewed as favorable secondhand market conditions and contracting to acquire 29
drybulk newbuilds. As a result, we have maintained an average age for the vessels in our fleet of 3.2 years
98
as of the end of each year from 1995 to 2007 and we continue to maintain a modern fleet of vessels with advanced designs that provide operational advantages. Also under their leadership, we have expanded the
classes of drybulk vessels in our fleet and the aggregate carrying capacity of our fleet has grown from 146,000 dwt in 1995 to 887,900 dwt currently. The quality and size of our current fleet, together with our
long-term relationships with several of our charter customers, are, we believe, the results of our long-term strategy of maintaining a young, high quality fleet, our broad knowledge of the drybulk industry and our
strong management team. In addition to benefiting from the experience and leadership of Polys Hajioannou and Nicolaos Hadjioannou, we also benefit from the expertise of our Manager which, along with its
predecessor, has specialized in drybulk shipping since 1965, providing services to over 30 drybulk vessels. A number of our Managers key management and operational personnel have been continuously employed
with Safety Management and its predecessor companies for over 25 years.
Our Competitive Strengths
We believe that we possess a number of strengths that provide us with a competitive advantage in the drybulk shipping industry, including:
Young fleet of Panamax, Kamsarmax and Post-Panamax class vessels.
With a carrying capacity of 887,900 dwt, our fleet is one the worlds youngest fleets of Panamax, Kamsarmax and Post-Panamax
class vessels. Vessels of these class sizes are considered highly flexible and are capable of carrying a wide variety of drybulk cargoes and accessing all major ports. Our current fleet of 11 Japanese-built vessels
had an average age of 2.6 years as of December 31, 2007, as compared to the average age of 11.5 years for the world fleet of Panamax, Kamsarmax and Post-Panamax class vessels. After delivery in May 2010 of
the last of our eight contracted newbuilds, our combined fleet of 19 drybulk vessels will have an average age of 3.2 years. The vessels in our current fleet are designed to lift more cargo on the same draft,
compared to the industry average, to have lower-than-average fuel consumption and to have larger-than-average generators, which offer greater operational efficiency and safety than smaller generators.
Significant contracted growth at attractive prices.
We have contracts for eight drybulk newbuilds which, upon delivery, will add an aggregate 872,000 dwt in capacity to our fleet, almost doubling the
aggregate carrying capacity of our current fleet. These newbuilds are comprised of two Japanese-built Post-Panamax class vessels, with contract prices of approximately $37.7 million (¥4.3 billion) per vessel,
scheduled for delivery in the fourth quarter of 2008 and first quarter of 2009, two South Korean-built Post-Panamax class vessels, with contract prices of $73.5 million per vessel, scheduled for delivery in the third
quarter of 2009 and first quarter of 2010, two Chinese Capesize class vessels, with contract prices of $80.0 million and $81.0 million, respectively, scheduled for delivery in the first quarter of 2010, and two South
Korean-built Kamsarmax class vessels, with contract prices of $48.1 million per vessel, subject to price adjustments not to exceed $3.9 million, scheduled for delivery in the first and second quarters of 2010. The
contract prices for our newbuilds, which are subject to certain adjustments such as reimbursement of certain third-party seller interest expenses and payments for early delivery at our request, are significantly below
the current market prices for vessels with similar specifications and delivery dates.
Reputation for operating excellence.
We believe our Manager has established a history of providing excellent service to leading drybulk charterers using our young and well-maintained fleet. We ensure
our vessels are maintained to a high standard through comprehensive maintenance and inspection programs completed under the supervision of our Managers dedicated technical management team. Our Managers
high operating standards resulted in a very limited number of unscheduled off-hire days for our vessels, as reflected by our vessels being utilized on an average 99.74% of available days for the three years ended
December 31, 2007. We also believe that our focus on operational excellence has enabled us to develop our strong relationships with high quality charters such as Bunge, Cargill and Daiichi. This operational focus
has resulted in lower hull and machinery insurance premiums, maintenance expenses and operating costs that create cost advantages to us.
Long-term relationships with key industry players.
We, through our Manager, have established long-term relationships with many of our customers by providing reliable service and consistently meeting
customers expectations. Our policy is to charter our vessels primarily to charterers who directly use our vessels without sub-chartering them to third parties. We find that developing and maintaining relationships
with the direct users of our services allows us to develop strong relationships with these customers, which
99
results in significant repeat business and gives us insight into the underlying demand for the commodities that our vessels carry. Our Manager has also developed strong relationships with shipyards, including the
Tsuneishi and IHI shipyards in Japan from which we have ordered 20 newbuilds over the past 13 years.
Long history of investing in the drybulk shipping industry.
Our Manager and its affiliates have been focused solely on the drybulk business since the founding of our Managers predecessor in 1965. Our
management team and key management and operational personnel at our Manager consist of experienced executives, many of whom have more than 25 years of experience in the drybulk shipping industry. Our
management team and Manager have demonstrated their ability to successfully manage our business throughout varying cycles in the drybulk industry, and our management team employs an opportunistic approach
to selling vessels and investing in newbuilds. Since 1995, we have sold ten vessels and acquired and taken delivery of 21 newbuilds, and we currently have eight newbuilds on order. In addition, we believe the
significant drybulk industry experience of our management team and Manager enhances our ability to strategically balance period time and spot charter deployment of our fleet over the drybulk industry cycle.
Our Business Strategy
Our primary objectives are to profitably grow our business, increase distributable cash flow per share and maximize value to our stockholders by pursuing the following strategies:
Pursue a balanced chartering strategy.
We have historically chartered our vessels on both period time charters of up to five years and spot charters, which we believe has given us flexibility in responding
to market developments and assisted us in enhancing the charter rates our vessels earn, while still providing significant contracted revenue. We intend to continue to employ our drybulk vessels on a mix of period
time and spot charters and, according to our assessment of market conditions, adjust the mix of these charters to take advantage of the relatively stable cash flow and high utilization rates associated with long-term
period time charters or to profit from attractive spot rates during periods of strong charter market conditions. For example, we have recently entered into five-year period time charters, which are scheduled to
commence in late 2008, 2009 and 2010, for six vessels in our current fleet, and two of our newbuilds, and have entered into a 20-year period time charter commencing in 2011 for one of our newbuilds. By
chartering these vessels in advance, we have been able to take advantage of the recent strong market conditions, while at the same time, reducing our exposure to charter rate fluctuations in late 2008, 2009 and
2010 when all of our newbuilds are delivered.
Strategically expand the size of our fleet.
We intend to grow our fleet through timely and selective investment in newbuild contracts for drybulk vessels in a manner that is accretive to cash flow per
share. Although we intend to focus on Panamax, Kamsarmax and Post-Panamax class newbuilds, we will monitor market conditions regularly and may purchase drybulk vessels of other sizes or contract for
secondhand drybulk vessels when those acquisitions would, in our view, present favorable investment opportunities. When acquiring vessels, we prefer to invest in groups of vessels, including vessels that will be
sister ships to vessels we already own, in order to take advantage of the operational flexibility and economies of scale that sister ships afford us and our charterers.
Continue to operate a high-quality fleet.
We intend to maintain a young fleet that meets the highest industry standards by strategically replacing existing vessels with newbuilds that have the technical
specifications and advanced designs to allow us to continuously provide our customers with modern, high-quality vessels that meet their needs. During the past 13 years, we have sold ten vessels and acquired 21
newbuilds, which has allowed us to maintain a fleet with an average age of 3.2 years as of the end of each year from 1995 to 2007. As of December 31, 2007, the average age of the vessels in our current fleet
was 2.6 years, and upon delivery of the last of our contracted newbuilds in May 2010, the average age of the vessels in our fleet will be 3.2 years. We preserve the quality of our vessels through a comprehensive
maintenance and inspection program supervised by our experienced, affiliated Manager.
Capitalize on track record and relationships.
We intend to capitalize on our Managers track record of strong operating performance, as demonstrated by its long-term relationships with reputable high-
quality charterers. We believe our safety as an operator and our long-term client relationships have helped us build relationships with financial institutions and shipyards, respectively, which provide us with
attractive
100
growth opportunities. We intend to continue to utilize these relationships to profitably charter Panamax class or larger drybulk vessels to charterers who are the end-users of our services.
Our Fleet
General.
Our fleet is currently comprised of 11 vessels, of which five are Panamax, three are Kamsarmax and three are Post-Panamax class vessels, with an aggregate carrying capacity of 887,900 dwt and
an average age of 2.6 years as of December 31, 2007. Upon delivery of the last of our eight contracted newbuilds in May 2010, our fleet will be comprised of five Panamax, five Kamsarmax, seven Post-Panamax
and two Capesize class vessels, the aggregate carrying capacity of our 19 vessels will be 1,759,900 dwt, and the average age of the vessels in our fleet will be 3.2 years.
As a result of our fleets low average age and our Managers technical and commercial management expertise, we have historically experienced lower maintenance and hull and machinery insurance costs
and relatively fewer unscheduled off-hire days than the industry in general. Our fleet is also attractive to customers because a substantial majority of our vessels, including all of our current vessels, have been or
are being manufactured in Japanese shipyards, which are known for constructing high-quality vessels. These Japanese-built vessels are designed to lift more cargo on the same draft, compared to the industry
average and to have lower-than-average fuel consumption. All of our vessels, including our newbuilds, have been manufactured or are being manufactured to high specifications to provide our customers with
vessels that provide certain operational advantages. Such specification improvements include the installation of larger-than-average generators, which offer greater operational efficiency and safety than smaller
generators, central ballast control consoles and larger-than-average ballast pumps, which simplify and expedite the ballasting and de-ballasting of our vessels, and un-manned UMS engine rooms, which reduce on-
board operating crew and related expenses. Certain of our vessels also have 16 mooring drums, instead of the more common ten mooring drums, which is necessary for trading in certain Japanese ports in the
winter, and our double-hulled vessels have flush cargo holds with limited obstructions, which allows for faster loading and discharging in ports.
Our current fleet is comprised of three groups of sister ships, and, upon delivery of our eight scheduled newbuilds, our fleet will be comprised of six groups of sister ships. Each group has been built based
upon the same design specifications and, therefore, uses the same parts and equipment. We believe that maintaining a fleet that includes sister ships enhances the revenue generating potential of our fleet by
providing us with operational and scheduling flexibility to more efficiently deploy our vessels. Under many of our long-term period time charters, we retain the right to substitute sister ships, and subject to certain
adjustments, other similar vessels, for the nominated vessel. The uniform nature of sister ships also improves our operating efficiency by allowing our Manager and crews to apply their acquired technical and
operational knowledge of one vessel to all vessels of the same series and creates economies of scale that enable us to realize cost savings when maintaining, supplying and crewing our vessels. When acquiring new
vessels, such as our newbuilds, we prefer to make acquisitions so that each new vessel has at least one sister ship.
Our vessels operate worldwide within the trading limits imposed by our insurance terms, and the main trade routes traveled are (a) transatlantic voyages from the east coast of South America to Europe;
(b) Europe to East Asia; (c) Australia or Indonesia to Japan; and (d) Indonesia or Australia through the Atlantic Ocean to Europe or the Mediterranean.
Under U.S. laws and regulations, certain countries are identified as state sponsors of terrorism. U.S. laws place restictions on investments in Iran and on U.S. persons doing business with such countries.
We believe that we are in compliance with these laws and regulations and intend to remain in compliance. From January 1, 2005 through December 31, 2007, vessels in our fleet made 14 calls to ports in Iran out
of a total of 695 calls on worldwide ports, and may make port calls in Iran or other such countries in the future, given that the charterers and not the Company determine the destinations of the vessels they charter
from us. One of our vessels, the
Pedhoulas Leader
, also made one port call to Iran from July 7, 2007 to July 8, 2007 for the sole purpose of bunkering (refueling). The total gross revenue that the vessels in our
fleet earned from voyages to ports located in Iran for each of 2005, 2006 and 2007 was $6.56 million, $0.24 million and $13.59 million, respectively, representing approximately 8%, 0.24% and 8% of the total
gross revenue across our entire fleet for each of those respective periods. From January 1, 2008 through
101
March 31, 2008, total revenue from calls to these ports was $4.52 million, representing approximately 9% of total voyage revenue over this period. We have no business operations, employees, assets or liabilities
in countries identified under U.S. laws and regulations as state sponsors of terrorism, and we believe that we have no direct or indirect business connections with the governments or persons or entities controlled
by the governments in such countries, although we have engaged a third party agent (which we believe is not controlled by the Iranian government) to provide services associated with the transportation of crew
members to and from our vessels calling at Iranian ports. See Risk FactorsRisks Related to Our CompanyOur vessels call on ports located in Iran, which is subject to restrictions imposed by the United States
government, which could be viewed negatively by investors and adversely affect the trading price of our common stock.
Each of our vessels is, or in the case of newbuilds will be, owned by a separate wholly owned Subsidiary incorporated in Liberia. All of our current vessels fly the Cyprus flag.
The table below presents information with respect to our drybulk vessel fleet, including our newbuilds, and its deployment as of December 31, 2007.
Vessel Name
Dwt
Month and
Country
Charterer
Charter
Charter Rate
Commissions (3)
Time Charter
Sister
Current Fleet
($/day)
Panamax class
Efrossini
(Efragel
76,000
Feb. 2003
Japan
Cargill
Spot
$
88,750
4.375
%
Spot
A
NYK
Time
$
69,600
/
59,600
/
Feb. 2008
49,600
(7)
4.50
%
Feb. 2011
Maria
(Marindou Shipping
76,000
Apr. 2003
Japan
NCS
Spot
$
89,000
5.0
%
Spot
A
Daiichi
Time
$
67,000
/
Feb. 2008
46,000
(8)
1.25
%
Feb. 2011
Vassos
(Avstes Shipping
76,000
Feb. 2004
Japan
Daiichi
Time
$
43,000
3.75
%
Oct. 2007
A
Daiichi
Time
$
29,000
1.25
%
Jan. 2009
Katerina
(Kerasies Shipping
76,000
May 2004
Japan
Bunge
Spot
$
80,000
3.75
%
Spot
A
Bunge
Time
$
62,000
3.75
%
Feb. 2008
Maritsa
(Marathassa Shipping
76,000
Jan. 2005
Japan
Daiichi
Time
$
44,500
3.75
%
June 2007
A
Bunge
Time
$
53,500
3.75
%
Jan. 2008
Kamsarmax class
Pedhoulas Merchant
(Pemer Shipping Ltd.
82,300
Mar. 2006
Japan
Daiichi
Time
$
38,500
3.75
%
Nov. 2007
B
Pedhoulas Trader
(Petra Shipping Ltd.
82,300
May 2006
Japan
Daiichi
Time
$
46,500
1.25
%
July 2007
B
Pedhoulas Leader
(Pelea Shipping Ltd.
82,300
Mar. 2007
Japan
Daiichi
Time
$
36,750
3.75
%
Dec. 2007
B
102
(Subsidiary Owner)
Year
Built (1)
Built
Type
(2)
Period (4)
Ship (5)
Shipping Corporation
(Efragel)) (6)
Corporation
(Marindou)) (6)
Corporation
(Avstes)) (6)
Nov. 2008
Jan. 2014
Corporation
(Kerasies)) (6)
Feb. 2009
Corporation
(Marathassa)) (6) (9)
Jan. 2008
Jan. 2009 (10)
(Pemer))
Jan. 2009
(Petra)) (11)
Feb. 2008
(Pelea))
Feb. 2010
Vessel Name
Dwt
Month and
Country
Charterer
Charter
Charter Rate
Commissions (3)
Time Charter
Sister
Current Fleet
($/day
)
Post-Panamax class
Stalo
(Staloudi Shipping
87,000
Jan. 2006
Japan
Intermare
Time
$
48,500
5.0
%
July 2007
C
Daiichi
Time
$
34,160
1.25
%
Apr. 2010
Marina
(Marinouki Shipping
87,000
Jan. 2006
Japan
Bunge
Time
$
25,000
3.75
%
Mar. 2007
C
Sophia
(Soffive Shipping
87,000
June 2007
Japan
Bunge
Time
$
24,000
3.75
%
July 2007
C
Daiichi
Time
$
34,720
1.25
%
Nov. 2008
Subtotal
887,900
Newbuilds
Kamsarmax class
Hull No. 2054
(Maxdeka Shipping
81,000
Mar. 2010
South
D (14
)
Hull No. 2055
81,000
May 2010
South
D (14
)
Post-Panamax class
Eleni
(Eniaprohi Shipping
87,000
Nov. 2008
Japan
Daiichi
Time
$
34,160
1.25
%
Apr. 2010
C
Martine
(Eniadefhi
87,000
Mar. 2009
Japan
Daiichi
Time
$
40,500
1.25
%
Mar. 2009
C
Hull No. 1039
(Maxdodeka Shipping
92,000
July 2009
South
E (14
)
Hull No. 1050
(Maxdekatria Shipping
92,000
Mar. 2010
South
E (14
)
Capesize class
Hull No. 1074
(Eptaprohi Shipping
176,000
Mar. 2010
China (16)
F
Hull No. 1075
(Maxpente Shipping
176,000
Jan. 2010
China (16)
F
Current Fleet
Subtotal
872,000
TOTAL
1,759,900
(Subsidiary Owner)
Year
Built (1)
Built
Type
(2)
Period (4)
Ship (5)
Corporation
(Staloudi)) (6) (12)
Transport
GmbH
Sept. 2009
Mar. 2015
Corporation
(Marinouki)) (13) (12)
Jan. 2008
Corporation
(Soffive)) (6) (12)
Aug. 2008
Nov. 2013
Corporation
(Maxdeka))
Korea
(Maxenteka Shipping
Corporation
(Maxenteka))
Korea
Corporation
(Eniaprohi)) (12), (15)
Mar. 2015
Shipping
Corporation
(Eniadefhi)) (12)
Mar. 2014
Corporation
(Maxdodeka))
Korea
Corporation
(Maxdekatria))
Korea
Corporation
(Eptaprohi))
(tbn Kanaris)
Corporation
(Maxpente)) (17)
103
(1)
For newbuilds, the dates shown reflect the expected delivery dates. See footnote (15) below for additional information regarding the expected delivery date of the
Eleni
.
(2)
Quoted charter rates are gross charter rates.
(3)
Commissions reflect payments made to third party brokers or our charterers, and do not include the 1.0% fee payable on gross freight, charter hire, ballast bonus and demurrage to our Manager pursuant
to our vessel management agreements with our Manager as of January 1, 2008 and pursuant to our new management agreement that will be in place following this offering.
(4)
The start dates listed reflect either actual start dates or, in the case of contracted charters that had not commenced as of December 31, 2007, scheduled start dates. Actual start dates may differ from the
scheduled start dates depending on the terms of the charter and market conditions, and we generally have the option under our charter contracts to deliver the vessel within 30 to 60 days prior to or after
the scheduled start date.
Redelivery dates listed are the expected redelivery dates. Actual redelivery dates may differ from the expected redelivery dates depending on the terms of the charter and market conditions. Charterers
under our charter contracts generally have a period of between 30 and 60 days during which they can redeliver the vessel.
(5)
Each vessel with the same letter is a sister ship of each other vessel that has the same letter.
(6)
This vessel was under period time or spot charter as of December 31, 2007, and, as of that date, was scheduled to commence a future period time charter as indicated in footnote (4) above. Information
for both the charter under which the vessel was deployed as of December 31, 2007 and the future period time charter has been provided for this vessel. To the extent there is an interim period between
the end of the current charter and the future period time charter, we expect to employ such vessel in the spot market during such period.
(7)
The gross daily charter rates to be paid by Nippon Yusen Kaisha (NYK) for the
Efrossini
are $69,600, $59,600 and $49,600 during the first, second and third years, respectively.
(8)
The daily charter rates to be paid by Daiichi for the
Maria
are $67,000 during 2008 and $46,000 during 2009 and 2010.
(9)
On March 13, 2008, we entered a five-year period time charter with Shinwa Kaiun Kaisha Tokyo (Shinwa) pursuant to which Shinwa will charter the
Maritsa
or a sister ship commencing in the first
quarter of 2010. Pursuant to the charter, Shinwa may choose from among three charter rate structures, and must select among them prior to the commencement of the charter. Under the first option, the
gross daily charter rates under this charter are $32,000 during the first and second years, $28,000 during the third year and $24,000 during the fourth and fifth years; under the second option, the gross
daily charter rates under this charter are $32,500 during the first, second and third years and $21,250 during the fourth and fifth years; and under the third option, the gross daily charter rate under this
charter is $28,000 during all five years. In each case, gross daily charter rates under this charter are subject to a 1.25% commission.
(10)
The
Maritsa
time charter with Bunge was scheduled to commence in February 2008, but we agreed in January 2008 to early delivery of the vessel in exchange for a payment by Bunge in the amount of
$75,000.
(11)
On January 24, 2008, we entered into a time charter with Bunge pursuant to which we agreed to charter the
Pedhoulas Trader
commencing February 9, 2008 and due to expire by July 24, 2008 at a
gross daily charter rate of $54,000. On March 3, 2008, we agreed with Bunge to terminate the charter. We estimate that the compensation payable to the charterer for early redelivery of the vessel, which
is expected to occur on May 30, 2008, will be approximately $800,000. In April 2008, we entered a five-year period time charter with Kawasaki Kisen Kaisha, Ltd., or K-Line, pursuant to which K-Line
will charter the
Pedhoulas Trader
commencing July 2008. The gross daily charter rates under this charter are $69,000, $56,500, $42,000, $20,000 and $20,000 during the first, second, third, fourth and
fifth years, respectively, subject to a 1.00% commission.
(12)
Double-hulled vessel.
104
(13)
On March 5, 2008, we entered a five-year period time charter with K-Line pursuant to which K-Line will charter the
Marina
or a sister ship commencing in the third or fourth quarter of 2008. The gross
daily charter rates under this charter are $61,500, $51,500, $41,500, $31,500 and $21,500 during the first, second, third, fourth and fifth years, respectively, subject to a 2.5% commission.
(14)
These Kamsarmax and Post-Panamax class newbuilds are being built in different shipyards than our current Kamsarmax and Post-Panamax class vessels, but may be subject to similar operational
treatment as the current vessels of the same class because they have substantially the same specifications as the current vessels. Under certain of our charter contracts, we are able to substitute these
newbuilds for the current vessels nominated under the charter contract, although in certain cases, such substitution may result in a discount in the charter rate.
(15)
Delivery date for this newbuild reflects agreement with the shipyard to deliver the newbuild in the fourth quarter of 2008, which is earlier than the originally scheduled delivery date of January 31, 2009
in the applicable newbuild contract, for an additional fee of $5,265 (¥591,500) per day for each day between the actual delivery date and the January 31, 2009 originally scheduled delivery date. On
April 17, 2008, we entered a period time charter with Daiichi pursuant to which Daiichi will charter the
Eleni
commencing in November 2008 through October 2009. The gross daily charter rate under this
charter is $77,000 per day, subject to a 1.25% commission.
(16)
This vessel is being built at the Jiangsu Rongsheng Heavy Industries Group Co., Ltd. (Rongsheng) shipyard.
(17)
On February 7, 2008 we entered into a 20-year period time charter with Eastern Energy Pte. Ltd. pursuant to which Eastern Energy Pte. Ltd. will charter the vessel to be named
Kanaris
commencing in
the third or fourth quarter of 2011. The gross daily charter rate under this charter is $25,928 subject to a 2.5% commission. The obligations of Eastern Energy Pte. Ltd. have been guaranteed by Tata
Power Company Limited and Coastal Gujarat Power Limited, two companies which are part of the Tata Group of companies. During the expected interim period between the scheduled delivery of the
Kanaris
and the commencement of this period time charter, we expect to employ the
Kanaris
in the spot market or on a period time charter.
Our main focus is on Panamax, Kamsarmax and Post-Panamax class vessels because these vessels have the flexibility to handle a wide variety of drybulk cargoes and are able to access all major ports. In
addition, unlike smaller drybulk vessels, Panamax, Kamsarmax and Post-Panamax class vessels are able to efficiently transport the major drybulk commodities, coal, iron ore, coal and grain, to Asian markets. We
believe that our focus on Panamax, Kamsarmax and Post-Panamax class vessels allows us to enter into stronger relationships with customers, including specific departments at our customers that specialize in the
types of cargo that are transported by these vessel classes. This focus also helps us better meet the needs of our customers and enables us to develop greater expertise in the management of a targeted group of
drybulk vessel classes.
Newbuilds
. We intend to grow our fleet through selective investment in drybulk newbuild contracts in order to both renew our fleet, by replacing vessels as they age with more modern vessels with
advanced designs, and to increase the number of vessels in our fleet. Since 1995, we have acquired and taken delivery of 21 newbuilds, and we currently have eight newbuilds on order. Our currently contracted
newbuilds are comprised of two Japanese-built Post-Panamax class vessels, with contract prices of approximately $37.7 million (¥4.3 billion) per vessel (plus an estimated additional cost of $0.4 million for early
delivery of one of these vessels), scheduled for delivery in the fourth quarter of 2008 and first quarter of 2009, two South Korean-built Post-Panamax class vessels, with contract prices of $73.5 million per vessel,
scheduled for delivery in the third quarter of 2009 and the first quarter of 2010, two Chinese-built Capesize class vessels, with contract prices of $80.0 million and $81.0 million, scheduled for delivery in the first
quarter of 2010 and two South Korean-built Kamsarmax class vessels, with contract prices of $48.1 million per vessel, scheduled for delivery in the first and second quarters of 2010. In addition to payment of the
contract prices for the newbuilds, we are required to make payments for certain adjustments, under our newbuild contracts, such as reimbursement of certain third-party seller interest expenses with respect to Hull
Nos. 2054 and 2055 and payments for early delivery, if requested by us. For example, with respect to the delivery of the
Eleni
, which the shipyard has agreed to deliver in the fourth quarter of 2008, earlier than
the originally scheduled delivery date of January 31, 2009, we are required to pay an additional
105
amount of $5,265 (¥591,500) per day for each day between the actual delivery of the
Eleni
and January 31, 2009. We expect that the
Eleni
will be delivered on or around November 10, 2008, and the amount
payable, assuming delivery on such date, would be $431,687 (¥48.5 million). The actual amount of such adjustment-related payments that will need to be made with respect to our newbuilds will depend on whether
adjustments are made prior to delivery of the newbuilds.
Although we intend to focus on Panamax, Kamsarmax and Post-Panamax class newbuilds, we monitor market conditions regularly and may acquire secondhand drybulk vessels or vessels of other sizes
when those acquisitions would, in our view, present favorable investment opportunities. Examples of this are our newbuild contracts for two Capesize class vessels. We believe that the addition of these Capesize
class vessels represents a reasonable expansion of the fleet towards larger sizes, provides our customers with additional flexibility and should generate attractive returns due to the attractive contract prices for the
vessels and early delivery time from the shipyard.
Chartering of Our Fleet
We currently deploy the vessels in our fleet under period time charters and trip time charters, a type of spot charter, to transport bulk cargoes, particularly grain, iron ore and coal, along worldwide
shipping routes. We intend to employ our drybulk vessels on a mix of period time and spot charters and, according to our assessment of market conditions, adjust the mix of these charters to take advantage of the
relatively stable cash flow and high utilization rates associated with long-term period time charters or to profit from attractive spot rates during periods of strong charter market conditions. We have recently entered
into five-year period time charters, which are scheduled to commence in late 2008, 2009 and 2010, for six vessels in our current fleet, and two of our newbuilds, and have entered into a 20-year time charter
commencing in 2011 for one of our newbuilds. By chartering these vessels in advance, we have been able to take advantage of the recent strong market conditions, while at the same time, reducing our exposure to
charter rate fluctuations in late 2008, 2009 and 2010 when all of our newbuilds are delivered. In addition, as of December 31, 2007, we had arranged one- to three-year period time charters commencing in 2008
for the three vessels in our fleet which were deployed on spot charters as of December 31, 2007. As a result, as of December 31, 2007, we had time charter commitments for approximately 75.9%, 50.6% and
36.1% of our fleets anticipated available days in 2008, 2009 and 2010, respectively, and our contracted period time charter arrangements for 2008 through 2010, are expected to provide revenues of $347.1 million.
We monitor developments in the drybulk shipping industry on a regular basis and seek to adjust the charter hire periods for our vessels according to our assessment of market conditions. Our Manager,
which in combination with its predecessor has over 40 years of experience in managing drybulk vessels, balances our charters between period time charters and spot charters. We are constantly evaluating
opportunities to increase the number of our drybulk vessels employed on period time charters, but only expect to enter into additional period time charters with financially strong charterers on terms that reflect the
value of our vessels. In addition, we have on occasion requested to terminate a charter earlier than scheduled when either we would like to take advantage of a strong long-term period time charter market
environment and believe that an opportunity to enter into a subsequent long-term period time charter is not likely to be available when the relevant vessel is originally scheduled to be redelivered or when our
vessel is otherwise chartered pursuant to a period time charter that is expected to generate lower charter revenues than would otherwise be available based on prevailing charter rates and market conditions.
Set forth below are brief descriptions of the types of charters under which our vessels may be employed.
Time Charters
: A time charter is a contract to charter a vessel for a fixed period of time at a set daily rate and can last from a few days up to several years. Under our time charters the charterer pays for
most voyage expenses, such as port, canal and fuel costs, agents fees, extra war risks insurance and any other expenses related to the cargoes, and we pay for vessel operating expenses, which include, among
other costs, costs for crewing, provisions, stores, lubricants, insurance, maintenance and repairs, drydocking and intermediate and special surveys.
Period time charters: Period time charters are time charters lasting from three months up to several years.
106
Trip time charters: A trip time charter is a short-term time charter that can last from a few days up to three months and consists of a limited number of trips between ports. Vessels deployed on
trip time charters are considered to be deployed in the spot market.
Voyage Charters
: Voyage charters are generally contracts to carry a specific cargo from a load port to a discharge port, including positioning the vessel at the load port. Under a voyage charter, the
charterer pays an agreed upon total amount or on a per cargo ton basis, and we pay for both vessel operating expenses and voyage expenses. Vessels deployed on voyage charters are considered to be deployed in
the spot market. We infrequently enter into voyage charters.
Spot Charters
: Spot chartering activity involves chartering either on a voyage charter or a trip time charter. Because we employ our vessels on voyage charters only infrequently, references to spot
charters in this prospectus generally refer to trip time charters unless otherwise indicated.
Contracts of Affreightment
: We also, infrequently, enter into contracts of affreightment, under which our vessels are used to carry multiple cargoes over the same route over a number of years.
Our Customers
Our customers, since 2005, have included over 30 national, regional and international companies, including Bunge, Cargill, Daiichi, Intermare Transport G.m.b.H., NYK and NCS, or their affiliates, which
were chartering our vessels as of December 31, 2007. In addition, in February, 2008 we entered into a 20-year period time charter with Eastern Energy Pte. Ltd., an affiliate of the Tata Group of companies,
pursuant to which Eastern Energy Pte. Ltd. will charter the newbuild to be named
Kanaris
commencing in 2011. In March and April of 2008, we entered into two separate five-year period time charters with
Kawasaki Kisen Kaisha, Ltd., or K-Line, pursuant to which K-Line will charter the
Marina
or a sister ship commencing in the third or fourth quarter of 2008 and K-Line will charter the
Pedhoulas Trader
commencing in July 2008. In March 2008, we also entered into a five-year period time charter contract with Shinwa pursuant to which Shinwa will charter the
Maritsa
or a sister ship commencing in the first
quarter of 2010. Our customers include leading drybulk charterers, some of which have been chartering our vessels or vessels of our affiliates for over 20 years. We seek to charter our vessels primarily to
charterers who intend to use our vessels without sub-chartering them to third parties. We find that developing and maintaining relationships with the end-users of our services allows us to develop strong
relationships with these customers and develop a better understanding of the commodities carried by our vessels. A prospective charterers financial condition and reliability are also important factors in negotiating
employment for our vessels.
Below is a brief description of our relationship with three of our largest customers with which we have strong relationships and which, as of December 31, 2007, were chartering nine of our vessels on
spot or period time charters:
Bunge Limited and its affiliates
: Bunge is a leading agribusiness and food company based in the United States. We have transported a variety of cargoes, including grain, coal and iron ore, for Bunge since
2002. Between January 1, 2003 and December 31, 2007, we made approximately 90 voyages and transported over 6.2 million metric tons (Mt) of cargo for Bunge. As of December 31, 2007, we had one spot
charter and two period time charters in place with Bunge, and in the first quarter of 2008, commenced two one-year period time charters with Bunge.
Cargill International S.A. and its affiliates
: Cargill is an international provider of food and agriculture products and services based in the United States. We have transported a variety of cargoes, including
grain, coal and iron ore, for Cargill since the early 1990s. Between January 1, 2003 and December 31, 2007, we made approximately 60 voyages and transported over 3.5 Mt of cargo for Cargill. As of December
31, 2007, we had one spot charter in place with Cargill.
Daiichi Chuo Kisen Kaisha and its affiliates
: Daiichi is a global provider of maritime transportation services based in Japan that also engages in commodities trading. In 2007, we solidified our relationship
with Daiichi with a series of period time charters to transport coal with an aggregate of more than 32 years of employment, as of December 31, 2007, and as of that date, had vessels deployed on five period time
charters with Daiichi. As of December 31, 2007, we also were scheduled to commence five additional five-year period time charters and one additional two-year period time charter with Daiichi at
107
various times between 2008 and 2010. These charters have established our company as one of Daiichis largest non-Japanese drybulk shipping associates.
See Risk FactorsRisks Related to Our CompanyWe depend upon a limited number of customers for a large part of our revenues and the loss of one or more of these customers could adversely affect our
financial performance.
Corporate Matters
Safe Bulkers, Inc. was incorporated on December 11, 2007, under the laws of the Republic of the Marshall Islands, for the purpose of acquiring ownership of our 19 Subsidiaries, each incorporated under
the laws of the Republic of Liberia, that either currently own vessels or are scheduled to own vessels. Each of these subsidiaries, since inception, has been under the common control of Polys Hajioannou and
Nicolaos Hadjioannou. Following the date of the final prospectus, and prior to the closing of this offering, each of these Subsidiaries will be transferred or contributed to Safe Bulkers, Inc. by Vorini Holdings, a
Marshall Islands corporation that will be majority owned by Polys Hajioannou and Nicolaos Hadjioannou, with Maria Hajioannou and Eleni Hajiannou having minority shareholdings. See Managements Discussion
and Analysis of Financial Condition and Results of OperationsOverview for more information on our Reorganization, which will occur following the date of the final prospectus and prior to the closing of this
offering. Following the closing of this offering, we will conduct our business operations through these Subsidiaries. Each of our vessels is owned by one of these Subsidiaries.
Management of Our Fleet
Our chief executive officer, president, chief operating officer and chief financial officer, collectively referred to in this prospectus as our executive officers, provide strategic management for our company
and also supervise the management of our day-to-day operations by our Manager. We expect that all of the executive officers, except for the chief financial officer, will allocate a substantial majority of their time
to our business. With respect to the chief financial officer, all of his time will be allocated to our business. Our arrangements with our Manager and its performance are reviewed by our board of directors. Prior to
this offering, we will be entering into a management agreement pursuant to which our Manager provides us and our subsidiaries with technical, administrative, commercial and certain other services for an initial
term expiring on the second anniversary of the completion of this offering, with automatic one-year renewals for an additional eight years, unless we provide notice of non-renewal 12 months prior to the end of
the then-current term. Our Manager reports to us and our board of directors through our executive officers.
Historically, our Manager only rarely managed vessels other than those in our fleet and currently it does not manage any other companies vessels, with the exception of certain services provided to
SafeFixing, an affiliate of our Manager, which is in the business of chartering-in third party vessels for subsequent chartering to customers. Our Manager has agreed that, during the term of our management
agreement and for a period of one year following its termination, our Manager will not provide management services to, or with respect to, any drybulk vessels other than (a) on our behalf, (b) with respect to
certain drybulk vessels chartered in by SafeFixing or (c) with respect to drybulk vessels that are owned or operated by the Hajioannou Entities, which include Polys Hajioannou, Nicolaos Hadjioannou, Vorini
Holdings and Machairiotissa Holdings, and drybulk vessel businesses that are acquired, invested in or controlled by the Hajioannou Entities, subject in each case to compliance with, or waivers of, the restrictive
covenant agreements entered into between us and the Hajioannou Entities. See Certain Relationships and Related Party Transactions and ManagementEmployment and Restrictive Covenant Agreements for a
description of our restrictive covenant agreements entered into with the Hajioannou Entities. We believe we will continue to derive significant benefits from our relationship with our Manager.
Our Manager has also agreed that if one of our drybulk vessels and a drybulk vessel owned or operated by any of the Hajioannou Entities are both available and meet the criteria for a charter being
arranged by our Manager, our drybulk vessel will receive such charter.
Following this offering, and until the second anniversary of the completion of this offering, in return for providing technical, administrative and commercial management of our vessels, including human
108
resources, financial and other administrative services such as bookkeeping, audits and accounting services, banking and financial services, client and investor relations services and office space, our Manager will
receive a management fee of $575 per day per vessel. Thereafter, these fees will be adjusted every year by agreement between us and our Manager. In return for chartering services rendered to us, our Manager
will also receive a fee of 1.0% on all freight, charter hire, ballast bonus and demurrage for each vessel. Our Manager will also receive a commission of 1.0% based on the contract price of any vessel bought or
sold by it on our behalf, including the acquisition of each of our contracted newbuilds other than the two Post-Panamax class vessels being built in the IHI shipyard in Japan. With respect to these two Post-
Panamax class vessels, our Manager will receive a commission of 1.0% based on the contract prices of those vessels through separate agreements with the Itochu Corporation, the trading house facilitating the IHI
newbuild sales and the counterparty to the applicable newbuild contracts, and not pursuant to the management agreement. We will also pay our Manager a flat supervision fee of $375,000 per newbuild, which we
will capitalize, for the on-premises supervision by selected engineers and others on the Managers staff of newbuilds we have agreed to acquire pursuant to shipbuilding contracts, memoranda of agreement, or
otherwise.
For more information on the services provided by our Manager pursuant to our management agreement, please read the section entitled Our Manager and Management Related Agreements.
Competition
We operate in highly competitive markets that are based primarily on supply and demand. Our business fluctuates in line with the main patterns of trade of the major drybulk cargoes and varies according
to changes in the supply and demand for these items. We believe we differentiate ourselves from our competition by providing young, modern vessels with advanced designs and technological specifications.
Having all of our current fleet and a majority of our current and contracted fleet built in Japanese shipyards, we believe, provides us with an advantage in attracting large, well-established customers, including
Japanese customers.
The drybulk sector is characterized by relatively low barriers to entry. According to Drewry, ownership of drybulk vessels is highly fragmented and, as of January 31, 2008, was divided among over 1,400
independent drybulk vessel owners. As of January 31, 2008, nearly 500 of these owners owned Panamax class drybulk vessels, with at least 20 owning at least ten such vessels. Some of these competitors have
larger fleets and greater financial resources than we do, which may make them more competitive. In general, we compete with other owners of Panamax class or larger drybulk vessels for charters based upon
price, customer relationships, operating expertise, professional reputation and size, age, location and condition of the vessel.
For a more detailed description of our competitive environment, please read The International Drybulk Shipping Industry.
Crewing and Shore Employees
Upon completion of this offering, we will have four shore-based employees, all of whom will be provided by our Manager. This management team will consist of our chief executive officer, president,
chief financial officer and chief operating officer. Our Manager is responsible for the technical management of our fleet and therefore also handles the recruiting, either directly or through a crewing agent, of the
senior officers and all other crew members for our vessels. Our Manager currently crews our vessels primarily with Greek senior officers and Filipino officers and seamen. We believe the streamlining of crewing
arrangements through our Manager ensures that all of our vessels will be crewed with experienced crews that have the qualifications and licenses required by international regulations and shipping conventions. As
of December 31, 2007, 231 people served on board the vessels in our fleet, and our Manager employed 34 people, all of whom were shore-based.
Permits and Authorizations
We are required by various governmental and other agencies to obtain certain permits, licenses, certificates and financial assurances with respect to each of our vessels. The kinds of permits, licenses,
109
certificates and financial assurances required by governmental and other agencies depend upon several factors, including the commodity being transported, the waters in which the vessel operates, the nationality of
the vessels crew and the type and age of the vessel. All permits, licenses, certificates and financial assurances currently required to operate our vessels have been obtained. Additional laws and regulations,
environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of doing business.
Risk of Loss and Liability Insurance
General
The operation of our fleet includes risks such as mechanical failure, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and
labor strikes as well as personal injury and loss of life. In addition, the operation of any oceangoing vessel is subject to the inherent possibility of marine disaster, including oil spills and other environmental
mishaps, and the liabilities arising from owning and operating vessels in international trade. The U.S. Oil Pollution Act of 1990 (OPA 90), which imposes virtually unlimited liability upon owners, operators and
demise charterers of vessels trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for vessel owners and operators
trading in the United States market.
Our Manager is responsible for arranging insurance for all our vessels on terms specified in our management agreement, which we believe are in line with standard industry practice. In accordance with
our management agreement, our Manager will procure and maintain hull and machinery insurance, war risks insurance, freight, demurrage and defense coverage and protection and indemnity coverage with mutual
assurance associations. Due to our low incident rate and young age of our fleet, we are generally able to procure relatively low hull and machinery insurance rates.
While our insurance coverage for our drybulk vessel fleet is in amounts that we believe to be prudent to protect us against normal risks involved in the conduct of our business and consistent with standard
industry practice, our Manager may not be able to maintain this level of coverage throughout a vessels useful life. Furthermore, there can be no assurance that all risks are adequately insured against, that any
particular claim will be paid or that adequate insurance coverage will always be able to be obtained at reasonable rates.
Hull and machinery and war risks insurance
Our marine hull and machinery insurance covers risks of partial loss or actual or constructive total loss from collision, fire, grounding, engine breakdown and other insured risk up to an agreed amount per
vessel. Our war risks insurance covers risks of partial loss or actual or constructive total loss from confiscation, seizure, capture, vandalism, sabotage and other war-related risks. Our vessels will each be covered up
to at least their fair market value after meeting certain deductibles per incident per vessel. We also maintain increased value coverage for each of our vessels. Under this increased value coverage, in the event of
the total loss of a vessel, we are entitled to recover amounts not recoverable under our hull and machinery policy due to under-insurance.
Protection and indemnity insurance
Protection and indemnity insurance is a form of mutual indemnity insurance provided by mutual marine protection and indemnity associations, or P&I Clubs, formed by vessel owners to provide protection
from large financial loss to one club member by contribution towards that loss by all members.
Protection and indemnity insurance covers our third-party and crew liabilities in connection with our shipping activities. This includes third-party liability, crew liability and other related expenses resulting
from the injury or death of crew members, passengers and other third parties, the loss or damage to cargo, third-party claims arising from collisions with other vessels, damage to other third-party property,
pollution arising from oil or other substances and salvage, towing and other related costs, including wreck removal.
110
Unless otherwise provided by the international conventions that limit the liability of vessel owners and subject to the capping discussed below, our coverage, except for pollution, will be unlimited.
Our current protection and indemnity insurance coverage for pollution is limited to $1.0 billion per vessel per incident. We are a member of a P&I Club that is a member of the International Group of P&I
Clubs (the International Group). The P&I Clubs that comprise the International Group insure approximately 90% of the worlds commercial blue-water tonnage and have entered into a pooling agreement to
reinsure each individual P&I Clubs liabilities. The International Group exists to arrange collective insurance and reinsurance for P&I Clubs, to represent the views of vessel owners and charterers who belong to those
P&I Clubs on matters of concern to the shipping industry and to provide a forum for the exchange of information. Each of the constituent P&I Clubs is an independent, non-profit making mutual insurance association,
providing cover for its vessel owners and charterer members against liabilities of their respective businesses. Each P&I Club is controlled by its members through a board of directors elected from the membership.
The board of directors retains responsibility for strategic and policy issues, but delegates the technical running of the P&I Club to full-time managers.
Although the P&I Clubs compete with each other for business, they have found it beneficial to pool their larger risks under the auspices of the International Group. This pooling is regulated by a contractual
agreement which defines the risks that are to be pooled and exactly how these are to be shared among the participating P&I Clubs. The pool provides a mechanism for sharing all claims in excess of $6.0 million up
to a limit of about $4.5 billion. For a layer of claims between $50.0 million and $2.0 billion the P&I Clubs in the International Group purchase reinsurance from the commercial market. The pooling system provides
participating P&I Clubs with reinsurance protection, at cost, at much higher levels than would normally be available in the commercial reinsurance market. As a member of a P&I Club that is a member of the
International Group, we are subject to periodic assessments payable to the P&I Clubs mainly based on our claims record, as well as the claims record of the International Group, all other members of the individual
P&I Clubs and members of the pool of P&I Clubs comprising the International Group.
Inspection by Classification Societies
Every oceangoing vessel must be classed by a classification society. The classification society certifies that the vessel is in class, signifying that the vessel has been built and maintained in accordance
with the rules and regulations of the classification society. In addition, each vessel must comply with all applicable laws, rules and regulations of the vessels country of registry, or flag state, as well as the
international conventions of which that flag state is a member. A vessels compliance with international conventions and corresponding laws and ordinances of its flag state can be confirmed by the applicable flag
state, port state control or, upon application or by official order, the classification society, acting on behalf of the authorities concerned.
The classification society also undertakes, upon request, other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each
individual case or to the regulations of the country concerned.
All areas subject to survey as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period
between two subsequent surveys of each area must not exceed five years. The maintenance of class, regular and extraordinary surveys of a vessels hull and machinery, including the electrical plant, and any special
equipment classed are required to be performed as follows:
Annual Surveys.
For oceangoing vessels, annual surveys are conducted for its hull and machinery, including the electrical plant, and for any special equipment classed, at intervals of 12 months
from the date of commencement of the class period indicated in the certificate.
Intermediate Surveys.
Extended annual surveys are referred to as intermediate surveys and typically are conducted on the occasion of the second or third annual surveys after commissioning
and after each class renewal.
Class Renewal / Special Surveys.
Class renewal surveys, also known as special surveys, are more extensive than intermediate surveys and are carried out at the end of each five year period.
During the special survey the vessel is thoroughly examined, including thickness-gauging to
111
determine any diminution in the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. It may be expensive to
have steel renewals pass a special survey if the vessel is aged or experiences excessive wear and tear. A vessel owner has the option of arranging with the classification society for the vessels
machinery to be on a continuous survey cycle, according to which all machinery would be surveyed within a five-year cycle. At an owners application, the surveys required for class renewal
may be split according to an agreed schedule to extend over the entire period of class.
Most vessels are also drydocked every 24 to 36 months for inspection of their underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a
recommendation or condition of class which must be rectified by the vessel owner within the prescribed time limits. If In Water Survey (IWS) notation is assigned by class, as is the case for our vessels, the
vessel owner has the option of carrying out an underwater inspection of the vessel in lieu of drydocking up to the tenth anniversary of vessel delivery, subject to certain conditions, thereby generally achieving a
higher utilization for the relevant vessel.
In general, insurance underwriters make it a condition for insurance coverage that a vessel be certified as in class by a classification society which is a member of the International Association of
Classification Societies (IACS). All of our vessels are certified as being in class by Lloyds Register of Shipping, which is a member of IACS.
The following table lists the dates of our recent drydockings and special surveys, and the dates by which we expect to carry out the next drydockings and special surveys for the vessels in our current
drybulk vessel fleet:
Vessel Name
Drydocking
Special Survey
Efrossini
April 2008
April 2008
Maria
May 2008
May 2008
Vassos
March 2008
February 2009
Katerina
July 2008
May 2009
Maritsa
February 2009
January 2010
Pedhoulas Merchant
March 2010 (1)
March 2011 (1)
Pedhoulas Trader
May 2010 (1)
May 2011 (1)
Pedhoulas Leader
February 2011 (1)
March 2012 (1)
Stalo
January 2010 (1)
January 2011 (1)
Marina
January 2010 (1)
January 2011 (1)
Sophia
June 2011 (1)
June 2012 (1)
(1)
For these vessels, we have the ability to carry out in-water survey of the vessel in lieu of drydocking, subject to certain conditions, which allows us to achieve a higher utilization of the relevant vessel.
In the event of an in-water survey as part of a particular intermediate survey, drydocking would be required for the following special survey.
Drydocking can be undertaken as part of a special survey if the drydocking occurs within 15 months prior to the special survey deadline.
Environmental and Other Regulations
General
Government regulation significantly affects the ownership and operation of our vessels. Our vessels are subject to international conventions and national, state and local laws and regulations in force in
international waters and the countries in which they operate or are registered, including those governing the management and disposal of hazardous substances and wastes, the cleanup of oil spills and the
management of other contamination, air emissions, water discharges and ballast water. These laws and regulations include OPA 90, the U.S. Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA), the U.S. Clean Water Act (CWA) and Clean Air Act (CAA), the International Convention for Prevention of Pollution from Ships, the International Convention for Safety of Life at Sea
(SOLAS) and implementing regulations adopted by the International Maritime Organization (IMO), the
112
European Union (EU) and other international, national and local regulatory bodies. Compliance with these laws, regulations and other requirements entails significant expense, including vessel modifications and
implementation of certain operating procedures. Our fleet, however, is young and modern and complies with all current requirements. Under our management agreement, our Manager will assume technical
management responsibility for our fleet, including compliance with all applicable government and other regulations. If our management agreement with our Manager terminates, we would attempt to hire another
party to assume this responsibility, including compliance with the regulations described herein. In such event we may be unable to hire another party to perform these and other services for a fixed fee, as is the
case with our Manager. However, due to the nature of our relationship with our Manager, we do not expect our management agreement to be terminated early.
A variety of governmental and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (such as the U.S. Coast Guard, harbor
master or equivalent), classification societies, flag state administration (country of registry), charterers and terminal operators. Certain of these entities require us to obtain permits, licenses, financial assurances and
certificates for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or temporarily suspend operation of one or more of our vessels.
We believe that the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety requirements on all vessels
and may accelerate the scrapping of older vessels throughout the drybulk shipping industry. Increasing environmental concerns have created a demand for vessels that conform to the stricter environmental
standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with U.S. and
international regulations. We believe that the operation of our vessels is in substantial compliance with all environmental laws and regulations applicable to us as of the date of this prospectus. However, because
such laws and regulations are subject to frequent change and may impose increasingly stricter requirements, such future requirements may limit our ability to do business, increase our operating costs, force the
early retirement of our vessels and/or affect their resale value, all of which could have a material adverse effect on our financial condition and results of operations. However, we believe that the nature of our
young, modern fleet is such that we will not be exposed to the same level of risk faced by owners of older, less modern vessels.
The International Maritime Organization
Our vessels are subject to standards imposed by the IMO, the United Nations agency for maritime safety and the prevention of pollution by ships. The IMO has adopted regulations that are designed to
reduce pollution in international waters, both from accidents and from routine operations, and has negotiated international conventions that impose liability for oil pollution in international waters and a signatorys
territorial waters. For example, Annex III of the International Convention for the Prevention of Pollution from Ships (MARPOL) regulates the transportation of marine pollutants and imposes standards on
packing, marking, labeling, documentation, stowage, quantity limitations and pollution prevention. These requirements have been expanded by the International Maritime Dangerous Goods Code, which imposes
additional standards for all aspects of the transportation of dangerous goods and marine pollutants by sea.
In September 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels. Annex VI became effective on May 19, 2005, and sets limits on sulfur oxide and nitrogen oxide
emissions from vessel exhausts and prohibits deliberate emissions of ozone depleting substances, such as chlorofluorocarbons. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for
special areas to be established with more stringent controls on sulfur emissions. We have obtained International Air Pollution Prevention Certificates for all our vessels, and believe that maintaining compliance with
Annex VI will not have an adverse financial impact on the operation of our vessels. Additional or new conventions, laws and regulations may be adopted that could adversely affect our ability to manage our
vessels. For example, the United States in February 2007 proposed a series of amendments to Annex VI regarding emissions of particulate matter, nitrogen oxides and sulfur oxides. The emissions program
described in this proposal would reduce air pollution from ships by establishing a new tier of
113
performance-based standards for marine diesel engines on all vessels and by establishing stringent emission requirements for ships that operate in certain coastal areas with particular air quality concerns. If these
amendments are implemented and are applied to existing vessels (as opposed to vessels manufactured after the effective date), we may incur costs to install additional pollution control equipment in our vessels.
In March 2001, the IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, which imposes strict liability on ship owners for pollution
damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention also requires registered owners of ships over 1,000 gross tons to maintain insurance in specified
amounts to cover their liability for relevant pollution damage. As of November 2007, the Bunker Convention had been ratified by a sufficient number of nations for entry into force, and the Bunker Convention
will become effective on November 21, 2008.
The operation of our vessels is also affected by the requirements set forth in the IMOs International Management Code for the Safe Operation of Ships and Pollution Prevention, or ISM Code. The ISM
Code requires vessel owners or any other person, such as a manager or bareboat charterer, who has assumed responsibility for the operation of a vessel from the vessel owner and on assuming such responsibility
has agreed to take over all the duties and responsibilities imposed by the ISM Code, to develop and maintain an extensive SMS, or Safety Management System, that includes the adoption of a safety and
environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. The ISM Code requires that vessel operators obtain a Safety
Management Certificate for each vessel they operate from the government of the vessels flag state. The certificate verifies that the vessel operates in compliance with its approved SMS. Currently, our Manager
has the requisite documents of compliance and safety management certificates for each of the vessels in our fleet for which the certificates are required by the IMO. Our Manager is required to renew these
documents of compliance and safety management certificates every five years. Compliance is externally verified on an annual basis for the Manager and between the second and third years for each vessel by the
applicable flag state. Although all our vessels are currently ISM Code-certified, there can be no assurance that such certification will be maintained indefinitely.
Noncompliance by a vessel owner, manager or bareboat charterer with the ISM Code may subject such party to increased liability, invalidate existing insurance or decrease available insurance coverage for
the affected vessels and result in a denial of access to, or detention in, certain ports. For example, the U.S. Coast Guard and EU authorities have indicated that vessels not in compliance with the ISM Code will be
prohibited from trading in U.S. and EU ports.
The U.S. Oil Pollution Act of 1990
OPA 90 established an extensive regulatory and liability regime for the protection of the environment from oil spills and cleanup of oil spills. OPA 90 applies to discharges of any oil from a vessel,
including discharges of fuel and lubricants. OPA 90 affects all owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in U.S. waters, which includes
the United States territorial sea and its two hundred nautical mile exclusive economic zone. While our vessels do not carry oil as cargo, they do carry lubricants and fuel oil, or bunkers, which subjects our
vessels to the requirements of OPA 90.
Under OPA 90, vessel owners, operators and bareboat charterers are responsible parties and are jointly, severally and strictly liable (unless the discharge of pollutants results solely from the act or
omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges, or threatened discharges, of pollutants from their vessels, including
bunkers. OPA 90 defines these other damages broadly to include:
natural resource damages and the costs of assessment thereof;
real and personal property damage;
net loss of taxes, royalties, rents, fees and other lost revenues;
lost profits or impairment of earning capacity due to property or natural resource damages; and
114
net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards and loss of subsistence use of natural resources.
OPA 90 preserves the right to recover damages under other existing laws, including maritime tort law.
As a result of 2006 amendments to OPA 90, the liability of responsible parties under OPA 90 was increased to the greater of $950 per gross ton or $800,000 per non-tank vessel (subject to periodic
adjustment for inflation). These limits of liability do not apply if an incident was directly caused by violation of applicable U.S. safety, construction or operating regulations or by a responsible partys gross
negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with oil removal activities.
Under OPA 90, all owners and operators of vessels over 300 gross tons are required to establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet their
potential liabilities under OPA 90. Current U.S. Coast Guard regulations require evidence of financial responsibility in the amount of $900 per gross ton for non-tank vessels, which includes the former OPA 90
liability limit of $600 per gross ton for non-tank vessels and the CERCLA liability limit of $300 per gross ton (see The U.S. Comprehensive Environmental Response, Compensation, and Liability Act below for
further details). On February 5, 2008, the U.S. Coast Guard proposed a new rule that will increase the amounts of required financial responsibility to reflect the July 2006 increases in OPA 90 liability. Under the
regulations, owners and operators may evidence their financial responsibility by showing proof of insurance, surety bond, guarantee, letter of credit or self-insurance. An owner or operator of a fleet of vessels is
required only to demonstrate evidence of financial responsibility in an amount sufficient to cover the vessel in the fleet having the greatest maximum liability under OPA 90. Under the self-insurance provisions, the
vessel owner or operator must have a net worth and working capital, measured in assets located in the United States against liabilities located anywhere in the world, that exceeds the applicable amount of financial
responsibility. We have complied with the U.S. Coast Guard regulations by providing a financial guarantee evidencing sufficient self-insurance. We have satisfied these requirements and obtained a U.S. Coast
Guard certificate of financial responsibility for all of our vessels.
The U.S. Coast Guards regulations concerning certificates of financial responsibility provide, in accordance with OPA 90, that claimants may bring suit directly against an insurer or guarantor that
furnishes certificates of financial responsibility. In the event that such insurer or guarantor is sued directly, it is prohibited from asserting any contractual defense that it may have had against the responsible party
and is limited to asserting those defenses available to the responsible party and the defense that the incident was caused by the willful misconduct of the responsible party. Certain organizations, which had typically
provided certificates of financial responsibility under pre-OPA 90 laws, including the major protection and indemnity organizations, have declined to furnish evidence of insurance for vessel owners and operators if
they are subject to direct actions or required to waive insurance policy defenses. This requirement may have the effect of limiting the availability of the type of coverage required by the U.S. Coast Guard and
could increase our costs of obtaining this insurance for our fleet, as well as the costs of our competitors that also require such coverage.
We currently maintain, for each of our vessels, oil pollution liability coverage insurance in the amount of $1.0 billion per incident. Although our vessels carry a relatively small amount of bunkers, a spill
of oil from one of our vessels could be catastrophic under certain circumstances. We also carry hull and machinery and protection and indemnity insurance to cover the risks of fire and explosion. Losses as a
result of fire or explosion could be catastrophic under some conditions. While we believe that our present insurance coverage is adequate, not all risks can be insured and there can be no guarantee that any specific
claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates. If the damages from a catastrophic spill exceeded our insurance coverage, the payment of those
damages could have a severe, adverse effect on us and could possibly result in our insolvency.
Title VII of the Coast Guard and Maritime Transportation Act of 2004 amended OPA 90 to require the owner or operator of any non-tank vessel of 400 gross tons or more that carries oil of any kind as a
fuel for main propulsion, including bunkers, to prepare and submit a response plan for each vessel. These vessel response plans include detailed information on actions to be taken by vessel personnel to prevent or
mitigate any discharge or substantial threat of such a discharge of ore from the vessel due to operational activities or casualties. All of our vessels have U.S. Coast Guard-approved response plans.
115
OPA 90 specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states have enacted legislation
providing for unlimited liability for oil spills. In some cases, states which have enacted such legislation have not yet issued implementing regulations defining vessels owners responsibilities under these laws. We
intend to comply with all applicable state regulations in the ports where our vessels call.
The U.S. Comprehensive Environmental Response, Compensation, and Liability Act
CERCLA applies to spills or releases of hazardous substances other than petroleum or petroleum products, whether on land or at sea. CERCLA imposes joint and several liability, without regard to fault,
on the owner or operator of a ship, vehicle or facility from which there has been a release, along with other specified parties. Costs recoverable under CERCLA include cleanup and removal costs, natural resource
damages and governmental oversight costs. Liability under CERCLA is generally limited to the greater of $300 per gross ton or $0.5 million per vessel carrying non-hazardous substances ($5.0 million for vessels
carrying hazardous substances), unless the incident is caused by gross negligence, willful misconduct or a violation of certain regulations, in which case liability is unlimited. As described above, owners and
operators of vessels must establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet their potential liabilities under CERCLA.
The U.S. Clean Water Act
The CWA prohibits the discharge of oil or hazardous substances in navigable waters and imposes strict liability in the form of penalties for any unauthorized discharges. It also imposes substantial liability
for the costs of removal, remediation and damages and complements the remedies available under the more recently enacted OPA 90 and CERCLA, discussed above. Currently, under U.S. Environmental Protection
Agency (EPA) regulations that have been in place since 1978, vessels are exempt from the requirement to obtain CWA permits for the discharge in U.S. ports of ballast water and other substances incidental to
the normal operation of vessels. However, on March 30, 2005, the United States District Court for the Northern District of California ruled in
Northwest Environmental Advocates v. EPA
, 2005 U.S. Dist. LEXIS
5373, that the EPA exceeded its authority in creating an exemption for ballast water. On September 18, 2006, the court issued an order granting permanent injunctive relief to the plaintiffs, invalidating the blanket
exemption in the EPAs regulations for all discharges incidental to the normal operation of a vessel as of September 30, 2008, and directing the EPA to develop a system for regulating all discharges from vessels
by that date. Under the courts ruling, owners and operators of vessels visiting U.S. ports would be required to comply with any CWA permitting program to be developed by the EPA or face penalties. Although
the EPA has appealed this decision to the Ninth Circuit Court of Appeals, it is proceeding with development of the regulations. In June 2007, the EPA provided notice of its intention to promulgate rules regarding
the regulation of ballast water discharges and other discharges incidental to the normal operation of vessels and solicited public comment. We cannot predict the outcome of the litigation, but, if the courts order is
ultimately upheld, we will incur certain costs to obtain CWA permits for our vessels and meet any related treatment requirements. While we do not believe that the costs associated with obtaining such permits and
meeting related treatment requirements would be material, it is difficult to predict the overall impact of CWA permitting requirements on our business. In addition, various states have also enacted legislation
restricting ballast water discharges and the introduction of non-indigenous species considered to be invasive. These and any similar restrictions enacted in the future could increase the costs of operating in the
relevant waters.
The U.S. Clean Air Act
The CAA requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. To address emissions from large ocean-going vessels, the EPA issued
Tier 1 emissions standards in 2003 for Category 3 marine diesel engines, which are compression-ignition diesel marine engines at or above 30 liters per-cylinder displacement, on vessels operating in U.S. waters.
This Tier 1 standard is the nitrogen oxides limit contained in Annex VI of MARPOL. In November 2007, the EPA issued an Advance Notice of Proposed Rulemaking announcing its intention to propose more
stringent emission standards for new Category 3 marine engines. The standards under consideration are
116
consistent with the United States proposal to amend Annex VI of MARPOL, as discussed above. If these amendments are implemented and apply to existing vessels (as opposed to vessels manufactured after the
effective date), we may incur costs to install additional pollution control equipment on our vessels to comply. The CAA also requires states to adopt State Implementation Plans, or SIPs, designed to attain national
health-based air quality standards in primarily major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor
control equipment. In addition, individual states, including California, have attempted to regulate vessel emissions within state waters. Although the California rules were recently struck down by the Ninth Circuit
Court of Appeals as preempted by the CAA, the state intends to request further judicial review. It could also seek a waiver from the EPA to allow the adoption of such standards. New or more stringent federal or
state air emission regulations could require significant capital expenditures to retrofit vessels and could otherwise increase our operating costs.
Other environmental initiatives
The EU has adopted legislation that (1) requires member states to refuse access to their ports by certain substandard vessels, according to vessel type, flag and number of previous detentions; (2) obliges
member states to inspect at least 25% of vessels using their ports annually and increase surveillance of vessels posing a high risk to maritime safety or the marine environment; (3) provides the EU with greater
authority and control over classification societies, including the ability to seek to suspend or revoke the authority of negligent societies; and (4) requires member states to impose criminal sanctions for certain
pollution events, such as the unauthorized discharge of tank washings. It is also considering legislation that will affect the operation of vessels and the liability of owners for oil pollution. While we do not believe
that the costs associated with our compliance with these adopted and proposed EU initiatives will be material, it is difficult to predict what additional legislation, if any, may be promulgated by the EU or any other
country or authority. For example, in October 2007, the Commission of the European Communities proposed an Integrated Maritime Policy for the European Union. Under the proposal, the Commission indicated
that it will, among other things, support international efforts to diminish air pollution, including greenhouse gas emissions, from ships, and will consider additional proposals in these areas at the European level.
The U.S. National Invasive Species Act (NISA) was enacted in 1996 in response to growing reports of harmful organisms being released into U.S. ports through ballast water taken on by vessels in
foreign ports. Under NISA, the U.S. Coast Guard adopted regulations in July 2004 imposing mandatory ballast water management practices for all vessels equipped with ballast water tanks entering U.S. waters.
These requirements can be met by performing mid-ocean ballast exchange, by retaining ballast water on board the vessel or by using environmentally sound alternative ballast water management methods approved
by the U.S. Coast Guard. However, mid-ocean ballast exchange is mandatory for vessels heading to the Great Lakes or Hudson Bay. Mid-ocean ballast exchange is the primary method for compliance with the U.S.
Coast Guard regulations, since holding ballast water can prevent vessels from performing cargo operations upon arrival in the United States and alternative methods are still under development. Vessels that are
unable to conduct mid-ocean ballast exchange due to voyage or safety concerns may discharge minimum amounts of ballast water (in areas other than the Great Lakes and Hudson Bay), provided that they comply
with record keeping requirements and document the reasons they could not follow the required ballast water management requirements. The U.S. Coast Guard is developing a proposal to establish ballast water
discharge standards, which could set maximum acceptable discharge limits for various invasive species or lead to requirements for active treatment of ballast water. A number of bills relating to ballast water
management have been introduced in the U.S. Congress, but it is difficult to predict which, if any, will be enacted. Several states, including Michigan and California, have adopted legislation or regulations relating
to the permitting and management of ballast water discharges. A challenge to the Michigan law was dismissed by the federal district court and is now under appeal in the Sixth Circuit Court of Appeals. If the
Michigan law is upheld, other states could adopt similar requirements that could increase the costs of operation in state waters.
At the international level, the IMO adopted an International Convention for the Control and Management of Ships Ballast Water and Sediments in February 2004 (the BWM Convention). The BWM
Conventions implementing regulations call for a phased introduction of mandatory ballast water
117
exchange requirements (beginning in 2009), to be replaced in time with mandatory concentration limits. The BWM Convention will not enter into force until 12 months after it has been adopted by 30 states, the
combined merchant fleets of which represent not less than 35% of the gross tonnage of the worlds merchant shipping. As of March 31, 2008, the BWM Convention had been adopted by 13 states, representing
3.62% of the worlds tonnage. Each vessel in our current fleet has been issued a BWM plan Statement of Compliance by the classification society with respect to the applicable IMO regulations and guidelines.
If mid-ocean ballast exchange is made mandatory at the international level, or if ballast water treatment requirements or options are instituted, the cost of compliance could increase for oceangoing vessels.
Although we do not believe that the costs of compliance with a mandatory mid-ocean ballast exchange would be material, it is difficult to predict the overall impact of such a requirement on our business.
Greenhouse Gas Regulation
In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change entered into force. Pursuant to the Protocol, adopting countries are required to implement national
programs to reduce emissions of certain gases, generally referred to as greenhouse gases, which are suspected of contributing to global warming. Currently, the emissions of greenhouse gases from international
shipping are not subject to the Kyoto Protocol. However, the European Union has indicated that it intends to propose an expansion of the existing European Union emissions trading scheme to include emissions of
greenhouse gases from vessels. In the United States, the California Attorney General and a coalition of environmental groups in October 2007 petitioned the EPA to regulate greenhouse gas emissions from ocean-
going vessels under the Clean Air Act. Any passage of climate control legislation or other regulatory initiatives by the IMO, European Union, or individual countries where we operate that restrict emissions of
greenhouse gases could entail financial impacts on our operations that we cannot predict with certainty at this time.
Vessel security regulations
A number of initiatives have been introduced in recent years intended to enhance vessel security. On November 25, 2002, the Maritime Transportation Security Act of 2002 (the MTSA) came into effect.
To implement certain portions of the MTSA, the U.S. Coast Guard issued regulations in July 2003 requiring the implementation of certain security requirements aboard vessels operating in waters subject to the
jurisdiction of the United States. Similarly, in December 2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. This new chapter came into effect in July
2004 and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the newly created International Ship and Port Facilities Security Code, or ISPS Code.
Among the various requirements are:
on-board installation of automatic information systems to enhance vessel-to-vessel and vessel-to-shore communications;
on-board installation of ship security alert systems;
the development of vessel security plans; and
compliance with flag state security certification requirements.
The U.S. Coast Guard regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from MTSA vessel security measures, provided such vessels have on board a
valid International Ship Security Certificate that attests to the vessels compliance with SOLAS security requirements and the ISPS Code. We have implemented the various security measures addressed by the
IMO, SOLAS and the ISPS Code, and we have approved ISPS certificates and plans on board all our vessels, which have been certified by the applicable flag state.
118
Properties
We have no freehold or leasehold interest in any real property. We occupy office space at 32 Avenue Karamanli, 16605 Voula, Athens, Greece that is provided to us as part of the services we receive
under our management agreement. Other than our vessels, we do not have any material property.
Legal Proceedings
We have not been involved in any legal proceedings which may have, or have had a significant effect on our business, financial position, results of operations or liquidity, nor are we aware of any
proceedings that are pending or threatened which may have a significant effect on our business, financial position, results of operations or liquidity.
The nature of our business exposes us to the risk of lawsuits for damages or penalties relating to, among other things, personal injury, property casualty and environmental contamination. From time to
time, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. We expect that these claims would be covered by insurance,
subject to customary deductibles. However, such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.
Exchange Controls
Under Marshall Islands law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other
payments to non-resident and non-citizen holders of our common stock.
119
Directors and Executive Officers
The following table sets forth information regarding our directors and executive officers. The business address of each of our executive officers and directors listed below is 32 Avenue Karamanli, 16605
Voula, Athens, Greece. Our telephone number at that address is 011-30-210-895-7070. Our board of directors will be elected annually on a staggered basis, and each elected director will hold office for a three-year
term. The following directors or nominees for director have been determined by our board of directors to be independent: Basil Sakellis, Frank Sica and Ole Wikborg. Officers are elected from time to time by vote
of our board of directors and hold office until a successor is elected.
Name
Age
Position
Polys Hajioannou
41
Chief Executive Officer, Chairman of the Board and Class I Director
Dr. Loukas Barmparis
45
President and Class II Director
Konstantinos Adamopoulos
45
Chief Financial Officer and Class III Director
Nicolaos Hadjioannou
29
Chief Operating Officer and Class I Director
Basil Sakellis
29
Class II Director Nominee*
Frank Sica
57
Class III Director Nominee*
Ole Wikborg
52
Class I Director Nominee*
*
Has agreed to join our board of directors upon completion of this offering.
Certain biographical information about each of these individuals is set forth below. The term of our Class I directors expires in 2010, the term of our Class II directors expires in 2009 and the term of our
Class III directors expires in 2008.
Polys Hajioannou
is our Chief Executive Officer and Chairman of our board of directors. Mr. Hajioannou also serves with our Manager, and prior to its inception, our Managers predecessor Alassia
Steamship Co., Ltd., which he joined in 1987. Mr. Hajioannou was elected as a member of the board of directors of the Union of Greek Shipowners in 2005 and has served on the board since that time. Mr.
Hajioannou is also a founding member of the Union of Cyprus Shipowners. Mr. Hajioannou holds a bachelor of science degree in nautical studies from Sunderland University.
Dr. Loukas Barmparis
is our President and a member of our board of directors. Dr. Barmparis also serves as the technical manager of our Manager, which he joined in February 2006, and is the
technical manager of the affiliated Alasia Development S.A., which he joined in January 2006, where he is responsible for project development. Prior to joining our Manager and Alasia Development S.A., from
1999 to 2005 and from 1993 to 1995, Dr. Barmparis was employed at N. Daskalantonakis Group, Grecotel, one of the largest hotel chains in Greece, as technical manager and project development general manager.
During the interim period between 1995 and 1999, Dr. Barmparis was employed at Exergia S.A. as an energy consultant. Dr. Barmparis holds a master of business administration from the Athens Laboratory of
Business Administration, a doctorate from the Imperial College of Science Technology and Medicine, a master of applied science from the University of Toronto and a diploma in mechanical engineering from the
Aristotle University of Thessaloniki.
Konstantinos Adamopoulos
is our Chief Financial Officer and a member of our board of directors. Prior to joining us, Mr. Adamopoulos was employed at Calyon, a financial institution, as a senior
relationship manager in shipping finance for 14 years. Prior to this, from 1990 to 1993, Mr. Adamopoulos was employed by the National Bank of Greece in London as an account officer for shipping finance and
in Athens as deputy head of the export finance department. Prior to this, from 1987 to 1989, Mr. Adamopoulos served as a finance officer in the Greek Air Force. Mr. Adamopoulos holds an M.B.A. in finance
from the City University Business School and a bachelor of science in business administration from the Athens School of Economics and Business Science.
Nicolaos Hadjioannou
is our Chief Operating Officer and a member of our board of directors. Mr. Hadjioannou also serves with our Manager, which he joined in 1999. Mr. Hadjioannou is a member of
the board of directors of the Union of Cyprus Shipowners and a member of the independent committee of the Norwegian Hull Club.
120
Basil Sakellis
has agreed to join our board of directors upon completion of this offering. Mr. Sakellis has been an associate of European Capital Financial Services Limited, a private equity firm based in
London, since 2006. In 2005, Mr. Sakellis worked for McKinsey & Company in London. From 2000 to 2004, Mr. Sakellis was an analyst and then an associate at NM Rothschild & Sons Ltd in London. Mr. Sakellis
received an M.B.A. from Harvard Business School in 2006 and his Masters in Engineering from Imperial College, University of London, in 2000.
Frank Sica
has agreed to join our board of directors upon completion of this offering. Mr. Sica has served as a Managing Partner at Tailwind Capital, a private equity firm, since 2006. From 2004 to
2005, Mr. Sica was a Senior Advisor to Soros Private Funds Management. During that period he was also President of Menemsha Capital Partners, Ltd., a private investment firm. From 2000 to 2003, Mr. Sica
was President of Soros Private Funds Management LLC, which oversaw the direct real estate and private equity investment activities of Soros. In 1998, Mr. Sica joined Soros Fund Management, where he was a
Managing Director responsible for Soros private equity investments. From 1988 to 1998, Mr. Sica was a Managing Director at Morgan Stanley. In 1996, Mr. Sica was elevated to Co-CEO of Morgan Stanleys
Merchant Banking Division, whose principal operating unit was Morgan Stanley Capital Partners. Prior to 1988, Mr. Sica was a Managing Director in Morgan Stanleys mergers and acquisitions department. From
1974 to 1977, Mr. Sica was an officer in the U.S. Air Force. Mr. Sica is a graduate of Wesleyan University, where he received a B.A. degree, and of the Amos Tuck School of Business at Dartmouth College,
where he received his M.B.A. Mr. Sica is also a director of CSG Systems International, an account management and billing software company for communication industries, JetBlue Airways Corporation, a
commercial airline, NorthStar Realty Finance Corporation, a real estate finance company, Onvoy, Inc., a provider of telecommunication services, and Kohls Corporation, an owner and operator of department stores.
Ole Wikborg
has agreed to join our board of directors upon completion of this offering. Mr. Wikborg has been involved in the marine and shipping industry in various capacities for over 30 years. Since
2002, Mr. Wikborg has served as a director, senior underwriter and member of the management team of the Norwegian Hull Club, based in Oslo, Norway. From 2002 to 2006, Mr. Wikborg also served as a
member and chairman of the Ocean Hull Committee of the International Union of Marine Insurance (IUMI), and since 2006 has served as Vice President and a member of the Executive Board of the IUMI. Since
1997, Mr. Wikborg has served as a board member of the Central Union of Marine Insurers, based in Oslo, and is presently that organizations Vice Chairman. From 1997 until 2002, Mr. Wikborg served as the
senior vice president of the marine division of the Energy Zurich Protector Insurance Company AS, based in Oslo and Zurich, and from 1993 until 1997 served as a senior underwriter for the marine division of
Protector Insurance Company AS, based in Oslo. Prior to his career in the field of marine insurance, Mr. Wikborg served in the Royal Norwegian Navy, attaining the rank of Lieutenant Commander.
Compensation of Directors and Senior Management
We did not pay our directors prior to this offering. Beginning in the fiscal year ending December 31, 2008, non-executive directors will receive annual fees in the amount of $40,000 plus reimbursement
for their out-of-pocket expenses. In addition, the Chairman of the audit committee, Frank Sica, will receive the annual equivalent of $60,000 in the form of shares of our common stock.
The members of our senior management, prior to this offering, have not and will not receive any compensation from us. We do not have any employment contracts with any of our executive officers, who
are provided to us by our Manager, and we do not have any service contracts with any of our non-executive directors that provide for benefits upon termination of their services.
Board of Directors
Upon the consummation of this offering, we will have seven members on our board of directors. The board of directors may change the number of directors to not less than three, nor more than 15, by a
vote of a majority of the entire board. Each director shall be elected to serve until the third succeeding annual meeting of stockholders and until his or her successor shall have been duly elected and qualified,
except in the event of death, resignation or removal. A vacancy on the board created by death, resignation, removal (which may only be for cause), or failure of the stockholders to elect the entire class of directors
121
to be elected at any election of directors or for any other reason, may be filled only by an affirmative vote of a majority of the remaining directors then in office, even if less than a quorum, at any special
meeting called for that purpose or at any regular meeting of the board of directors.
Following the completion of this offering, Vorini Holdings, a company controlled by Polys Hajioannou and Nicolaos Hadjioannou will continue to control a majority of our outstanding common stock. As a
result, we will be a controlled company within the meaning of the New York Stock Exchange corporate governance standards. Under the New York Stock Exchange rules, a company of which more than 50% of
the voting power is held by another company or group is a controlled company and may elect not to comply with certain New York Stock Exchange corporate governance requirements, including: (a) the
requirement that a majority of the board of directors consist of independent directors, (b) the requirement that the nominating committee be composed entirely of independent directors and have a written charter
addressing the committees purpose and responsibilities, (c) the requirement that the compensation committee be composed entirely of independent directors and have a written charter addressing the committees
purpose and responsibilities and (d) the requirement of an annual performance evaluation of the nominating, corporate governance and compensation committees. Following this offering, a majority of our board of
directors will be non-independent directors and our nominating, corporate governance and compensation committee will include non-independent directors, as permitted under this exemption.
Committees of the Board of Directors
Audit committee
Upon consummation of this offering, our audit committee will consist of Ole Wikborg, Basil Sakellis and Frank Sica as Chairman. We believe that Frank Sica qualifies as an audit committee financial
expert, as such term is defined in Regulation S-K promulgated by the SEC. The audit committee will be responsible for:
the hiring or termination of independent auditors and approving any non-audit work performed by such auditor;
approving the overall scope of the audit;
assisting the board in monitoring the integrity of our financial statements, the independent accountants qualifications and independence, the performance of the independent accountants and our
internal audit function and our compliance with legal and regulatory requirements;
annually reviewing an independent auditors report describing the auditing firms internal quality-control procedures, any material issues raised by the most recent internal quality-control review,
or peer review, of the auditing firm;
discussing the annual audited financial and quarterly statements with management and the independent auditor;
discussing earnings press releases, as well as financial information and earning guidance provided to analysts and rating agencies;
discussing policies with respect to risk assessment and risk management;
meeting separately, periodically, with management, internal auditors and the independent auditor;
reviewing with the independent auditor any audit problems or difficulties and managements response;
setting clear hiring policies for employees or former employees of the independent auditors;
annually reviewing the adequacy of the audit committees written charter;
reporting regularly to the full board of directors;
evaluating the board of directors performance; and
handling such other matters that are specifically delegated to the audit committee by the board of directors from time to time.
122
Nominating, corporate governance and compensation committee
Upon consummation of this offering, our nominating, corporate governance and compensation committee will consist of Ole Wikborg, Basil Sakellis and Frank Sica as Chairman. The nominating, corporate
governance and compensation committee will be responsible for:
developing and recommending criteria for selecting new directors;
screening and recommending to the board of directors individuals qualified to become executive officers;
developing and recommending to the board of directors compensation for board members;
overseeing compliance with any applicable compensation reporting requirements of the Securities and Exchange Commission and the New York Stock Exchange;
overseeing evaluations of the board of directors, its members and committees of the board of directors; and
handling such other matters that are specifically delegated to the nominating, corporate governance and compensation committee by the board of directors from time to time.
Codes of Conduct and Ethics
Prior to consummation of this offering, the board of directors will approve and adopt a Code of Business Conduct and Ethics for all officers and employees, a Code of Conduct for the chief executive
officer and senior financial officers and a Code of Ethics for directors, copies of which will be available on our website and upon written request by our stockholders at no cost.
Employees
We have four executive officers. Our Manager employs, and provides us with, all four of our executive officers, including our chief executive officer, Polys Hajioannou, our president, Dr. Loukas
Barmparis, our chief operating officer, Nicolaos Hadjioannou and our chief financial officer, Konstantinos Adamopoulos. Our Manager is responsible for paying any salaries payable to our executive officers.
Share Ownership
The common stock beneficially owned by our directors and executive officers and/or entities affiliated with these individuals is disclosed in the section entitled Principal and Selling Stockholders below.
Employment and Restrictive Covenant Agreements
We have not entered into any employment agreements with our employees.
We have entered into restrictive covenant agreements with each of Polys Hajioannou, our chief executive officer, and Nicolaos Hadjioannou, our chief operating officer. In the case of Polys Hajioannou, the
restricted period is the longer of (a) the term of the management agreement and one year following its termination and (b) the term of his services as director or employment with us and for one year following the
termination of his services and employment with us. In the case of Nicolaos Hadjioannou, the restricted period is the term of his services as director or employment with us and for one year following the
termination of his services and employment with us. Pursuant to the terms of these restrictive covenant agreements, during the restricted period these executive officers will be prohibited from (i) owning or
operating any drybulk vessels and (ii) acquiring or investing in any business involved in the ownership or operation of drybulk vessels (a drybulk vessel business). Notwithstanding these restrictions, Polys
Hajioannou and Nicolaos Hadjioannou are permitted to engage in the restricted activities in the following circumstances:
(a)
pursuant to their involvement with us;
(b)
pursuant to their involvement with our Manager, subject to compliance with, or waivers of, the management agreement;
123
(c)
with respect to certain permitted acquisitions (as defined below), provided that (i) any commercial management of drybulk vessels controlled by the restricted individuals and entities in connection
with such permitted acquisition is performed by our Manager and (ii) the restricted individuals and entities comply with the requirements for permitted acquisitions described below;
(d)
with respect to certain permitted activities of SafeFixing, which are described in more detail below, provided that any commercial management of drybulk vessels chartered-in by SafeFixing is
performed by our Manager; or
(e)
pursuant to their passive ownership of up to 9.99% of the outstanding voting securities of any publicly traded company that is engaged in the drybulk vessel business.
As noted above, Polys Hajioannou, Nicolaos Hadjioannou and the other Hajioannou Entities are permitted to engage in restricted activities with respect to two types of permitted acquisitions. One such
permitted acquisition is an acquisition of a drybulk vessel or an acquisition or investment in a drybulk vessel business, on terms and conditions as to price that are not more favorable, and on such other terms and
conditions that are not materially more favorable, than those first offered to us and refused by a majority of our independent directors. The second type of permitted acquisition is an acquisition of a group of
vessels or a business that includes non-drybulk vessels and non-drybulk businesses, provided that less than 50% of the fair market value of the acquisition is attributable to drybulk vessels or drybulk vessel
businesses. Under this second type of permitted acquisition, we must be promptly given the opportunity to buy the drybulk vessels or drybulk vessel businesses included in the acquisition for its fair market value
plus certain break-up costs.
Polys Hajioannou, Nicolaos Hadjioannou and the other Hajioannou Entities are also permitted to engage in restricted activities with respect to certain permitted activities of SafeFixing. SafeFixing is
controlled by Polys Hajioannou and Nicolaos Hadjioannou and is engaged in the business of chartering in vessels from third-party vessel owners for subsequent chartering out to customers. Under the restrictive
covenant agreement, we will have the option of chartering-in vessels that SafeFixing has chartered in as of the closing of this offering, if such vessel is not subject to a charter out arrangement with a customer or
the current charter out arrangement terminates or expires. In addition, with respect to any vessels chartered-in by SafeFixing after the closing of this offering, we will have the option to charter in such vessels from
SafeFixing within 10 business days following notice of entry into the charter-in agreement between SafeFixing and the third-party vessel owner.
Equity Compensation Plans
We have not adopted any equity compensation plans, although we have agreed to provide the Chairman of the audit committee, Frank Sica, as part of his remuneration, the annual equivalent of $60,000 in
the form of shares of our common stock.
124
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial ownership of our common stock as of the date of this prospectus and upon completion of this offering, by:
each of our directors and director nominees;
each of our executive officers;
all of our executive officers, directors and director nominees as a group;
each person known to us to beneficially own more than five percent of our common stock; and
the selling stockholder.
The selling stockholder in this offering is Vorini Holdings, which following the date of the final prospectus, and prior to the closing of this offering, will be wholly owned by members of the Hajioannou
family. As set forth in the table below, members of the Hajioannou family, through Vorini Holdings, will, following the Reorganization, be the beneficial owners of 54,500,000 shares of our common stock,
representing 100% of our issued and outstanding shares. Polys Hajioannou, our chief executive officer and Nicolaos Hadjioannou, our chief operating officer control Vorini Holdings. Information with respect to the
Hajioannou family and Vorini Holdings and their material relationships with us is provided under Certain Relationships and Related Party Transactions.
Following the date of the final prospectus, and prior to the closing of this offering, the shares of the Subsidiaries will be contributed by Polys Hajioannou and Nicolaos Hadjioannou to Safe Bulkers, Inc.
through Vorini Holdings, a company controlled by Polys Hajioannou and Nicolaos Hadjioannou, in exchange for the issuance of 100% of the outstanding shares of Safe Bulkers, Inc. to Vorini Holdings (the
Reorganization). Following the Reorganization, Safe Bulkers, Inc. will own each of the Subsidiaries and Vorini Holdings will be the sole stockholder of Safe Bulkers, Inc. See the section entitled Managements
Discussion and Analysis of Financial Conditions and Results of OperationsOverview for more information on our Reorganization, which will occur following the date of the final prospectus and prior to the
closing of this offering.
Vorini Holdings, the selling stockholder, is an underwriter within the meaning of the Securities Act of 1933 in connection with the sale of our common stock in this offering.
Upon closing of this offering, we will have one class of common stock outstanding. Each outstanding share of our common stock will entitle our stockholders, including the selling stockholder listed in this
table, to one vote. As of the date of this prospectus, none of the outstanding shares of our common stock were held in the United States.
Identity of Person or Group
Shares of Common
Shares to
Shares of Common
Shares to
Shares of Common
Number
Percentage
Number
Percentage
Number
Percentage
Officers and Directors
Polys Hajioannou (1)
54,500,000
100
%
10,000,000
44,500,000
81.7
%
1,500,000
43,000,000
78.9
%
Dr. Loukas Barmparis
Konstantinos Adamopoulos
Nicolaos Hadjioannou (1)
54,500,000
100
%
10,000,000
44,500,000
81.7
%
1,500,000
43,000,000
78.9
%
Basil Sakellis
Frank Sica
Ole Wikborg
All officers and directors as a group (7 persons)
54,500,000
100
%
10,000,000
44,500,000
81.7
%
1,500,000
43,000,000
78.9
%
5% Beneficial Owner/Selling Stockholder
Vorini Holdings Inc. (2)
54,500,000
100
%
10,000,000
44,500,000
81.7
%
1,500,000
43,000,000
78.9
%
(1)
By virtue of shares owned indirectly through Vorini Holdings, our sole stockholder.
125
Stock Beneficially
Held Prior to the
Offering
be sold
in this
offering
Stock Beneficially
Held Following
the Offering
be sold
upon Full
Exercise of
Overallotment
Option
Stock Beneficially
Held Following Full
Exercise of the
Overallotment
Option
of
Shares
of
Shares
of
Shares
(2)
Vorini Holdings is controlled by Polys Hajioannou and Nicolaos Hadjioannou, who together hold the majority of the shares in the company. The address of Vorini Holdings is 32 Avenue Karamanli,
16605 Voula, Athens, Greece.
Any shares that may be acquired by these individuals following this offering are not included in the above table.
126
OUR MANAGER AND MANAGEMENT RELATED AGREEMENTS
Our Manager, Safety Management Overseas S.A., is ultimately owned by Machairiotissa Holdings Inc., or
Machairiotissa, which is wholly owned by Polys Hajioannou, our chief executive officer. Our
Manager, along with its predecessor, has provided services to our vessels since 1965 and continues to provide technical, administrative and certain commercial services which support our business, as well as
comprehensive ship management services such as technical supervision and commercial management, including chartering our vessels, pursuant to our management agreement described below. As of December 31,
2007, 231 people served on board the vessels in our fleet, and our Manager employed 34 people, all of whom were shore-based.
Management Agreement
Under our management agreement, our Manager is responsible for providing us with technical, administrative and certain commercial services, which include the following:
Technical services
These services include managing day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory compliance and compliance with the law of the flag state of each vessel and of
the places where the vessel operates, ensuring classification society compliance, supervising the maintenance and general efficiency of vessels, arranging the hire of qualified officers and crew, training,
transportation and lodging, insurance (including handling and processing all claims) of, and appropriate investigation of any charterer concerns with respect to, the crew, conducting union negotiations concerning the
crew, performing normally scheduled drydocking and general and routine repairs, arranging insurance for vessels (including marine hull and machinery, protection and indemnity and risks insurance), purchasing
stores, supplies, spares, lubricating oil and maintenance capital expenditures for vessels, appointing supervisors and technical consultants, providing technical support, shoreside support, shipyard supervision and
attending to all other technical matters necessary to run our business.
Commercial services
These services include chartering the vessels which we own, assisting in our chartering, locating, purchasing, financing and negotiating the purchase and sale of our vessels, supervising the design and
construction of newbuilds, and such other commercial services as we may reasonably request from time to time.
Administrative services
These services include administering payroll services, assistance with the preparation of our tax returns and financial statements, assistance with corporate and regulatory compliance matters not related to
our vessels, procuring legal and accounting services, assistance in complying with U.S. and other relevant securities laws, human resources (including provision of our executive officers and directors of our
Subsidiaries), cash management and bookkeeping services, development and monitoring of internal audit controls, disclosure controls and information technology, assistance with all regulatory and reporting
functions and obligations, furnishing any reports or financial information that might be requested by us and other non-vessel related administrative services, assistance with office space, providing legal and financial
compliance services, overseeing banking services (including the opening, closing, operation and management of all of our accounts including making deposits and withdrawals reasonably necessary for the
management of our business and day-to-day operations), arranging general insurance and director and officer liability insurance (at our expense), providing all administrative services required for any subsequent
debt and equity financings and attending to all other administrative matters necessary to ensure the professional management of our business.
Reporting Structure
Our Manager reports to us and our board of directors through our executive officers.
127
Compensation of Our Manager
Under our management agreement, and until the second anniversary of this offering, in return for providing technical, commercial and administrative services, our Manager receives a fee of $575 per vessel
per day for vessels in our fleet, pro rated for the number of calendar days that we own or charter-in each vessel and $250 per day, per vessel for bareboat charters. Our Manager also receives a fee of 1.0% on all
gross freight, charter hire, ballast bonus and demurrage with respect to each vessel in our fleet. Further, our Manager receives a commission of 1.0% based on the contract price of any vessel bought or sold by it
on our behalf, including each of our contracted newbuilds other than the two Post-Panamax class vessels being built by the IHI shipyard in Japan. For these two Post-Panamax class vessels, our Manager will
receive a commission of 1.0% based on the contract prices of the vessels through separate agreements with Itochu Corporation. We also pay our Manager a flat fee of $375,000 per newbuild, for the on-premises
supervision of all newbuilds we have agreed to acquire pursuant to shipbuilding contracts, memoranda of agreement, or otherwise. The management fees are fixed until the second anniversary of this offering, and
are not subject to adjustment for euro/U.S. dollar exchange rate fluctuations or deflation during that period. After the second anniversary of this offering, these fees will be adjusted every year by agreement
between us and our Manager.
The management fees do not cover expenses such as voyage expenses, vessel operating expenses, maintenance expenses, crewing costs, insurance premiums, commissions and certain public company
expenses such as directors and officers liability insurance, legal and accounting fees and other similar third party expenses, which are reimbursed by us.
Each year, our Manager prepares and submits to us a detailed draft budget for the next calendar year, which includes a statement of estimated revenue, estimated general and administrative expenses and a
proposed budget for capital expenditures, repairs or alterations. Once approved by us, this draft budget becomes the approved budget. We advance, on a monthly basis, all vessel operating expenses with respect to
each vessel in our fleet to enable our Manager to arrange for the payment of such expenses on our behalf. To the extent the amounts advanced are greater or less than the actual vessel operating expenses of our
fleet for each quarter, our Manager or us, as the case may be, will pay the other the difference at the end of such quarter, although our Manager may instead choose to credit such amount against future vessel
operating expenses to be advanced for future quarters.
Term and Termination Rights
Subject to the termination rights described below, the initial term of our management agreement expires on the second anniversary of this offering. Upon expiration of the initial term or any renewal term,
our management agreement automatically renews for one-year periods until the tenth anniversary of this offering, at which point the agreement will expire. In addition to the termination provisions outlined below,
we are able to terminate our management agreement at any point after the initial term upon 12 months notice to our Manager.
Our Managers termination rights
Our Manager may terminate our management agreement prior to the end of its term if:
any money payable by us is not paid when due or if due on demand, within ten business days following demand by our Manager;
we default in the performance of any other material obligation under the management agreement and the matter is unresolved within 20 business days after we receive written notice of such
default from our Manager;
the management fee determined by arbitration in respect of any annual period following the initial term is unsatisfactory to our Manager, in which case the Manager may terminate upon 12
months written notice to us;
any acquisition of our shares or a merger, consolidation or similar transaction results in any person or group acquiring 40% or more of the total voting power of our or the resulting entitys
outstanding voting securities, and such percentage represents a higher percentage of such voting power than that held by the Hajioannou Entities, collectively; or
128
there is a change in directors after which a majority of the members of our board of directors are not continuing directors.
Continuing directors means, as of any date of determination, any member of our board of directors who was:
a member of our board of directors on the date immediately after the closing of this offering; or
nominated for election or elected to our board of directors with the approval of a majority of the directors then in office who were either directors immediately after the closing of this offering or
whose nomination or election was previously so approved.
Our termination rights
In addition to certain standard termination rights, we may terminate our management agreement prior to the end of its term if:
our Manager defaults in the performance of any material obligation under our management agreement and the matter is not resolved within 20 business days after our Manager receives from us
written notice of such default; or
any money payable by our Manager to us or third parties under our management agreement is not paid or accounted for within ten business days following written notice by us.
Non-Competition
Our Manager has agreed that, during the term of our management agreement and for one year after its termination, our Manager will not provide any management services to, or with respect to, any
drybulk vessels, other than in the following circumstances:
(a)
pursuant to its involvement with us; or
(b)
with respect to drybulk vessels that are owned or operated by the Hajioannou Entities and drybulk vessel businesses that are acquired, invested in or controlled by the Hajioannou Entities, subject in
each case to compliance with, or waivers of, the restrictive covenant agreement entered into between us and the Hajioannou Entities, described below.
Our Manager has also agreed that if one of our drybulk vessels and a drybulk vessel owned or operated by any of the Hajioannou Entities are both available and meet the criteria for a charter being fixed
by our Manager, our drybulk vessel will receive such charter.
Polys Hajioannou, our chief executive officer, Nicolaos Hadjioannou, our chief operating officer, and the other Hajioannou Entities, including SafeFixing, have also agreed to restrictions on their ownership
or operation of any drybulk vessels or the acquisition, investment in or control of any business involved in the ownership or operation of drybulk vessels, subject to certain exceptions. For a description of our
restrictive covenant agreements with Polys Hajioannou, Nicolaos Hadjiannou and other Hajioannou Entities, please read the sections entitled Certain Relationships and Related Party Transactions and
ManagementEmployment and Restrictive Covenant Agreements.
Sale of Our Manager
Our Manager has agreed that, during the term of the management agreement and for one year after its termination, our Manager will not transfer, assign, sell or dispose of all or substantially all of its
business that is necessary for the performance of its services under the management agreement without the prior written consent of our board of directors. Furthermore, during such period, in the event of any
proposed change in control of our Manager, we have a 30-day right of first offer to purchase our Manager.
For these purposes, a proposed change in control of our Manager means (a) the approval of the board of directors of our Manager or the stockholders of our Manager of a proposed sale of all or
substantially all of the assets or property of our Manager necessary for the performance of its services under the management agreement, (b) the approval of our Managers stockholders of a proposed sale of our
Managers shares that would result in the Hajioannou Entities owning less than 80% of the outstanding voting securities of our Manager or (c) the approval of our Managers stockholders of a proposed merger,
consolidation or similar transaction, as a result of which the Hajioannou Entities would beneficially own less than 80% of the outstanding voting securities of the resulting entity following such transaction.
129
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Management Related Agreements
For a description of our management agreement, please read the section entitled Our Manager and Management Related Agreements. We believe the fees and commissions set forth in our management
agreement are no more than the rates we would pay to an unaffiliated third party to provide us with comparable management services.
Our Manager is an affiliate of Polys Hajioannou, our chief executive officer, and SafeFixing is an affiliate of Polys Hajioannou, our chief executive officer, and Nicolaos Hadjioannou, our chief operating
officer.
Restrictive Covenant Agreements
Under restrictive covenant agreements entered into with us, Polys Hajioannou, Nicolaos Hadjioannou and the other Hajioannou Entities, including SafeFixing, have agreed to restrictions on their ownership
or operation of any drybulk vessels or the acquisition, investment in or control of any business involved in the ownership or operation of drybulk vessels, subject to the exceptions described below.
In the case of Polys Hajioannou, the restricted period continues until the later of (a) one year following the termination of the management agreement and (b) one year following the termination of his
services and employment with us. In the case of Nicolaos Hadjioannou, the restricted period continues until one year following the termination of his services and employment with us. In the case of the other
Hajioannou Entities, including SafeFixing, the restricted period continues until one year following the termination of the management agreement. Notwithstanding these restrictions, Polys Hajioannou, Nicolaos
Hadjioannou and the other Hajioannou Entities are permitted to engage in the restricted activities in the following circumstances:
(a)
pursuant to their involvement with us;
(b)
pursuant to their involvement with our Manager, subject to compliance with, or waivers of, the management agreement;
(c)
with respect to certain permitted acquisitions (as defined below), provided that (i) any commercial management of drybulk vessels controlled by the restricted individuals and entities in connection
with such permitted acquisition is performed by our Manager and (ii) the restricted individuals and entities comply with the requirements for permitted acquisitions described below;
(d)
with respect to certain permitted activities of SafeFixing, which are described in more detail below, provided that any commercial management of drybulk vessels chartered-in by SafeFixing is
performed by our Manager; and
(e)
pursuant to their passive ownership of up to 9.99% of the outstanding voting securities of any publicly traded company that is engaged in the drybulk vessel business.
As noted above, Polys Hajioannou, Nicolaos Hadjioannou and the other Hajioannou Entities are permitted to engage in restricted activities with respect to two types of permitted acquisitions. One such
permitted acquisition is an acquisition of a drybulk vessel or an acquisition or investment in a drybulk vessel business, on terms and conditions as to price that are not more favorable, and on such other terms and
conditions that are not materially more favorable, than those first offered to us and refused by a majority of our independent directors. The second type of permitted acquisition is an acquisition of a group of
vessels or a business that includes non-drybulk vessels and non-drybulk vessel businesses, provided that less than 50% of the fair market value of the acquisition is attributable to drybulk vessels or drybulk vessel
businesses. Under this second type of permitted acquisition, we must be promptly given the opportunity to buy the drybulk vessels or drybulk vessel businesses included in the acquisition for its fair market value
plus certain break-up costs.
Polys Hajioannou, Nicolaos Hadjioannou and the other Hajioannou Entities are also permitted to engage in restricted activities with respect to certain permitted activities of SafeFixing. SafeFixing is
controlled by Polys Hajioannou and Nicolaos Hadjioannou and is engaged in the business of chartering in vessels from third-party vessel owners for subsequent chartering out to customers. Under the restrictive
130
covenant agreement, we will have the option of chartering in from SafeFixing vessels that SafeFixing has chartered in from third parties as of the closing of this offering, if such vessel is not subject to a charter
out arrangement with a customer or the current charter out arrangement terminates or expires. In addition, with respect to any vessels chartered-in by SafeFixing after the closing of this offering, we will have the
option to charter in such vessels from SafeFixing within 10 business days following notice of entry into the charter-in agreement between SafeFixing and the third-party vessel owner.
Polys Hajioannou, Nicolaos Hadjioannou and the other Hajioannou Entities, including SafeFixing, have also agreed that if one of our drybulk vessels and a drybulk vessels owned or operated by any of the
Hajioannou Entities are both available and meet the criteria for a charter being fixed by our Manager, our drybulk vessels will receive such charter.
In addition, Polys Hajioannou, Nicolaos Hadjioannou and the other Hajioannou Entities have agreed that in the event of any proposed change in control of SafeFixing, we have a 15-day right of first offer
to purchase SafeFixing.
For these purposes, a proposed change in control of SafeFixing means (a) the approval of the board of directors of SafeFixing or the stockholders of SafeFixing of a proposed sale of all or substantially all
of the assets or property of SafeFixing, (b) the approval of SafeFixings stockholders of a proposed sale of SafeFixingss shares that would result in one or more of Polys Hajioannou, Nicolaos Hadjioannou and the
other Hajioannou Entities, collectively, owning less than 50.1% of the voting power of the outstanding voting securities of SafeFixing or (c) the approval of SafeFixings stockholders of a proposed merger,
consolidation or similar transaction, as a result of which one or more of Polys Hajioannou, Nicolaos Hadjioannou and the other Hajioannou Entities, collectively, would beneficially own less than 50.1% of the
voting power of the outstanding voting securities of the resulting entity following such transaction.
Reorganization and Certain Related Transactions
Following the date of the final prospectus, and prior to the closing of this offering, the shares of the Subsidiaries will be contributed by Polys Hajioannou and Nicolaos Hadjioannou to Safe Bulkers, Inc.
through Vorini Holdings, a company controlled by Polys Hajioannou and Nicolaos Hadjioannou, in exchange for the issuance of 100% of the outstanding shares of Safe Bulkers, Inc. to Vorini Holdings (the
Reorganization). Following the Reorganization, Safe Bulkers, Inc. will own each of the Subsidiaries and Vorini Holdings will be the sole stockholder of Safe Bulkers, Inc. See the section entitled Managements
Discussion and Analysis of Financial Conditions and Results of OperationsOverview for more information on our Reorganization, which will occur following the date of the final prospectus and prior to the
closing of this offering.
In March and April 2008 we settled all intercompany balances as of December 31, 2007 with our Manager and with our owners. In connection with this, in January 2008, our Manager repaid on our
behalf prior advances from owners in the amount of $10.1 million, resulting in a corresponding decrease in amounts due from our Manager. In March and April 2008, we paid an aggregate dividend of $147.8
million to Polys Hajionnou and Nicolaos Hadjioannou, our current owners, which was funded from amounts due from our Manager. Finally, in order to settle the remaining amount of $4.0 million due from our
Manager, $4.0 million in restricted cash in collateral accounts held by our Manager was transferred in April 2008 to two new restricted cash collateral accounts of $2.0 million held by each of our Subsidiaries,
Petra and Pemer.
In addition to the aggregate dividend of $147.8 million paid to our current owners in March and April 2008, an estimated additional dividend of $31.0 million, which will be funded using amounts due
from our Manager, reflecting a portion of estimated net income earned from January 1, 2008 until the date immediately prior to the closing of this offering will also be declared prior to the closing of this offering.
Investors in this offering will not be entitled to receive any portion of this dividend.
Registration Rights Agreement
We intend to enter into a registration rights agreement prior to the closing of this offering with Vorini Holdings, our existing stockholder, pursuant to which we will grant it and certain of its transferees
the right, under certain circumstances and subject to certain restrictions, including restrictions included in
131
the lock-up agreements to which Vorini Holdings will be a party, to require us to register under the Securities Act shares of our common stock held by those persons. Under the registration rights agreement,
Vorini Holdings and certain of its transferees will have the right to request us to register the sale of shares held by them on their behalf and may require us to make available shelf registration statements
permitting sales of shares into the market from time to time over an extended period. In addition, those persons will have the ability to exercise certain piggyback registration rights in connection with registered
offerings initiated by us. Immediately after this offering, Vorini Holdings will own 44,500,000 shares entitled to these registration rights, assuming the underwriters do not exercise their overallotment option.
Other Transactions
We have, in the past, used advances from owners to finance vessel acquisitions. During the period from January 1, 2005 through December 31, 2007, we received an aggregate of $246.0 million in net
advances from owners. No interest is payable with respect to these advances, and, in respect of the same period, we had repaid $326.2 million of such advances with funds received either from subsequent bank
debt, or from proceeds of sale of vessels where no bank debt had been obtained. Please see Note 10 of our predecessor combined financial statements for more information on these advances.
Our current owners advanced the amount of $7.7 million to our Subsidiaries, Eniaprohi and Eniadefhi, in order to fund on March 4, 2008, payments to shipyards of ¥800 million (the equivalent of $7.7
million based on the exchange rate of ¥104.15/$1.00). We will also be required to pay, on May 27, 2008, an additional amount of ¥400 million to be advanced from our current owners in relation to the newbuild of
Eniaprohi to the relevant shipyard. After this offering, we expect to pay back these amounts to our current owners.
Since April 9, 2008, two cash collateral deposits of $2.0 million each for credit facilities of our Subsidiaries Petra and Pemer have been maintained in their names, which deposits were previously
maintained in the name of our Manager on behalf of those Subsidiaries.
Three of our previously sold vessels, which were sold to third party buyers, have, since their sale, been chartered for periods ranging from 10 months to 38 months by SafeFixing, an affiliate of Polys
Hajioannou, Nicolaos Hadjioannou and our Manager.
The security for the bank performance guarantee to be entered into by our Subsidiaries Eptaprohi and Maxpente of $32.2 million relating to Hull H1074 and Hull H1075 in favor of the relevant shipyard
will be provided by our current owners, and following this offering it will be provided by Eptaprohi and Maxpente.
132
The following is a summary of the material provisions of the instruments evidencing our indebtedness. It does not purport to be complete and is qualified by reference to all of the provisions of the
documents evidencing our indebtedness, copies of which are filed as exhibits to the registration statement of which this prospectus forms a part. Unless otherwise indicated, Swiss franc, or CHF, amounts translated
to U.S. dollars have been translated at a rate of CHF1.1267:$1.00, and Japanese yen, or ¥, amounts translated to U.S. dollars have been translated at a rate of ¥112.35:$1.00, the exchange rates in effect on
December 31, 2007
.
Our Credit Facilities
As of December 31, 2007, we, through the Subsidiaries, had an aggregate of $322.9 million outstanding under various credit agreements to finance the purchase of the vessels owned by such entities,
comprised of outstanding amounts in U.S. dollars, Japanese yen and Swiss francs. As of December 31, 2007, of our aggregate indebtedness, CHF86.5 million (the equivalent of $76.8 million, based on an exchange
rate of CHF1.1267:$1.00 on December 31, 2007) was denominated in Swiss francs and ¥8.5 billion (the equivalent of $75.8 million, based on an exchange rate of ¥112.35:$1.00 on December 31, 2007) was
denominated in Japanese yen. We have historically borrowed amounts under our credit facilities in currencies other than the U.S. dollar due to the lower interest rates applicable to borrowings in such currencies.
Since December 31, 2007, we, through two of our Subsidiaries, have entered into two new credit facilities relating to our vessels the
Maria
and the
Efrossini
under which we borrowed an additional $84.0 million,
of which $38.5 million was used to refinance existing indebtedness related to those vessels. In April 2008, we, through our Subsidiary Avstes, also entered into a new credit facility to borrow an additional $36.0
million, which was advanced to our Manager to enable the payment of dividends to our current owners. Since December 31, 2007, we have also accepted commitment letters for two new credit facilities in the
amounts of $45.0 million each. The weighted average interest rate on all of our indebtedness during the year ended December 31, 2007 was 3.35% compared to 3.27% during the year ended December 31, 2006.
Below is a description of the material terms of each such credit facility. See also Managements Discussion and Analysis of Financial Condition and Results of OperationsCredit Facilities for additional
information with respect to our credit facilities.
Old Marindou Shipping Corporation Credit Facility
On May 12, 2003, our Subsidiary Marindou entered into a ten-year, $16.0 million multi-currency credit facility with Den Norske Bank ASA, which we refer to in this section as the Old Marindou credit
facility. As of December 31, 2007, there was CHF15.3 million (the equivalent of approximately $13.6 million) outstanding under the Old Marindou credit facility, which amount was repaid in its entirety and
replaced with a new credit facility entered into by Marindou on January 11, 2008 relating to the
Maria
. See New Marindou Credit Facility.
Old Efragel Shipping Corporation Credit Facility
On November 11, 2004, our Subsidiary Efragel entered into a ten-year, $30.0 million multi-currency secured reducing revolving credit facility with DnB NOR Bank ASA, which we refer to in this section
as the Old Efragel credit facility. As of December 31, 2007, there was CHF16.6 million and ¥1.0 billion (together, the equivalent of approximately $23.8 million) outstanding under the Old Efragel credit facility,
which amount was repaid in its entirety and replaced with a new credit facility entered into by Efragel on January 11, 2008 relating to the
Efrossini
. See New Efragel Credit Facility.
Marathassa Shipping Corporation Credit Facility
On February 16, 2005, our Subsidiary Marathassa entered into a 12-year, $28.0 million multi-currency credit facility with RBS, which we refer to in this section as the Marathassa credit facility, to
refinance a portion of the purchase price of the
Maritsa
and to provide working capital. We borrowed $28.0 million on February 18, 2005 under the Marathassa credit facility, and, as of December 31, 2007, there
was $11.6 million and CHF13.5 million (together, the equivalent of approximately $23.6 million) outstanding
133
under the Marathassa credit facility. Subject to certain requirements, borrowings may be made and outstanding amounts may be converted into the following optional currencies in addition to the U.S. dollar: Swiss
francs, Japanese yen, Canadian dollars, euros and British pounds sterling.
The interest rate under the Marathassa credit facility is LIBOR applicable to deposits in the relevant currency (or, in the case of tranches denominated in euros, EURIBOR) plus a margin of 0.675% per
annum. The average interest rate (including the margin) for the outstanding balance translated into U.S. dollars during the years 2005, 2006 and 2007 was 3.012%, 3.962% and 4.589%, respectively. As of
December 31, 2007, there were 19 remaining semi-annual installments, payable as follows: $477,500 and CHF550,000 for the first installment; $407,500 and CHF470,000 for each of the second to 18th
installments; and $4.2 million and CHF4.9 million for the 19th installment.
Our obligations under the Marathassa credit facility are secured by a first-priority mortgage over the
Maritsa
and by a first-priority assignment of our earnings related to the vessel, including charter
revenues and any insurance proceeds.
By a letter dated May 14, 2008, Marathassa agreed with RBS to an amended margin of 0.750% per annum, which will apply following the closing of this offering and will be formally documented by a
supplemental agreement. Although this letter from RBS contained certain proposed key terms to be included in the supplemental agreement (including this amended margin and the covenants to apply following the
offering), RBSs proposal is subject to agreement on all relevant terms of the supplemental agreement. Accordingly, the final terms of this supplemental agreement may differ from the proposed terms and could be
more onerous, which may require us to seek alternative financing.
Marinouki Shipping Corporation Credit Facility
On March 1, 2006, our Subsidiary Marinouki entered into a secured 12-year, $30.4 million multi-currency credit facility with RBS, which we refer to in this section as the Marinouki credit facility, to
refinance a portion of the purchase price of the
Marina
and to provide working capital. We borrowed $30.4 million on March 3, 2006 under the Marinouki credit facility, and, as of December 31, 2007, there was
¥3.4 billion (the equivalent of approximately $30.4 million) outstanding under the Marinouki credit facility. On March 19, 2008, amounts outstanding in Japanese yen under the Marinouki credit facility were
converted into U.S. dollar amounts so that following the conversion the remaining balance of the credit facility was $32.6 million.
The interest rate under the Marinouki credit facility is LIBOR applicable to deposits in the relevant currency (or, in the case of tranches denominated in euros, EURIBOR) plus a margin of 0.675% per
annum. The average interest rate (including the margin) for the outstanding balance translated into U.S. dollars during the years 2006 and 2007 was 4.548% and 2.114%, respectively. Following the conversion of
the credit facility into U.S. dollar amounts on March 19, 2008, the remaining principal amount of the loan is payable in 20 semi-annual installments as follows: the first two installments of $545,000 each; the 3rd
to 8th installments of $767,000 each; the 9th to 20th istallments of $877,000 each and a final balloon installment of $16.4 million payable together with the final installment.
Our obligations under the Marinouki credit facility are secured by a first-priority mortgage over the
Marina
and by a first-priority assignment of our earnings related to the vessel, including charter
revenues and any insurance proceeds.
By a letter dated May 14, 2008, Marinouki agreed with RBS to an amended margin of 0.750% per annum, which will apply following the closing of this offering and will be formally documented by a
supplemental agreement. Although this letter from RBS contained certain proposed key terms to be included in the supplemental agreement (including this amended margin and the covenants to apply following the
offering), RBSs proposal is subject to agreement on all relevant terms of the supplemental agreement. Accordingly, the final terms of this supplemental agreement may differ from the proposed terms and could be
more onerous, which may require us to seek alternative financing.
Staloudi Shipping Corporation Credit Facility
On May 29, 2006, our Subsidiary Staloudi entered into a ten-year, $30.0 million multi-currency secured credit facility with Deutsche Schiffsbank Aktiengesellschaft, which we refer to in this section as the
134
Staloudi credit facility, to partly finance the construction cost of the
Stalo
. The Staloudi credit facility consists of two tranches as follows: (a) Tranche A in the amount of up to $25.5 million and (b) Tranche B
in the amount of up to $4.5 million. Only amounts under Tranche A may be borrowed or converted into optional currencies other than the U.S. dollar; amounts under Tranche B are limited to U.S. dollars. We
borrowed $25.5 million under Tranche A and $4.5 million under Tranche B on May 29, 2006 under the Staloudi credit facility, and, as of December 31, 2007, there was $30.4 million outstanding under the
Staloudi credit facility, comprised of $26.3 million outstanding under Tranche A and $4.2 million outstanding under Tranche B. Subject to certain requirements, borrowings may be made and outstanding amounts
may be converted into the following optional currencies in addition to the U.S. dollar: Swiss francs, Japanese yen, Canadian dollars, euros and British pounds sterling.
The interest rate under the Staloudi credit facility is LIBOR applicable to deposits in the relevant currency (or in the case of tranches denominated in euros, EURIBOR) plus a margin of 0.65% per annum.
The average interest rate (including the margin) for the outstanding balance translated into U.S. dollars during the years 2006 and 2007 was 3.444% and 3.542%, respectively. Beginning on November 30, 2006, we
began repaying the principal amount of this loan. Pursuant to an amendment dated December 3, 2007, the remaining 17 semi-annual installments are payable as follows: Tranche A: $687,500 each, with an
additional balloon payment of $14.6 million due at the last installment and Tranche B: $112,500 each, with an additional balloon payment of $2.3 million due at the last installment.
Our obligations under the Staloudi credit facility are secured by a first-priority mortgage over the
Stalo
, by a first-priority assignment of our earnings related to the vessel, including charter revenues and
any insurance proceeds.
Petra Shipping Ltd. Credit Facility
On January 11, 2007, our Subsidiary Petra entered into a 12-year, $36.0 million multi-currency credit facility with Bayerische Hypo-Und Vereinsbank Aktiengesellschaft, or Bayerische, which we refer to in
this section as the Petra credit facility, to finance the purchase price of the
Pedhoulas Trader
. We borrowed $36.0 million on January 16, 2007 under the Petra credit facility, and, as of December 31, 2007, there
was CHF41.1million and $2.0 million (together, the equivalent of approximately $38.4 million) outstanding under the Petra credit facility. On January 18, 2008, amounts outstanding in Swiss francs under the Petra
credit facility were converted into U.S. dollar amounts so that following the conversion the remaining balance of the credit facility was $38.2 million.
The interest rate under the Petra credit facility is LIBOR applicable to deposits in the relevant currency (or, in the case of tranches denominated in euros, EURIBOR) plus a margin of 0.65% per annum.
The average interest rate (including the margin) for the outstanding balance translated into U.S. dollars during the year ended December 31, 2007 was 3.371%. Following conversion of the credit facility into U.S.
dollar amounts on January 18, 2008, the remaining principal amount of the loan is payable as follows: 21 semi-annual installments of $1.1 million each plus a final repayment installment of $15.1 million.
Our obligations under the Petra credit facility are secured by a first-priority mortgage over the
Pedhoulas Trader
, by a first-priority assignment of our earnings related to the vessel, including charter
revenues and any insurance proceeds and by a cash collateral deposit of $2.0 million (or an equivalent amount in an optional currency), deposited on behalf of Petra by our Manager, which will gradually be
reduced after three years following drawdown under the Petra credit facility. Since April 9, 2008, the cash collateral deposit has been maintained in the name of Petra.
Pemer Shipping Ltd. Credit Facility
On March 7, 2007, our Subsidiary Pemer entered into a 12-year, $36.0 million multi-currency credit facility with Bayerische, which we refer to in this section as the Pemer credit facility, to finance the
purchase price of the
Pedhoulas Merchant
. We borrowed $36.0 million
on March 7, 2007 under the Pemer credit facility, and, as of December 31, 2007, there was ¥4.1 billion (the equivalent of approximately $36.2
million) outstanding under the Pemer credit facility. On March 7, 2008, amounts outstanding in Japanese yen under the Pemer credit facility were converted into U.S. dollar amounts so that following the
conversion the remaining balance of the credit facility was $38.2 million.
135
The interest rate under the Pemer credit facility is LIBOR applicable to deposits in the relevant currency (or, in the case of tranches denominated in euros, EURIBOR) plus a margin of 0.65% per annum.
The average interest rate (including the margin) for the outstanding balance translated into U.S. dollars during the year ended December 31, 2007 was 1.500%. Following conversion of the credit facility into U.S.
dollar amounts on March 7, 2008, the remaining principal amount of the loan is payable as follows: 21 semi-annual installments of $1.1 million each plus a final repayment installment of $15.1 million.
Our obligations under the Pemer credit facility are secured by a first-priority mortgage over the
Pedhoulas Merchant
, by a first-priority assignment of our earnings related to the vessel, including charter
revenues and any insurance proceeds and by a cash collateral deposit of $2.0 million (or an equivalent amount in an optional currency), deposited on behalf of Pemer by our Manager, which will gradually be
reduced after three years following drawdown under the Pemer credit facility. Since April 9, 2008, the cash collateral deposit has been maintained in the name of Pemer.
Pelea Shipping Ltd. Credit Facility
On June 12, 2007, our Subsidiary Pelea entered into a 12-year, $42.0 million secured multi-currency reducing revolving credit facility with DnB Nor Bank ASA, which we refer to in this section as the
Pelea credit facility, to refinance post-delivery costs with respect to the
Pedhoulas Leader
.
We borrowed $42.0 million
on June 12, 2007
under the Pelea credit facility, and as of December 31, 2007, there was $41.4 million outstanding under the Pelea credit facility. Subject to certain
requirements, borrowings may be made and outstanding amounts may be converted into the following optional currencies in addition to the U.S. dollar: Swiss francs, Japanese yen and euros. We may prepay all
loans at any time without penalty upon 14 business days prior notice, however, we are responsible for indemnifying the lender for any costs incurred by it if we make a repayment other than on the last day of an
interest period under the agreement. Amounts that have been prepaid may be re-borrowed subject to the availability reduction described in the next paragraph.
The total amounts available for borrowing under the Pelea credit facility are reduced semi-annually beginning after December 12, 2007 until June 12, 2019, the maturity date, at which time the Pelea credit
facility will terminate, as follows: the first six reductions are in the amount of $650,000 each; the seventh through 12th reductions are in the amount of $750,000 each; the 13th through 23rd reductions are in the
amount of $1.2 million each; and the final reduction is in the amount of $20.5 million.
The interest rate under the Pelea credit facility is LIBOR plus a margin of 0.575% per annum. The average interest rate (including the margin) for the outstanding balance translated into U.S. dollars during
the year ended December 31, 2007 was 6.008%. We incur a commitment fee on the unused portion of the amount available under the Pelea credit facility at a rate of 0.15% per year.
We are subject to customary conditions precedent before we may borrow under the Pelea credit facility, including that no event of default is ongoing and there having occurred no material adverse effect
on our ability to perform our payment obligations under the Pelea credit facility.
Our obligations under the Pelea credit facility are secured by a first-priority mortgage over the
Pedhoulas Leader
and by a first-priority assignment of our earnings related to the vessel, including charter
revenue, and any insurance proceeds. In addition, following this offering, we will guarantee the obligations of our Subsidiary Pelea under this credit facility and certain financial covenants will apply to us,
including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition, there will be a covenant that the Hajioannou
family maintain its majority interest in us.
Soffive Shipping Corporation Credit Facility
On November 19, 2007, our Subsidiary Soffive entered into a secured 12-year, $45.0 million multi-currency credit facility with RBS, which we refer to in this section as the Soffive credit facility, to
refinance a portion of the purchase price of the
Sophia
. We borrowed approximately $45.0 million under the Soffive credit facility on November 19, 2007 and as of December 31, 2007, there was $45.0 million
outstanding under the Soffive credit facility.
136
The interest rate under the Soffive credit facility is LIBOR applicable to deposits in the relevant currency (or, in the case of tranches denominated in euros, EURIBOR) plus a margin of 0.575% per
annum. The average interest rate (including the margin) for the outstanding balance translated into U.S. dollars during the year ended December 31, 2007 was 5.445%. The principal is payable in 24 semi-annual
installments, the first such installment to be paid on May 20, 2008, as follows: $900,000 for each of the first six installments; $1.2 million for each of the seventh to 18th installments; $1.5 million for each of the
19th to the 23rd installments; and $17.7 million for the final installment.
Our obligations under the Soffive credit facility are secured by a first-priority mortgage over the
Sophia
and by a first-priority assignment of our earnings related to the vessel, including charter revenues
and any insurance proceeds.
By a letter dated May 14, 2008, Soffive agreed with RBS to an amended margin of 0.750% per annum, which will apply following the closing of this offering and will be formally documented by a
supplemental agreement. Although this letter from RBS contained certain proposed key terms to be included in the supplemental agreement (including this amended margin and the covenants to apply following the
offering), RBSs proposal is subject to agreement on all relevant terms of the supplemental agreement. Accordingly, the final terms of this supplemental agreement may differ from the proposed terms and could be
more onerous, which may require us to seek alternative financing.
Kerasies Credit Facility
On December 13, 2007, our Subsidiary Kerasies entered into a 12-year, $40.0 million multi-currency credit facility with RBS, which we refer to as the Kerasies credit facility, to refinance existing
indebtedness and provide working capital. We borrowed $40.0 million under the Kerasies credit facility on December 14, 2007 and as of December 31, 2007, there was $40.0 million outstanding under the Kerasies
credit facility.
The interest rate under the Kerasies credit facility is LIBOR applicable to deposits in the relevant currency (or, in the case of tranches denominated in euros, EURIBOR) plus a margin of 0.575% per
annum. The average interest rate (including the margin) for the outstanding balance translated into U.S. dollars during the year 2007 was 5.575%. The principal is payable in 24 semi-annual installments, the first
such installment to be paid on June 14, 2007, as follows: $800,000 for each of the first six installments; $1.1 million for each of the seventh to 18th installments; $1.3 million for each of the 19th to the 23rd
installments; and $15.7 million for the final installment.
Our obligations under the Kerasies credit facility are secured by a first-priority mortgage over the
Katerina
and by a first-priority assignment of our earnings related to the vessel, including charter revenues
and any insurance proceeds.
By a letter dated May 14, 2008, Kerasies agreed with RBS to an amended margin of 0.750% per annum, which will apply following the closing of this offering and will be formally documented by a
supplemental agreement. Although this letter from RBS contained certain proposed key terms to be included in the supplemental agreement (including this amended margin and the covenants to apply following the
offering), RBSs proposal is subject to agreement on all relevant terms of the supplemental agreement. Accordingly, the final terms of this supplemental agreement may differ from the proposed terms and could be
more onerous, which may require us to seek alternative financing.
New Marindou Credit Facility
On January 11, 2008, our Subsidiary Marindou entered into a ten-year, $42.0 million multi-currency reducing revolving credit facility with DnB NOR BANK ASA, which we refer to in this section as the
New Marindou credit facility, to refinance the existing indebtedness under the Old Marindou credit facility and provide working capital. We borrowed $42.0 million on January 14, 2008 under the New Marindou
credit facility. Subject to certain requirements, borrowings may be made and outstanding amounts may be converted into the following optional currencies in addition to the U.S. dollar: Swiss francs, Japanese yen
and euros.
The interest rate under the New Marindou credit facility is LIBOR plus a margin of 0.65% per annum. The facility amount will be reduced by semi-annual reductions starting July 14, 2008, as follows:
137
the amount of each of the first to sixth reductions will be each $750,000; the amount of the seventh to 12th reductions will be each $1.0 million; the amount of the thirteenth through 20th reductions will be each
$1.7 million; and a final reduction of $18.0 million will occur together with the 20th scheduled reduction.
Our obligations under the New Marindou credit facility will be secured by a first-priority mortgage over the
Maria
and by a first-priority assignment of our earnings related to the vessel, including charter
revenue and any insurance proceeds. In addition, following this offering, we will guarantee the obligations of our Subsidiary Marindou under this credit facility and certain financial covenants will apply to us,
including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition, there will be a covenant that the Hajioannou
family maintain its majority interest in us.
New Efragel Credit Facility
On January 11, 2008, our Subsidiary Efragel entered into a ten-year, $42.0 million multi-currency reducing revolving credit facility with DnB Nor Bank ASA, which we refer to in this section as the New
Efragel credit facility, to refinance the existing indebtedness under the Old Efragel credit facility and provide working capital. We borrowed $42.0 million on January 17, 2008 under the New Efragel credit
facility. Subject to certain requirements, borrowings may be made and outstanding amounts may be converted into the following optional currencies in addition to the U.S. dollar: Swiss francs, Japanese yen and
euros.
The interest rate under the New Efragel credit facility is LIBOR plus a margin of 0.65% per annum. The facility amount will be reduced by semi-annual reductions starting July 17, 2008, as follows: the
amount of each of the first to sixth reductions will be each $750,000; the amount of the seventh to 12th reductions will be each $1.0 million; the amount of the thirteenth through 20th reductions will be each
$1.7 million; and a final reduction of $18.0 million will occur together with the 20th scheduled reduction.
Our obligations under the New Efragel credit facility will be secured by a first-priority mortgage over the
Efrossini
and by a first-priority assignment of our earnings related to the vessel, including charter
revenue and any insurance proceeds. In addition, following this offering, we will guarantee the obligations of our Subsidiary Efragel under this credit facility and certain financial covenants will apply to us,
including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition, there will be a covenant that the Hajioannou
family maintain its majority interest in us.
Avstes Credit Facility.
On April 17, 2008, our Subsidiary Avstes entered into a ten-year, $36.0 million multi-currency reducing revolving credit facility with DnB NOR Bank ASA, which we refer to as the Avtses credit
facility. We drew down the full amount of $36.0 million on April 18, 2008 under the Avstes credit facility and advanced this amount to our Manager, so that our Manager could pay dividends to our current
owners on our behalf. Subject to certain requirements, borrowings may be made and outstanding amounts may be converted into the following optional currencies in addition to the U.S. dollar: Swiss francs,
Japanese yen and euros.
The interest rate under the Avstes credit facility is LIBOR plus a margin of 0.80%, and the margin that will apply following this offering will be agreed prior to the closing of this offering. We will incur
a commitment fee on the unused portion of the amount available under the Avstes credit facility at a rate of 0.20% per year.
The facility amount will be reduced by 20 semi-annual reductions starting on October 18, 2008. The amount of each reduction will be $0.9 million and a balloon reduction of $18.0 million will occur
together with the final scheduled reduction.
Our obligations under the Avstes credit facility are secured by a first-priority mortgage over the
Vassos
and by a first-priority assignment of our earnings related to the vessel, including charter revenues
and any insurance proceeds. In addition, upon or prior to this offering, we intend to enter into a supplemental agreement pursuant to which we will guarantee the obligations of our Subsidiary Avstes under this
credit facility and certain financial covenants will apply to us, including a consolidated leverage ratio,
138
consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition, there will be a covenant that the Hajioannou family maintain its majority interest in
us.
Eniaprohi Credit Facility
We accepted a commitment letter from DnB NOR Bank ASA on April 3, 2008 to enter into a 10-year multi-currency reducing revolving credit facility pursuant to which we will borrow, through our
subsidiary Eniaprohi, $45.0 million and which we refer to in this prospectus as the Eniaprohi credit facility. Borrowings under this credit facility will be used to finance construction of our newbuild
Eleni
upon
its delivery from the shipyard.
The commitment letter provides that the Eniaprohi credit facility will initially bear interest at LIBOR plus a margin of 0.90%, and the margin that will apply following this offering will be agreed prior to
the closing of this offering. We will incur a commitment fee on the unused portion of the amount available under the Eniaprohi credit facility at a rate of 0.20% per year.
The facility amount will be reduced by 20 semi-annual reductions starting six months from the date of delivery of the
Eleni
, as follows: the amount of each reduction will be $1.125 million and a balloon
reduction of $22.5 million will occur together with the final scheduled reduction.
The obligations under the Eniaprohi credit facility will be initially secured by a first-priority mortgage over the
Eleni
and by a first-priority assignment of our earnings related to the vessel, including
charter revenue and any insurance proceeds. In addition, the commitment letter provides that following this offering, we will guarantee the obligations of our subsidiary Eniaprohi under this credit facility and
certain financial covenants will apply to us, including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition,
there will be a covenant that the Hajioannou family maintain their majority interest in us.
Eniadefhi Credit Facility
We accepted a commitment letter from DnB NOR Bank ASA on April 3, 2008 to enter into a 10-year multi-currency reducing revolving credit facility pursuant to which we will borrow, through our
subsidiary Eniadefhi, $45.0 million and which we refer to in this prospectus as the Eniadefhi credit facility. Borrowings under this credit facility will be used to finance construction of our newbuild
Martine
upon its delivery from the shipyard.
The commitment letter provides that the Eniadefhi credit facility will initially bear interest at LIBOR plus a margin of 0.90%, and the margin that will apply following this offering will be agreed prior to
the closing of this offering. We will incur a commitment fee on the unused portion of the amount available under the Eniadfehi credit facility at a rate of 0.20% per year.
The facility amount will be reduced by 20 semi-annual reductions starting six months from the date of delivery of the
Martine
, as follows: the amount of each reduction will be $1.125 million and a
balloon reduction of $22.5 million will occur together with the final scheduled reduction.
The obligations under the Eniadefhi credit facility will be initially secured by a first-priority mortgage over the
Martine
and by a first-priority assignment of our earnings related to the vessel, including
charter revenue and any insurance proceeds. In addition, the commitment letter provides that following this offering, we will guarantee the obligations of our subsidiary Eniadefhi under this credit facility and
certain financial covenants will apply to us, including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition,
there will be a covenant that the Hajioannou family maintain their majority interest in us.
Covenants and Events of Default
Our existing credit facilities contain various covenants limiting the ability of certain of our Subsidiaries to:
pay dividends if an event of default has occurred and is continuing or would occur as a result of the payment of such dividend;
139
enter into long-term charters for more than 13 months;
incur additional indebtedness, including through the issuance of guarantees;
change the flag, class or management of a vessel mortgaged under the credit facility or terminate or materially amend the management agreement relating to such vessel;
create liens on their assets, including the vessel;
make loans;
make investments;
make capital expenditures;
undergo a change in ownership; and
sell a vessel mortgaged under the credit facility.
Certain
of the credit facilities also contain requirements that the value of the
vessel mortgaged under the applicable credit facility not fall below 100
to 120%, as applicable, of the outstanding amount of the loan. Under certain
of the credit facilities, outstanding amounts in currencies other than the
U.S. dollar may not exceed at any time 100% or 110%, as applicable, of the
U.S. dollar equivalent amount specified in the relevant credit facility for
the applicable period. In the event the outstanding amounts in non-U.S. currencies
exceed the applicable threshold amount, the borrower has to either make a
loan prepayment or provide cash collateral security in an amount necessary
for the outstanding amounts to comply with the above requirement. Although
certain of our existing facilities (Pelea, Avstes New Marindou and New Efragel
credit facilties) contain a covenant requiring us to obtain the relevant lenders
consent prior to the payment of dividends by the Subsidiary borrowers, we intend
to enter into supplementary agreements removing this covenant prior to the
closing of this offering. If, despite own expectation, we remain bound by this
covenant after the closing of this offering (which relates to four of our 19
Subsidiaries), it could limit our ability to pay dividends.
The supplemental agreements which we have agreed to enter into with RBS in respect of the Marathassa, Marinouki, Soffive and Kerasies credit facilities will also contain requirements that the Hajioannou
family continue to hold a minimum 51% shareholding in us, Polys Hajioannou remain as our chief executive officer and the relevant Subsidiary under each loan continue to remain wholly-owned by us. In
addition, we will provide a guarantee in respect of each Subsidiarys obligations under the relevant loan, and be required to comply with certain financial covenants, including: (i) maintaining a minimum adjusted
net worth of $200.0 million and minimum free liquidity of $500,000 on deposit with RBS, (ii) ensuring that our total indebtedness does not exceed 70% of adjusted total assets or 550% of 12-month trailing
EBITDA, (iii) having the ability to pay dividends of up to 100% of free cash flow, subject to no event of default occurring and (iii) customary undertakings with respect to the delivery of all information required
by the SEC or pursuant to the Sarbanes Oxley Act. Under these agreements, the margin applicable to the Marathassa and Marinouki loans will increase to 0.75% from 0.675% and the margin applicable to the
Kerasies and Soffive loans will increase to 0.75% from 0.57%. In connection with our intended guarantee of the loans of Efragel Shipping Corporation, Marindou Shipping Corporation and Pelea Shipping
Corporation, we expect that the margins applicable to those loan obligations will also increase.
Based on the terms of the commitment letters to enter into two new credit facilities of $45.0 million each that we have accepted from DnB NOR Bank ASA, those new credit facilities will contain
covenants substantially similar to the covenants described above. Pursuant to those commitment letters, we will also guarantee the obligations of our Subsidiaries under those credit facilities and certain financial
covenants will apply to us, including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition, these credit
facilities will contain a covenant that the Hajioannou family maintain their majority interest in us.
The credit facilities contain customary events of default, including nonpayment of principal or interest, breach of covenants or material inaccuracy of representations, default under other material
indebtedness, bankruptcy and change of control of certain of our Subsidiaries.
140
Interest Rate Swap Transactions
Prior to December 14, 2007, we had not entered into any interest rate swap arrangements. Set forth below is our interest rate swap arrangement as of December 31, 2007:
Loan Facility
Counter party
Initial notional
Inception
Expiry
Swap rate
New Kerasies
RBS
$
40.0 million
December 14, 2007
December 14, 2010
4.0925
%
The initial notional amount of the swap arrangement is equal to the principal amount. The interest rate swap does not meet hedge accounting criteria under SFAS 133 Accounting for Derivative
Instruments and Hedging Activities and as such is accounted for as a trading derivative. Although we are exposed to credit-related losses in the event of non-performance in connection with such swap
arrangement, because the counterparty RBS is a major financial institution, we consider the risk of loss due to nonperformance to be minimal.
Subsequent to December 31, 2007, we entered into the following interest rate swap transactions with respect to the various credit facilities in order to manage interest costs and the risk associated with
changing interest rates with respect to these loans.
Loan Facility
Counter Party
Initial notional
Inception
Expiry
Swap rate
(in thousands)
New Marindou
DnB NOR Bank ASA
$
42,000
January 14, 2008
January 14, 2013
3.95%
New Efragel
DnB NOR Bank ASA
$
42,000
January 17, 2008
January 17, 2013
3.65%
Petra
Bayerische
$
38,171
February 19, 2008
January 18, 2013
2.885%
Pemer
Bayerische
$
38,168
March 7, 2008
March 7, 2013
2.745%
Marinouki
RBS
$
32,620
March 19, 2008
March 5, 2013
2.73%
Avstes
DnB NOR Bank ASA
$
36,000
April 25, 2008
April 18, 2013
3.89%
The initial notional amounts of all the above transactions are equal to the principal amounts of the respective loans and are reduced during the term of the relevant swap transaction based on the expected
principal outstanding under the respective facility. Under all the swap transactions, the counterparty will make semi-annual floating-rate payments to us for the relevant amount based on the six month USD LIBOR,
and we will make semi-annual payments to the bank on the relevant amount at the respective fixed swap rates set out in the table above. In the Petra and Pemer transactions, Bayerische has the right to cancel the
respective swap on January 18, 2011 and March 7, 2011, respectively, and on six-month intervals thereafter. In the Marinouki transaction, RBS has the right to cancel the swap on March 5, 2011 and on six-
monthly intervals thereafter.
We entered into these interest rate swap agreements to mitigate our exposure to interest rate fluctuations and at a time when we believed long-term interest rates were reasonably low. No interest rate swap
meets hedge accounting criteria under SFAS 133. Although we are exposed to credit-related losses in the event of non-performance in connection with such swap agreements, because the counterparties, DnB NOR
Bank ASA, Bayerische and RBS are major financial institutions, we consider the risk of loss due to their nonperformance to be minimal.
141
amount
amount
The following is a description of the material terms of our articles of incorporation and bylaws that will be in effect prior to completion of this offering. We refer you to our articles of incorporation and
bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus forms a part.
Purpose
Our purpose, as stated in our articles of incorporation, is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the Business Corporations Act of the
Marshall Islands, or the BCA. Our articles of incorporation and bylaws do not impose any limitations on the ownership rights of our stockholders.
Authorized Capitalization
Under our articles of incorporation, our authorized capital stock consists of 200,000,000 shares of common stock, par value $0.001 per share, of which no shares were issued and outstanding as of the date
of this prospectus and 20,000,000 shares of blank check preferred stock, par value $0.01 per share, of which no shares were issued and outstanding as of the date of this prospectus. Of this blank check preferred
stock, 1,000,000 shares have been designated Series A Participating Preferred Stock in connection with our adoption of a stockholder rights plan as described below under Stockholder Rights Plan. Upon
completion of this offering, we will have outstanding 54,500,000 shares of common stock and no shares of preferred stock. All of our shares of stock are in registered form.
Immediately prior to this offering, there was no public market for our common stock. Although our common stock has been approved for listing on the NYSE, we cannot assure you that a market for our
common stock will develop or if it develops that it will be sustained.
Common stock
As of the date of this prospectus, we have no shares of common stock outstanding. Upon completion of this offering, we will have outstanding 54,500,000 shares of common stock, of which Vorini will
own 44,500,000 or 43,000,000 shares if the underwriters overallotment option is exercised in full, out of 200,000,000 shares authorized to be issued. Each outstanding share of common stock entitles the holder to
one vote on all matters submitted to a vote of stockholders. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of shares of common stock are entitled to receive
ratably all dividends, if any, declared by our board of directors out of funds legally available for dividends. Please read the section entitled Dividend Policy. Upon our dissolution or liquidation or the sale of all
or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of our common stock
will be entitled to receive pro rata our remaining assets available for distribution. Holders of common stock do not have conversion, redemption or preemptive rights to subscribe to any of our securities. The rights,
preferences and privileges of holders of common stock are subject to the rights of the holders of any shares of preferred stock which we may issue in the future.
Preferred stock
Our articles of incorporation authorize our board of directors, without any further vote or action by our stockholders, to issue up to 20,000,000 shares of blank check preferred stock, of which 1,000,000
shares have been designated Series A Participating Preferred Stock, in connection with our adoption of a stockholder rights plan as described below under Stockholder Rights Plan, and to determine, with respect
to any series of preferred stock established by our board of directors, the terms and rights of that series, including:
the designation of the series;
the number of shares of the series;
142
the preferences and relative, participating, option or other special rights, if any, and any qualifications, limitations or restrictions of such series; and
the voting rights, if any, of the holders of the series.
Stockholder Meetings
Under our bylaws, annual stockholder meetings will be held at a time and place selected by our board of directors. The meetings may be held inside or outside of the Marshall Islands. Special meetings
may be called by the Chairman of the Board of Directors, the Chief Executive Officer or a majority of the Board of Directors. Our board of directors may set a record date between 15 and 60 days before the date
of any meeting to determine the stockholders that will be eligible to receive notice and vote at the meeting.
Stockholder Action by Written Consent
Our bylaws permit stockholder action by unanimous written consent.
Directors
Under our bylaws, our directors are elected by a plurality of the votes cast at each annual meeting of the stockholders by the holders of shares entitled to vote in the election. There is no provision for
cumulative voting.
Pursuant to the provision of our bylaws, the board of directors may change the number of directors to not less than three, nor more than 15, by a vote of a majority of the entire board. Each director shall
be elected to serve until the third succeeding annual meeting of stockholders and until his or her successor shall have been duly elected and qualified, except in the event of death, resignation or removal. A
vacancy on the board created by death, resignation, removal (which may only be for cause), or failure of the stockholders to elect the entire class of directors to be elected at any election of directors or for any
other reason, may be filled only by an affirmative vote of a majority of the remaining directors then in office, even if less than a quorum, at any special meeting called for that purpose or at any regular meeting
of the board of directors. The board of directors has the authority to fix the amounts which shall be payable to the members of our board of directors for attendance at any meeting or for services rendered to us.
Dissenters Rights of Appraisal and Payment
Under the BCA, our stockholders have the right to dissent from various corporate actions, including any merger or sale of all, or substantially all, of our assets not made in the usual course of our
business, and receive payment of the fair value of their shares. In the event of any amendment of our articles of incorporation, a stockholder also has the right to dissent and receive payment for their shares if the
amendment alters certain rights in respect of those shares. The dissenting stockholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting stockholder fail to
agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in the high court of the Republic of the Marshall Islands or in any appropriate court in any
jurisdiction in which our shares are primarily traded on a local or national securities exchange. The value of the shares of the dissenting stockholder is fixed by the court after reference, if the court so elects, to the
recommendations of a court-appointed appraiser.
Stockholders Derivative Actions
Under the BCA, any of our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the stockholder bringing the action is a
holder of common stock both at the time the derivative action is commenced and at the time of the transaction to which the action relates.
143
Limitations on Liability and Indemnification of Officers and Directors
The BCA authorizes corporations to limit or eliminate the personal liability of directors and officers to corporations and their stockholders for monetary damages for breaches of directors fiduciary duties.
Our bylaws include a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director to the fullest extent permitted by law.
Our bylaws provide that we must indemnify our directors and officers to the fullest extent authorized by law. We are also expressly authorized to advance certain expenses (including attorneys fees and
disbursements and court costs) to our directors and officers and carry directors and officers insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe
that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers.
The limitation of liability and indemnification provisions in our articles of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty.
These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders.
In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
Anti-takeover Effect of Certain Provisions of our Articles of Incorporation and Bylaws
Several provisions of our articles of incorporation and bylaws, which are summarized in the following paragraphs, may have anti-takeover effects. These provisions are intended to avoid costly takeover
battles, lessen our vulnerability to a hostile change of control and enhance the ability of our board of directors to maximize stockholder value in connection with any unsolicited offer to acquire us. However, these
anti-takeover provisions could also delay, defer or prevent (a) the merger or acquisition of our company by means of a tender offer, a proxy contest or otherwise that a stockholder might consider in its best
interest, including attempts that may result in a premium over the market price for the shares held by the stockholders, and (b) the removal of incumbent officers and directors.
Blank check preferred stock
Under the terms of our articles of incorporation, our board of directors has authority, without any further vote or action by our stockholders, to issue up to 20,000,000 shares of blank check preferred stock,
of which 1,000,000 shares have been designated Series A Participating Preferred Stock, in connection with our adoption of a stockholder rights plan as described below under Stockholder Rights Plan. Our board
of directors may issue shares of preferred stock on terms calculated to discourage, delay or prevent a change of control of our company or the removal of our management.
Classified board of directors
Our articles of incorporation provide for a board of directors serving staggered, three-year terms. Approximately one-third of our board of directors will be elected each year. This classified board provision
could discourage a third party from making a tender offer for our shares or attempting to obtain control of our company. It could also delay stockholders who do not agree with the policies of the board of
directors from removing a majority of the board of directors for two years.
Election and removal of directors
Our articles of incorporation prohibit cumulative voting in the election of directors. Our bylaws require parties other than the board of directors to give advance written notice of nominations for the
election of directors. Our bylaws also provide that our directors may be removed only for cause. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.
144
Calling of special meeting of stockholders
Our articles of incorporation and bylaws provide that special meetings of our stockholders may only be called by our Chairman of the Board of Directors, Chief Executive Officer or a majority of our
Board of Directors.
Advance notice requirements for stockholder proposals and director nominations
Our bylaws provide that stockholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of stockholders must provide timely notice of their proposal in
writing to the corporate secretary.
Generally, to be timely, a stockholders notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the previous years
annual meeting. Our bylaws also specify requirements as to the form and content of a stockholders notice. These provisions may impede stockholders ability to bring matters before an annual meeting of
stockholders or to make nominations for directors at an annual meeting of stockholders.
Stockholder Rights Plan
Each share of our common stock includes a right that entitles the holder to purchase from us a unit consisting of one-thousandth of a share of our Series A participating preferred stock at a purchase price
of $25.00 per unit, subject to specified adjustments. The rights are issued pursuant to a stockholder rights agreement between us and American Stock Transfer & Trust Company, as rights agent. Until a right is
exercised, the holder of a right will have no rights to vote or receive dividends or any other stockholder rights.
The rights may have anti-takeover effects. The rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our board of directors. As a result, the overall
effect of the rights may be to render more difficult or discourage any attempt to acquire us. Because our board of directors can approve a redemption of the rights or a permitted offer, the rights should not
interfere with a merger or other business combination approved by our board of directors. The adoption of the rights agreement was approved by our existing stockholder prior to this offering.
We have summarized the material terms and conditions of the rights agreement and the rights below. For a complete description of the rights, we encourage you to read the stockholder rights agreement,
which we have filed as an exhibit to the registration statement of which this prospectus is a part.
Detachment of rights
The rights are attached to all certificates representing our outstanding common stock and will attach to all common stock certificates we issue prior to the rights distribution date that we describe below.
The rights are not exercisable until after the rights distribution date and will expire at the close of business on the tenth anniversary date of the adoption of the rights plan, unless we redeem or exchange them
earlier as described below. The rights will separate from the common stock and a rights distribution date will occur, subject to specified exceptions, on the earlier of the following two dates:
ten days following a public announcement that a person or group of affiliated or associated persons or an acquiring person has acquired or obtained the right to acquire beneficial ownership of
15% or more of our outstanding common stock; or
ten business days following the start of a tender or exchange offer that would result, if closed, in a person becoming an acquiring person.
Our existing stockholder and its affiliates are excluded from the definition of acquiring person for purposes of the rights, and therefore their ownership or future share acquisitions cannot trigger the
rights. Specified inadvertent owners that would otherwise become an acquiring person, including those who would have this designation as a result of repurchases of common stock by us, will not become
acquiring persons as a result of those transactions.
145
Our board of directors may defer the rights distribution date in some circumstances, and some inadvertent acquisitions will not result in a person becoming an acquiring person if the person promptly
divests itself of a sufficient number of shares of common stock.
Until the rights distribution date:
our common stock certificates will evidence the rights, and the rights will be transferable only with those certificates; and
any new shares of common stock will be issued with rights and new certificates will contain a notation incorporating the rights agreement by reference.
As soon as practicable after the rights distribution date, the rights agent will mail certificates representing the rights to holders of record of common stock at the close of business on that date. After the
rights distribution date, only separate rights certificates will represent the rights.
We will not issue rights with any shares of common stock we issue after the rights distribution date, except as our board of directors may otherwise determine.
Flip-in event
A flip-in event will occur under the rights agreement when a person becomes an acquiring person. If a flip-in event occurs and we do not redeem the rights as described under the heading Redemption
of rights below, each right, other than any right that has become void, as described below, will become exercisable at the time it is no longer redeemable for the number of shares of common stock, or, in some
cases, cash, property or other of our securities, having a current market price equal to two times the exercise price of such right.
If a flip-in event occurs, all rights that then are, or in some circumstances that were, beneficially owned by or transferred to an acquiring person or specified related parties will become void in the
circumstances the rights agreement specifies.
Flip-over event
A flip-over event will occur under the rights agreement when, at any time after a person has become an acquiring person:
we are acquired in a merger or other business combination transaction; or
50% or more of our assets, cash flows or earning power is sold or transferred.
If a flip-over event occurs, each holder of a right, other than any right that has become void as we describe under the heading Flip-in event above, will have the right to receive the number of shares of
common stock of the acquiring company having a current market price equal to two times the exercise price of such right.
Antidilution
The number of outstanding rights associated with our common stock is subject to adjustment for any stock split, stock dividend or subdivision, combination or reclassification of our common stock
occurring prior to the rights distribution date. With some exceptions, the rights agreement does not require us to adjust the exercise price of the rights until cumulative adjustments amount to at least 1% of the
exercise price. It also does not require us to issue fractional shares of our preferred stock that are not integral multiples of one one-hundredth of a share, and, instead we may make a cash adjustment based on the
market price of the common stock on the last trading date prior to the date of exercise. The rights agreement reserves us the right to require, prior to the occurrence of any flip-in event or flip-over event that, on
any exercise of rights, that a number of rights must be exercised so that we will issue only whole shares of stock.
146
Redemption of rights
At any time until ten days after the date on which the occurrence of a flip-in event is first publicly announced, we may redeem the rights in whole, but not in part, at a redemption price of $0.01 per
right. The redemption price is subject to adjustment for any stock split, stock dividend or similar transaction occurring before the date of redemption. At our option, we may pay that redemption price in cash,
shares of common stock or any other consideration our board of directors may select. The rights are not exercisable after a flip-in event until they are no longer redeemable. If our board of directors timely orders
the redemption of the rights, the rights will terminate on the effectiveness of that action.
Exchange of rights
We may, at our option, exchange the rights (other than rights owned by an acquiring person or an affiliate or an associate of an acquiring person, which have become void), in whole or in part. The
exchange must be at an exchange ratio of one share of common stock per right, subject to specified adjustments at any time after the occurrence of a flip-in event and prior to:
any person other than our existing stockholder becoming the beneficial owner of common stock with voting power equal to 50% or more of the total voting power of all shares of common stock
entitled to vote in the election of directors; or
the occurrence of a flip-over event.
Amendment of terms of rights
While the rights are outstanding, we may amend the provisions of the rights agreement only as follows:
to cure any ambiguity, omission, defect or inconsistency;
to make changes that do not adversely affect the interests of holders of rights, excluding the interests of any acquiring person; or
to shorten or lengthen any time period under the rights agreement, except that we cannot change the time period when rights may be redeemed or lengthen any time period, unless such
lengthening protects, enhances or clarifies the benefits of holders of rights other than an acquiring person.
At any time when no rights are outstanding, we may amend any of the provisions of the rights agreement, other than decreasing the redemption price.
Transfer Agent
The registrar and transfer agent for the common stock is American Stock Transfer & Trust Company.
Listing
Our common stock has been approved for listing on the New York Stock Exchange under the symbol SB.
147
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 54,500,000 shares of common stock outstanding. Of these shares, only the 10,000,000 shares sold in this offering, or 11,500,000 shares if the underwriters
over allotment option is exercised in full, will be freely transferable in the United States without restriction under the Securities Act, except for any shares purchased by one of our affiliates, which will be
subject to the resale limitations of Rule 144 under the Securities Act. Prior to this offering, our existing stockholder will be our sole stockholder. After the consummation of this offering, our existing stockholder
will continue to own 44,500,000, or 43,000,000 if the underwriters exercise their allotment option in full, shares of common stock which were acquired in private transactions not involving a public offering and
these shares are therefore treated as restricted securities for purposes of Rule 144. Restricted securities may not be resold except in compliance with the registration requirements of the Securities Act or under an
exemption from those registration requirements, such as the exemptions provided by Rule 144, Regulation S and other exemptions under the Securities Act. Upon consummation of this offering, our existing
stockholder will have rights to require, or participate in, the registration under the Securities Act of the 44,500,000 shares of our common stock it will hold upon completion of this offering (assuming no exercise
of the underwriters overallotment option). Registration of these shares under the Securities Act would result in these shares becoming fully tradeable without restriction under the Securities Act immediately upon
the effectiveness of the applicable registration statement, except for shares purchased by affiliates.
In general, under Rule 144, our existing stockholder or any other affiliate of ours, who owns restricted shares that were acquired from the issuer or another affiliate at least six months ago, and following
the 90th day after the completion of this offering, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of (a) 1% of the then outstanding shares of our
common stock, which would be approximately 545,000 shares immediately after this offering and (b) an amount equal to the average weekly reported volume of trading in shares of our common stock on all
national securities exchanges and/or reported through the automated quotation system of registered securities associations during the four calendar weeks preceding the date on which notice of the sale is filed with
the SEC. Sales in reliance on Rule 144 are also subject to other requirements regarding the manner of sale, notice and availability of current public information about us. As defined in Rule 144, an affiliate of
an issuer is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, that same issuer.
The restricted securities held by our existing stockholder, officers and directors will be subject to the underwriters 180-day lock-up agreement. Under the lock-up agreement, our existing stockholder,
officers and directors have agreed during the period beginning from the date of the prospectus and continuing to and including the date 180 days after the date of this prospectus, not to offer, sell, contract to sell
or otherwise dispose of any of our common stock or other securities which are substantially similar to the common stock or which are convertible or exchangeable into securities which are substantially similar to
the common stock, without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC. These agreements do not apply to transfers to immediate family
or donees who receive such securities as bona fide gifts; provided that such transferees agree to substantially the same transfer restrictions on the securities they receive.
As a result of these lock-up agreements and rules of the Securities Act, the restricted shares held by our existing stockholder will be available for sale in the public market, subject to certain volume and
other restrictions, as mentioned above, as follows:
Days After the Date of this Prospectus
Number of Shares
Comment
Date of prospectus
None
Shares not locked up and eligible for sale
freely or under Rule 144.
180 days
44,500,000
Lock-up of officers and directors and our
existing stockholder released; shares will
be eligible for sale subject to compliance
with Rule 144.
148
Eligible for Sale
Prior to this offering, there has been no public market for our common stock, and no reliable prediction can be made as to the effect, if any, that future sales or the availability of shares for sale will have
on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock in the public market or the perception that those sales may occur, could
adversely affect prevailing market prices for our common stock.
149
MARSHALL ISLANDS COMPANY CONSIDERATIONS
Our corporate affairs are governed by our articles of incorporation and bylaws and by the Business Corporations Act of the Republic of the Marshall Islands, or BCA. The provisions of the BCA
resemble provisions of the corporation laws of a number of states in the United States. For example, the BCA allows the adoption of various anti-takeover measures such as stockholder rights plans. While the
BCA also provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the
BCA in the Marshall Islands. Accordingly, we cannot predict whether Marshall Islands courts would reach the same conclusions as United States courts and you may have more difficulty in protecting your
interests in the face of actions by the management, directors or controlling stockholders than would stockholders of a corporation incorporated in a United States jurisdiction which has developed a substantial body
of case law. The following table provides a comparison between the statutory provisions of the BCA and the Delaware General Corporation Law relating to stockholders rights.
Marshall Islands
Delaware
Stockholder Meetings
Held at a time and place as designated in the
bylaws.
May be held at such time or place as
designated in the certificate of incorporation or
the bylaws, or if not so designated, as
determined by the board of directors.
May be held in or outside of the Marshall
Islands.
May be held in or outside of Delaware.
Notice:
Notice:
- Whenever stockholders are required to take
action at a meeting, written notice shall state
the place, date and hour of the meeting, unless
it is the annual meeting indicate that it is being
issued by or at the direction of the person
calling the meeting, and if such meeting is a
special meeting such notice shall also state the
purpose for which it is being called.
- Whenever stockholders are required to take
any action at a meeting, a written notice of the
meeting shall be given which shall state the
place, if any, date and hour of the meeting, and
the means of remote communication, if any.
- A copy of the notice of any meeting shall be
given personally or sent by mail not less than
15 nor more than 60 days before meeting.
- Written notice shall be given not less than ten
nor more than 60 days before the meeting.
Stockholders Voting Rights
Any action required to be taken by a meeting
of stockholders may be taken without a meeting
if consent is in writing and is signed by all the
stockholders entitled to vote.
With limited exceptions, stockholders may act
by written consent to elect directors.
Any person authorized to vote may authorize
another person to act for him or her by proxy.
Any person authorized to vote may authorize
another person or persons to act for him or her
by proxy.
Unless otherwise provided in the articles of
incorporation, a majority of shares entitled to
vote constitutes a quorum. In no event shall a
quorum consist of fewer than one-third of the
shares entitled to vote at a meeting.
For stock corporations, a certificate of
incorporation or bylaws may specify the number
to constitute a quorum, but in no event shall a
quorum consist of less than one-third of shares
entitled to vote at a meeting. In the absence of
such specifications, a majority of shares entitled
to vote shall constitute a quorum.
150
Marshall Islands
Delaware
When a quorum is once present to organize a
meeting, it is not broken by the subsequent
withdrawal of any stockholders.
When a quorum is once present to organize a
meeting, it is not broken by the subsequent
withdrawal of any stockholders.
The articles of incorporation may provide for
cumulative voting in the election of directors.
The certificate of incorporation may provide for
cumulative voting.
Any two or more domestic corporations may
merge into a single corporation if approved by
the board and if authorized by a majority vote
of the holders of outstanding shares at a
stockholder meeting.
Any two or more corporations existing under
the laws of the state may merge into a single
corporation pursuant to a board resolution and
upon the majority vote by stockholders of each
constituent corporation at an annual or special
meeting.
Any sale, lease, exchange or other disposition
of all or substantially all the assets of a
corporation, if not made in the corporations
usual or regular course of business, once
approved by the board, shall be authorized by
the affirmative vote of two-thirds of the shares
of those entitled to vote at a stockholder
meeting.
Every corporation may at any meeting of the
board sell, lease or exchange all or substantially
all of its property and assets as its board deems
expedient and for the best interests of the
corporation when so authorized by a resolution
adopted by the holders of a majority of the
outstanding stock of a corporation entitled to
vote.
Any domestic corporation owning at least 90%
of the outstanding shares of each class of
another domestic corporation may merge such
other corporation into itself without the
authorization of the stockholders of any
corporation.
Any corporation owning at least 90% of the
outstanding shares of each class of another
corporation may merge the other corporation
into itself and assume all of its obligations
without the vote or consent of stockholders;
however, in case the parent corporation is not
the surviving corporation, the proposed merger
shall be approved by a majority of the
outstanding stock of the parent corporation
entitled to vote at a duly called stockholder
meeting.
Any mortgage, pledge of or creation of a
security interest in all or any part of the
corporate property may be authorized without
the vote or consent of the stockholders, unless
otherwise provided for in the articles of
incorporation.
Any mortgage or pledge of a corporations
property and assets may be authorized without
the vote or consent of stockholders, except to
the extent that the certificate of incorporation
otherwise provides.
Directors
The board of directors must consist of at least
one member.
The board of directors must consist of at least
one member.
Number of members can be changed by an
amendment to the bylaws, by the stockholders,
or by action of the board pursuant to the
bylaws.
Number of board members shall be fixed by the
bylaws, unless the certificate of incorporation
fixes the number of directors, in which case a
change in the number shall be made only by
amendment of the certificate of incorporation.
If the board of directors is authorized to change
the number of directors, it can only do so by a
majority of the entire board and so long as no
decrease in the number shall shorten the term of
any incumbent director.
151
Marshall Islands
Delaware
Removal:
Removal:
- Any or all of the directors may be removed
for cause by vote of the stockholders.
- Any or all of the directors may be removed,
with or without cause, by the holders of a
majority of the shares entitled to vote unless the
certificate of incorporation otherwise provides.
- If the articles of incorporation or the bylaws
so provide, any or all of the directors may be
removed without cause by vote of the
stockholders.
- In the case of a classified board, stockholders
may effect removal of any or all directors only
for cause.
Dissenters Rights of Appraisal
Stockholders have a right to dissent from a
merger or sale of all or substantially all assets
not made in the usual course of business, and
receive payment of the fair value of their
shares.
With limited exceptions, appraisal rights shall
be available for the shares of any class or series
of stock of a corporation in a merger or
consolidation.
A holder of any adversely affected shares who
does not vote on, or consent in writing to, an
amendment to the articles of incorporation has
the right to dissent and to receive payment for
such shares if the amendment:
The certificate of incorporation may provide
that appraisal rights are available for shares as a
result of an amendment to the certificate of
incorporation, any merger or consolidation or
the sale of all or substantially all of the assets.
- alters or abolishes any preferential right of
any outstanding shares having preference;
- creates, alters, or abolishes any provision or
right in respect to the redemption of any
outstanding shares;
- alters or abolishes any preemptive right of
such holder to acquire shares or other securities;
or
- excludes or limits the right of such holder to
vote on any matter, except as such right may be
limited by the voting rights given to new shares
then being authorized of any existing or new
class.
Stockholders Derivative Actions
An action may be brought in the right of a
corporation to procure a judgment in its favor,
by a holder of shares or of voting trust
certificates or of a beneficial interest in such
shares or certificates. It shall be made to appear
that the plaintiff is such a holder at the time of
bringing the action and that he was such a
holder at the time of the transaction of which
he complains, or that his shares or his interest
therein devolved upon him by operation of law.
In any derivative suit instituted by a stockholder
of a corporation, it shall be averred in the
complaint that the plaintiff was a stockholder of
the corporation at the time of the transaction of
which he complains or that such stockholders
stock thereafter devolved upon such stockholder
by operation of law.
Complaint shall set forth with particularity the
efforts of the plaintiff to secure the initiation of
such action by the board of directors or the
reasons for not making such effort.
152
Marshall Islands
Delaware
Such action shall not be discontinued,
compromised or settled, without the approval of
the High Court of the Republic of the Marshall
Islands.
Reasonable expenses, including attorneys fees,
may be awarded if the action is successful.
Corporation may require a plaintiff bringing a
derivative suit to give security for reasonable
expenses if the plaintiff owns less than 5% of
any class of stock and the shares have a value
of less than $50,000.
153
The following is a discussion of the material Marshall Islands, Liberian and U.S. Federal income tax considerations relevant to an investment decision by a prospective investor with respect to the
acquisition, ownership and disposition of our common stock.
This discussion is general in nature and therefore does not purport to deal with the tax consequences of owning our common stock to all categories of investors, some of which (such as dealers in
securities, banks, thrifts or other financial institutions, insurance companies, regulated investment companies, tax-exempt organizations, U.S. expatriates, persons that hold our common stock as part of a straddle,
conversion transaction or hedge, persons deemed to sell our common stock under the constructive sale provisions of the U.S. Internal Revenue Code of 1986 (the Code), investors that are paying the alternative
minimum tax, investors whose functional currency is not the U.S. dollar and investors that own, actually or under applicable constructive ownership rules, 10% or more of our common stock) may be subject to
special rules.
This discussion deals only with holders who purchase our common stock in connection with this offering and hold our common stock as a capital asset (
i.e.
, for investment purposes).
If you are considering investing in our common stock, you should consult your own tax advisors concerning the tax consequences arising in your particular situation under U.S. Federal, state,
local or foreign tax laws of acquiring, owning and disposing of our common stock.
Marshall Islands Tax Considerations
In the opinion of Cozen OConnor, our counsel as to matters of the laws of the Republic of the Marshall Islands, the following are the material Marshall Islands tax consequences of our activities to us
and to you as a holder of our common stock who is not a citizen of, does not reside in, maintain offices in or engage in business in the Marshall Islands.
We are a non-resident domestic Marshall Islands corporation. Because we do not, and we do not expect that we will, conduct business or operations in the Marshall Islands, and because all documentation
related to this offering will be executed outside of the Marshall Islands, under current Marshall Islands law we are not subject to tax on income or capital gains and, so long as you are not a citizen or resident of
the Marshall Islands, you will not be subject to Marshall Islands taxation or withholding on dividends and other distributions (including upon a return of capital) we make to you. In addition, so long as you are not
a citizen or resident of the Marshall Islands, you will not be subject to Marshall Islands stamp, capital gains or other taxes on your purchase, holding or disposition of our common stock, and you will not be
required by the Republic of the Marshall Islands to file a tax return relating to our common stock.
Liberian Tax Considerations
In the opinion of Cozen OConnor, our counsel as to matters of the laws of the Republic of Liberia, the following are the material Liberian tax consequences of the activities of our Liberian Subsidiaries.
The Republic of Liberia enacted a new income tax act effective as of January 1, 2001, or the New Act. In contrast to the income tax law previously in effect since 1977, the New Act does not
distinguish between the taxation of non-resident Liberian corporations, such as our Liberian Subsidiaries, which conduct no business in Liberia and were wholly exempt from taxation under the prior law, and
resident Liberian corporations which conduct business in Liberia and are (and were under the prior law) subject to taxation.
In 2004, the Liberian Ministry of Finance issued regulations exempting non-resident corporations engaged in international shipping (and not engaged in shipping exclusively within Liberia), such as our
Liberian Subsidiaries, from Liberian taxation under the New Act retroactive to January 1, 2001. It is unclear whether these regulations, which ostensibly conflict with the provisions of the New Act, are a valid
exercise of the regulatory authority of the Liberian Ministry of Finance such that the regulations can be considered unquestionably enforceable. However, an opinion dated December 23, 2004 addressed by the
Minister of Justice and Attorney General of the Republic of Liberia to The LISCR Trust Company stated
154
that the regulations are a proper exercise of the powers of the regulatory authority of the Ministry of Finance. The Liberian Ministry of Finance has not at any time since January 1, 2001 sought to collect taxes
from any of our Liberian Subsidiaries.
If, however, our Liberian Subsidiaries were subject to Liberian income tax under the New Act, they would be subject to tax at a rate of 35% on their worldwide income. As a result, their, and
subsequently our, net income and cash flow would be materially reduced. In addition, as the ultimate stockholder of the Liberian Subsidiaries, we would be subject to Liberian withholding tax on dividends paid by
our Liberian Subsidiaries at rates ranging from 15% to 20%.
United States Federal Income Tax Considerations
The following discussion represents the opinion of Cravath, Swaine & Moore LLP regarding the material U.S. Federal income tax consequences to us of our activities and, subject to the limitations referred
to above under Tax Considerations, to you as a holder of our common stock.
The following discussion of U.S. Federal income tax matters is based on the Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the U.S. Department
of the Treasury, all of which are subject to change, possibly with retroactive effect. This discussion does not address any U.S. state or local taxes.
Taxation of Our Shipping Income
Subject to the discussion of effectively connected income below, unless exempt from U.S. income tax under the rules contained in Section 883 of the Code, a non-U.S. corporation is, under the rules of
Section 887 of the Code, subject to a 4% U.S. income tax in respect of its gross U.S. source shipping income (without the allowance for deductions).
For this purpose, shipping income means income that is derived from:
(a)
the use of vessels,
(b)
the hiring or leasing of vessels for use on a time, operating or bareboat charter basis,
(c)
the participation in a pool, partnership, strategic alliance, joint operating agreement or other joint venture it directly or indirectly owns or participates in that generates such income or
(d)
the performance of services directly related to those uses.
For this purpose, 50% of the shipping income that is attributable to transportation that begins or ends (but that does not both begin and end) in the United States constitutes U.S. source shipping income.
Shipping income attributable to transportation that both begins and ends in the United States is generally considered to be 100% U.S. source shipping income. Although there can be no assurance, we do not expect
to engage in transportation that produces income that is considered to be 100% U.S. source shipping income. Shipping income attributable to transportation exclusively between non-U.S. ports is generally
considered to be 100% non-U.S. source shipping income, which is not subject to any U.S. income tax.
Under Section 883 of the Code, a non-U.S. corporation will be exempt from U.S. income tax on its U.S. source shipping income if:
(a)
it is organized in a foreign country (or the country of organization) that grants an equivalent exemption to U.S. corporations; and
(b)
either
(i)
more than 50% of the value of its stock is owned, directly or indirectly, by individuals who are residents of our country of organization or of another foreign country that grants an
equivalent exemption to U.S. corporations; or
(ii)
its stock is primarily and regularly traded on an established securities market in its country of organization, in another country that grants an equivalent exemption to U.S. corporations,
or in the United States.
We believe that, following this offering, we will not satisfy the requirements of Section 883 of the Code because of our ownership structure. As a result, we will be subject to the 4% U.S. income tax on
our
155
U.S. source shipping income. Since we expect that no more than 50% of our shipping income would be treated as U.S. source shipping income, we expect that the maximum effective rate of U.S. income tax on
our gross shipping income would not exceed 2%. Many of our charters contain a provision that obligates the charterer to reimburse us for the 4% U.S. income tax we are required to pay in respect of the vessel
that is subject to the relevant charter.
Since the exemption of Section 883 of the Code will not apply to us, our U.S. source shipping income that is considered to be effectively connected with the conduct of a U.S. trade or business would
be subject to the U.S. corporate income tax currently imposed at rates of up to 35% (net of applicable deductions). In addition, we may be subject to the 30% U.S. branch profits taxes on earnings effectively
connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of our U.S. trade or business.
Our U.S. source shipping income would be considered effectively connected with the conduct of a U.S. trade or business only if:
(a)
we had, or were considered to have, a fixed place of business in the United States involved in the earning of U.S. source shipping income, and
(b)
substantially all of our U.S. source shipping income was attributable to regularly scheduled transportation, such as the operation of a vessel that followed a published schedule with repeated
sailings at regular intervals between the same points for voyages that begin or end in the United States.
We believe that we will not have, or permit circumstances that would result in having, any vessel sailing to or from the United States on a regularly scheduled basis. Based on the foregoing and on the
expected mode of our shipping operations and other activities, we expect that none of our U.S. shipping income will be effectively connected with the conduct of a U.S. trade or business.
Taxation of Gain on Sale of Assets
Regardless of whether we qualify for the exemption under Section 883 of the Code, we will not be subject to U.S. income taxation with respect to gain realized on a sale of a vessel, provided the sale is
considered to occur outside of the United States (as determined under U.S. tax principles). In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel
(and risk of loss with respect to the vessel) pass to the buyer outside of the United States. We expect that any sale of a vessel will be so structured that it will be considered to occur outside of the United States.
Taxation of United States Holders
You are a U.S. holder if you are a beneficial owner of our common stock and you are a U.S. citizen or resident, a U.S. corporation (or other U.S. entity taxable as a corporation), an estate the income
of which is subject to U.S. Federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more
U.S. persons have the authority to control all substantial decisions of that trust.
If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a
partnership holding our common stock, you should consult your tax advisor.
Distributions on Our Common Stock
Subject to the discussion of passive foreign investment companies (or PFICs) below, any distributions with respect to our common stock that you receive from us will generally constitute dividends,
which may be taxable as ordinary income or qualified dividend income as described below, to the extent of our current or accumulated earnings and profits (as determined under U.S. tax principles). Distributions
in excess of our earnings and profits will be treated first as a nontaxable return of capital to the extent of your tax basis in our common stock (on a dollar-for-dollar basis) and thereafter as capital gain.
156
Because we are not a U.S. corporation, if you are a U.S. corporation (or a U.S. entity taxable as a corporation), you will not be entitled to claim a dividends received deduction with respect to any
distributions you receive from us.
Dividends paid with respect to our common stock will generally be treated as passive category income for purposes of computing allowable foreign tax credits for U.S. foreign tax credit purposes.
If you are an individual, trust or estate, dividends you receive from us should be treated as qualified dividend income taxed at a preferential rate of 15% (through 2010), provided that:
(a)
the common stock is readily tradable on an established securities market in the United States (such as the New York Stock Exchange);
(b)
we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (see the discussion below under PFIC Status);
(c)
you own our common stock for more than 60 days in the 121-day period beginning 60 days before the date on which the common stock becomes ex-dividend;
(d)
you are not under an obligation to make related payments with respect to positions in substantially similar or related property; and
(e)
certain other conditions are met.
Special rules may apply to any extraordinary dividend. Generally, an extraordinary dividend is a dividend in an amount which is equal to (or in excess of) 10% of your adjusted tax basis (or fair market
value in certain circumstances) in a share of our common stock. If we pay an extraordinary dividend on our common stock that is treated as qualified dividend income and if you are an individual, estate or
trust, then any loss derived by you from a subsequent sale or exchange of such common stock will be treated as long-term capital loss to the extent of such dividend.
There is no assurance that dividends you receive from us will be eligible for the preferential 15% rate. Dividends you receive from us that are not eligible for the preferential rate of 15% will be taxed at
the ordinary income rates.
In addition, even if we are not a PFIC, under proposed legislation, dividends of a corporation incorporated in a country without a comprehensive income tax system paid to U.S. holders who are
individuals, estates or trusts would not be eligible for the 15% tax rate. Although the term comprehensive income tax system is not defined in the proposed legislation, we believe this rule would apply to us
because we are incorporated in the Marshall Islands. As of the date hereof, it is not possible to predict with certainty whether or in what form the proposed legislation will be enacted.
Sale, Exchange or other Disposition of Common Stock
Provided that we are not a PFIC for any taxable year, you generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common stock in an amount equal to the
difference between the amount realized by you from such sale, exchange or other disposition and your tax basis in such stock. Such gain or loss will be treated as long-term capital gain or loss if your holding
period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as U.S. source income or loss, as applicable, for U.S. foreign tax credit
purposes. Your ability to deduct capital losses against ordinary income is subject to limitations.
PFIC Status
Special U.S. income tax rules apply to you if you hold stock in a non-U.S. corporation that is classified as a passive foreign investment company (or PFIC) for U.S. income tax purposes. In general,
we will be treated as a PFIC in any taxable year in which, after applying certain look-through rules, either:
(a)
at least 75% of our gross income for such taxable year consists of passive income (
e.g.
, dividends, interest, capital gains and rents derived other than in the active conduct of a rental business);
or
(b)
at least 50% of the average value of our assets during such taxable year consists of passive assets
(i.e.
, assets that produce, or are held for the production of, passive income).
157
For purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiary corporations in which
we own at least 25% of the value of the subsidiarys stock. Income earned, or deemed earned, by us in connection with the performance of services will not constitute passive income. By contrast, rental income
will generally constitute passive income (unless we are treated under certain special rules as deriving our rental income in the active conduct of a trade or business).
Since we have chartered all our vessels to unrelated charterers on the basis of period time and spot charter contracts (and not on the basis of bareboat charters) and since we expect to continue to do so,
we believe that we should not be treated as having been a PFIC in 2007, and should not become a PFIC. We believe that, although there is no legal authority directly on point, our gross income derived from our
time charter activities should constitute active service income (as opposed to passive rental income) and, as a result, our vessels should constitute active assets (as opposed to passive assets) for purposes of
determining whether we are a PFIC. We believe there is legal authority supporting this position, consisting of case law and IRS pronouncements concerning the characterization of income derived from time
charters as service income for other tax purposes. However, we have not sought, and we do not expect to seek, an IRS ruling on this matter. As a result, the IRS or a court could disagree with our position. No
assurance can be given that this result will not occur. In addition, although we intend to conduct our affairs in a manner to avoid, to the extent possible, being classified as a PFIC with respect to any taxable year,
we cannot assure you that the nature of our operations will not change in the future, or that we can avoid PFIC status in the future.
As discussed below, if we were to be treated as a PFIC for any taxable year, you generally would be subject to one of three different U.S. income tax regimes, depending on whether or not you make
certain elections.
Taxation of U.S. Holders That Make a Timely QEF Election
If we were a PFIC and if you make a timely election to treat us as a Qualifying Electing Fund for U.S. tax purposes (a QEF Election), you would be required to report each year your pro rata share
of our ordinary earnings and our net capital gain for our taxable year that ends with or within your taxable year, regardless of whether we make any distributions to you. Such income inclusions would not be
eligible for the preferential tax rates applicable to qualified dividend income. Your adjusted tax basis in our common stock would be increased to reflect such taxed but undistributed earnings and profits.
Distributions of earnings and profits that had previously been taxed would result in a corresponding reduction in your adjusted tax basis in our common stock and would not be taxed again once distributed. You
would generally recognize capital gain or loss on the sale, exchange or other disposition of our common stock. Even if you make a QEF Election for one of our taxable years, if we were a PFIC for a prior taxable
year during which you held our common stock and for which you did not make a timely QEF Election, you would also be subject to the more adverse rules described below under Taxation of U.S. Holders That
Make No Election.
You would make a QEF election with respect to any year that our company is treated as a PFIC by completing and filing IRS Form 8621 with your U.S. income tax return in accordance with the relevant
instructions. If we were to become aware that we were to be treated as a PFIC for any taxable year, we would notify all U.S. holders of such treatment and would provide all necessary information to any U.S.
holder who requests such information in order to make the QEF election described above.
Taxation of U.S. Holders That Make a Timely Mark-to-Market Election
Alternatively, if we were to be treated as a PFIC for any taxable year and, as we believe, our common stock is treated as marketable stock, you would be allowed to make a mark-to-market election
with respect to our common stock, provided you complete and file IRS Form 8621 in accordance with the relevant instructions. If that election is made, you generally would include as ordinary income in each
taxable year the excess, if any, of the fair market value of our common stock at the end of the taxable year over your adjusted tax basis in our common stock. You also would be permitted an ordinary loss in
respect of the excess, if any, of your adjusted tax basis in our common stock over its fair market value at the end of the taxable year (but only to the extent of the net amount previously included in income as a
result of
158
the mark-to-market election). Your tax basis in our common stock would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our common stock would
be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common stock would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-
market gains previously included by you.
Taxation of U.S. Holders That Make No Election
Finally, if we were treated as a PFIC for any taxable year and if you did not make either a QEF Election or a mark-to-market election for that year, you would be subject to special rules with respect to
(a) any excess distribution (that is, the portion of any distributions received by you on our common stock in a taxable year in excess of 125% of the average annual distributions received by you in the three
preceding taxable years, or, if shorter, your holding period for our common stock) and (b) any gain realized on the sale, exchange or other disposition of our common stock. Under these special rules:
(i)
the excess distribution or gain would be allocated ratably over your aggregate holding period for our common stock;
(ii)
the amount allocated to the current taxable year would be taxed as ordinary income; and
(iii)
the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the
deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
If you were to die while owning our common stock, your successor generally would not receive a step-up in tax basis with respect to such stock for U.S. tax purposes.
United States Federal Income Taxation of Non-U.S. Holders
You are a non-U.S. holder if you are a beneficial owner of our common stock (other than a partnership for U.S. tax purposes) and you are not a U.S. holder.
Distributions on Our Common Stock
You generally will not be subject to U.S. income or withholding taxes on dividends received from us with respect to our common stock, unless that income is effectively connected with your conduct of a
trade or business in the United States. If you are entitled to the benefits of an applicable income tax treaty with respect to those dividends, that income generally is taxable in the United States only if it is
attributable to a permanent establishment maintained by you in the United States.
Sale, Exchange or Other Disposition of Our Common Stock
You generally will not be subject to U.S. income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of our common stock, unless:
(a)
the gain is effectively connected with your conduct of a trade or business in the United States. If you are entitled to the benefits of an applicable income tax treaty with respect to that gain, that
gain generally is taxable in the United States only if it is attributable to a permanent establishment maintained by you in the United States; or
(b)
you are an individual who is present in the United States for 183 days or more during the taxable year of disposition and certain other conditions are met.
If you are engaged in a U.S. trade or business for U.S. tax purposes, you will be subject to U.S. tax with respect to your income from our common stock (including dividends and the gain from the sale,
exchange or other disposition of the stock that is effectively connected with the conduct of that trade or business) in the same manner as if you were a U.S. holder. In addition, if you are a corporate non-U.S.
holder, your earnings and profits that are attributable to the effectively connected income (subject to certain adjustments) may be subject to an additional U.S. branch profits tax at a rate of 30%, or at a lower rate
as may be specified by an applicable income tax treaty.
159
United States Backup Withholding and Information Reporting
In general, if you are a non-corporate U.S. holder, dividend payments (or other taxable distributions) made within the United States will be subject to information reporting requirements and backup
withholding tax if you:
(1)
fail to provide us with an accurate taxpayer identification number;
(2)
are notified by the IRS that you have failed to report all interest or dividends required to be shown on your federal income tax returns; or
(3)
in certain circumstances, fail to comply with applicable certification requirements.
If you are a non-U.S. holder, you may be required to establish your exemption from information reporting and backup withholding by certifying your status on IRS Form W-8BEN, W-8ECI or W-8IMY,
as applicable.
If you sell our common stock to or through a U.S. office or broker, the payment of the sales proceeds is subject to both U.S. backup withholding and information reporting unless you certify that you are a
non-U.S. person, under penalties of perjury, or you otherwise establish an exemption. If you sell our common stock through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside
the United States, then information reporting and backup withholding generally will not apply to that payment. However, U.S. information reporting requirements (but not backup withholding) will apply to a
payment of sales proceeds, even if that payment is made outside the United States, if you sell our common stock through a non-U.S. office of a broker that is a U.S. person or has certain other connections with
the United States.
Backup withholding tax is not an additional tax. Rather, you generally may obtain a refund of any amounts withheld under backup withholding rules that exceed your income tax liability by accurately
completing and timely filing a refund claim with the IRS.
160
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We estimate the expenses in connection with the issuance and distribution of our common stock in this offering, other than underwriting discounts and commissions, as follows:
SEC registration fee
$
9,943
Printing and engraving expenses
150,000
Legal fees and expenses
1,950,000
Accountants fees and expenses
1,650,000
NYSE fee
50,685
FINRA fee
25,825
Transfer agents fees and expenses
3,000
Miscellaneous costs
200,000
Total
$
3,895,775
161
Vorini Holdings, as the selling stockholder, intends to offer the shares of common stock through the underwriters. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA)
LLC are acting as joint bookrunning managers of the offering and as representatives of each of the underwriters named below. Subject to the terms and conditions described in an underwriting agreement among us,
the underwriters and the selling stockholder, the selling stockholder has agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from the selling stockholder, the number of shares
listed opposite their names below.
Underwriters
Number
Merrill Lynch, Pierce, Fenner & Smith
Credit Suisse Securities (USA) LLC
Jefferies & Company, Inc.
Dahlman Rose & Company, LLC.
DnB NOR Markets, Inc.
Total
10,000,000
The underwriters have agreed to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased. If an underwriter defaults, the underwriting agreement provides that
the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.
We and the selling stockholder have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and
other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers
to the public and to reject orders in whole or in part.
Discounts and Commission
The representatives have advised us and the selling stockholder that the underwriters propose initially to offer the shares to the public at the initial public offering price on the cover of this prospectus and
to dealers at that price less a concession not in excess of $
per share. The underwriters may allow, and the dealers may re-allow, a discount not in excess of $
per share to other dealers. After the
initial public offering, the public offering price, concession and discount may be changed.
The following table shows the public offering price, underwriting discount and proceeds to the selling stockholder. The information assumes either no exercise or full exercise by the underwriters of their
overallotment options.
Per Share
Without
With
Public offering price
$
$
$
Underwriting discount
$
$
$
Proceeds to the selling stockholder
$
$
$
The expenses of this offering, not including the underwriting discount, are estimated at $3.9 million and are payable by us.
162
of Shares
Incorporated
Overallotment
Option
Overallotment
Option
Overallotment Option
The selling stockholder has granted options to the underwriters to purchase up to an additional 1,500,000 shares at the public offering price less the underwriting discount. The underwriters may exercise
these options for 30 days from the date of this prospectus solely to cover any overallotments. If the underwriters exercise these options, each will be obligated, subject to conditions contained in the underwriting
agreement, to purchase a number of additional shares proportionate to that underwriters initial amount reflected in the above table.
No Sales of Similar Securities
Together with our directors, our officers and the selling stockholder, which is our sole existing stockholder, we have agreed, with certain exceptions, not to sell or transfer any shares of our common stock
for 180 days after the date of this prospectus without first obtaining the written consent of the representatives. Specifically, we, our directors, our officers and the selling stockholder have agreed, subject to certain
exceptions, not directly or indirectly, to:
offer, pledge, sell or contract to sell any shares of common stock;
sell any option or contract to purchase any shares of common stock;
purchase any option or contract to sell any shares of common stock;
grant any option, right or warrant for the sale of any shares of common stock;
lend or otherwise dispose of or transfer any shares of common stock;
request or demand that we file a registration statement related to the common stock; or
enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any shares of common stock whether any such swap or transaction is to be
settled by delivery of shares or other securities, in cash or otherwise.
These lock-up provisions apply to our common stock and to securities convertible into or exchangeable or exercisable for or repayable with our common stock. These provisions also apply to common
stock owned now or acquired later by such persons or for which such persons later acquire the power of disposition. In the event that either (a) during the last 17 days of the 180-day period referred to above, we
issue an earnings release or material news or a material event relating to us occurs or (b) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results or become aware
that material news or a material event will occur during the 16-day period beginning on the last day of the 180-day restricted period, the restrictions described above will continue to apply until the expiration of
the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. The lock-up provisions do not apply to transfers to immediate family or donees who
receive such securities as bona fide gifts; provided that such transferees agree to substantially the same transfer restrictions on the securities they receive.
NYSE Listing
Our common stock has been approved for listing on the New York Stock Exchange under the symbol SB. In order to meet the requirements for listing on the New York Stock Exchange, the
underwriters have undertaken to sell a minimum number of shares to a minimum number of beneficial owners as required by the New York Stock Exchange.
Before this offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations among us and the representatives. In addition to
prevailing market conditions, the factors considered in determining the initial public offering price will be:
the valuation multiples of publicly traded companies that the representatives believe to be comparable to us;
our financial information;
163
the history of, and the prospects for, our company and the industry in which we compete;
an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;
the present state of our development; and
the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price.
The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our common stock. However, the representatives may engage
in transactions that stabilize the price of the common stock, such as bids or purchases to peg, fix or maintain that price.
If the underwriters create a short position in the common stock in connection with the offering,
i.e.
, if they sell more shares than are listed on the cover of this prospectus, the representatives may reduce
that short position by purchasing shares in the open market. The representatives may also elect to reduce any short position by exercising all or part of the overallotment options described above. Purchases of the
common stock to stabilize its price or to reduce a short position may cause the price of the common stock to be higher than it might be in the absence of such purchases.
The representatives may also impose a penalty bid on underwriters and selling group members. This means that if the representatives purchase shares in the open market to reduce the underwriters short
position or to stabilize the price of such shares, they may reclaim the amount of the selling concession from the underwriters and selling group members who sold those shares. The imposition of a penalty bid may
also affect the price of the shares in that it discourages resales of those shares.
Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common
stock. In addition, neither we nor any of the underwriters makes any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued
without notice.
Electronic Distribution
A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters participating in this offering, or by their
affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter, prospective investors may be allowed to place orders online. The underwriters may
allocate a limited number of shares of common stock for sale to their online brokerage customers. Any such allocation for online distributions will be made by the representatives on the same basis as other
allocations. Other than the prospectus in electronic format, the information on any underwriters website and any information contained in any other website maintained by an underwriter is not part of this
prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter and should not be relied upon by
investors.
Notices to Certain European Residents
In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the
164
Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of common stock described in this prospectus may not be made to the public in that relevant member
state prior to the publication of a prospectus in relation to the common stock that has been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant
member state and notified to the competent authority in that relevant member state, all in accordance with the Prospectus Directive, except that, with effect from and including the relevant implementation date, an
offer of securities may be offered to the public in that relevant member state at any time:
to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
to any legal entity that has two or more of (a) an average of at least 250 employees during the last financial year; (b) a total balance sheet of more than
43,000,000; and (c) an annual net
turnover of more than
50,000,000, as shown in its last annual or consolidated accounts;
to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the underwriters; or
in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive.
Each purchaser of common stock described in this prospectus located within a relevant member state will be deemed to have represented, acknowledged and agreed that it is a qualified investor within
the meaning of Article 2(1)(e) of the Prospectus Directive.
For purposes of this provision, the expression an offer to the public in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the
offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the expression may be varied in that member state by any measure implementing the Prospectus
Directive in that member state, and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each relevant member state.
The sellers of the common stock have not authorized and do not authorize the making of any offer of common stock through any financial intermediary on their behalf, other than offers made by the
underwriters with a view to the final placement of the common stock as contemplated in this prospectus. Accordingly, no purchaser of the common stock, other than the underwriters, is authorized to make any
further offer of the common stock on behalf of the sellers or the underwriters.
This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (Qualified
Investors) that are also (a) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (b) high net worth entities, and
other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons). This prospectus and its contents are
confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a
relevant person should not act or rely on this document or any of its contents. Each underwriter will represent, warrant and agree that (i) it has communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act of 2000 (the FSMA))
received by it in connection with the issue or sale of the shares in circumstances in which section 21(1) of the FSMA does not apply to us; and (ii) it has complied and will comply with all applicable provisions
of the FSMA with respect to anything done by it in relation to the offering of the shares as contemplated by this prospectus in, from or otherwise involving the United Kingdom.
Neither this prospectus nor any other offering material relating to the common stock described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or
by the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The common stock has not been offered or sold and will not be offered
165
or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the common stock has been or will be:
released, issued, distributed or caused to be released, issued or distributed to the public in France; or
used in connection with any offer for subscription or sale of the common stock to the public in France.
Such offers, sales and distributions will be made in France only:
to qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint dinvestisseurs), in each case investing for their own account, all as defined in, and in
accordance with, Article L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier; or
to investment services providers authorized to engage in portfolio management on behalf of third parties; or
in a transaction that, in accordance with article L.411-2-II-1
°
-or-2
°
-or 3
°
of the French Code monétaire et financier and article 211-2 of the General Regulations (Règlement Général) of the Autorité
des Marchés Financiers, does not constitute a public offer (appel public à lépargne).
The common stock may be resold directly or indirectly, only in compliance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French
Code monétaire et financier.
Marshall Islands
The common stock has not been offered or sold and will not be offered or sold, directly or indirectly, to the public in the Republic of the Marshall Islands.
The underwriters and their affiliates may from time to time in the future engage in transactions with us and perform services for us in the ordinary course of their business.
DnB NOR Bank ASA, an affiliate of DnB NOR Markets Inc., provides financial services to certain of our subsidiaries, including acting as a lender under credit facilities entered into by these subsidiaries.
Poten Capital Services LLC, a FINRA member firm, is acting as an underwriter in connection with this offering but will not receive any allocation of shares of common stock. It will receive a fee from
the other underwriters equal to 10% of the aggregate underwriting discounts and commissions for services it performs in connection with this offering. The address of Poten Capital Services LLC is 805 Third
Avenue, New York, New York 10022.
Merrill Lynch, Pierce, Fenner & Smith Incorporateds address is 4 World Financial Center, New York, New York 10080. Credit Suisse Securities (USA) LLCs address is Eleven Madison Avenue, New
York, New York 10010.
Jefferies & Company, Inc.s address is 520 Madison Avenue, New York, New York 10022. DnB NOR Markets, Inc.s address is 200 Park Avenue, New York, New York 10166. Dahlman Rose & Company
LLCs address is 142 West 57th Street, New York, New York 10019.
166
Other Relationships
The validity of the common stock offered by this prospectus, the matter of enforcement of judgments in the Marshall Islands, Marshall Islands tax considerations and Liberian tax considerations will be
passed upon for us by Cozen OConnor, New York, New York. United States legal matters related to this offering and certain matters relating to U.S. federal income taxation will be passed upon for us by
Cravath, Swaine & Moore LLP, New York, New York. The underwriters are being represented by Morgan, Lewis & Bockius LLP, New York, New York.
The combined financial statements of the predecessor businesses of Safe Bulkers, Inc. as of December 31, 2006 and 2007 and for the years ended December 31, 2005, 2006 and 2007, included in this
prospectus have been audited by Deloitte, Hadjipavlou, Sofianos & Cambanis S.A., an independent registered public accounting firm, as stated in their report appearing herein and elsewhere in the registration
statement, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The financial statements of Safe Bulkers, Inc. as of December 31, 2007 and for the period from December 11, 2007 (inception) to December 31, 2007, included in this prospectus, have been audited by
Deloitte, Hadjipavlou, Sofianos & Cambanis S.A., an independent registered public accounting firm as stated in their report appearing herein and elsewhere in the registration statement, and are included in reliance
upon the report of such firm given upon their authority as experts in accounting and auditing.
The discussions contained under the sections of this prospectus entitled Prospectus SummaryDrybulk Industry Trends, Risk Factors, Business and The International Drybulk Shipping Industry have
been reviewed by Drewry Shipping Consultants, Ltd., or Drewry, which has confirmed to us that they accurately describe the international drybulk shipping markets, as indicated in the consent of Drewry included
as an exhibit to the registration statement on Form F-1 under the Securities Act of which this prospectus is a part.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the common stock offered hereby. For the purposes of this section, the term registration statement
means the original registration statement and any and all amendments including the schedules and exhibits to the original registration statement or any amendment. This prospectus does not contain all of the
information set forth in the registration statement we have filed. For further information regarding us and the common stock offered in this prospectus, you should review the full registration statement, including
the exhibits attached thereto. The registration statement, including its exhibits and schedules, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, NE, Washington,
D.C. 20549. You may obtain information on the operation of the public reference room by calling 1-800-SEC-0330, and you may obtain copies at prescribed rates from the Public Reference Section of the SEC at
its principal office in Washington, D.C. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically
with the SEC.
We will furnish holders of common stock with annual reports containing audited financial statements and a report by our independent registered public accounting firm, and intend to make available
quarterly reports containing selected unaudited financial data for the first three quarters of each fiscal year. The audited financial statements will be prepared in accordance with GAAP and those reports will include
a Managements Discussion and Analysis of Financial Condition and Results of Operations section for the relevant periods. As a foreign private issuer, we will be exempt from the rules under the Exchange
Act prescribing the furnishing and content of proxy statements to stockholders, but will be required to furnish those proxy statements to stockholders under New York Stock Exchange rules. Those proxy statements
are not expected to conform to Schedule 14A of the proxy rules promulgated under the Exchange Act. In
167
addition, as a foreign private issuer, we will be exempt from the rules under the Exchange Act relating to short-swing profit reporting and liability.
Drewry Shipping Consultants, Ltd., or Drewry, has provided us with statistical and graphical information contained in the sections of this prospectus entitled Prospectus SummaryDrybulk Industry Trends,
Risk Factors, Business and The International Drybulk Shipping Industry relating to the drybulk shipping industry. We believe that the information and data supplied by Drewry is accurate in all material
respects and we have relied upon such information for purposes of this prospectus. Drewry has advised us that this information is drawn from its databases and other sources and that:
certain information in Drewrys database is derived from estimates or subjective judgments;
the information in the databases of other maritime data collection agencies may differ from the information in Drewrys database; and
while Drewry has taken reasonable care in the compilation of the statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and
validation procedures.
ENFORCEABILITY OF CIVIL LIABILITIES
We are a Marshall Islands corporation and our executive offices are located outside of the United States in Athens, Greece. Our registered address in the Marshall Islands is Trust Company Complex,
Ajeltake Roade, Ajeltake Island, Majuro, Marshall Islands MH96960. The name of our registered agent at such address is The Trust Company of the Marshall Islands, Inc. A majority of our directors and officers
and some of the experts in this prospectus reside outside the United States. In addition, a substantial portion of our assets and the assets of our directors, officers and experts are located outside of the United
States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside of the United States,
judgments you may obtain in U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. Federal or state securities laws.
Furthermore, there is substantial doubt that the courts of the Marshall Islands or Greece would enter judgments in original actions brought in those courts predicated on U.S. Federal or state securities laws.
168
Following are definitions of shipping terms used in this Prospectus.
Annual Survey
The inspection of a vessel by a classification society, on behalf of the country whose flag a vessel flies, or the flag state, that takes place every year.
Ballast
A voyage during which the ship is not laden with cargo.
Bunkers
Heavy fuel oil used to power a vessels engines.
Capesize
A drybulk vessel with a cargo-carrying capacity exceeding 100,000 dwt. These vessels generally operate along long haul iron ore and coal trade routes. Only the largest ports around the world possess the
infrastructure to accommodate vessels of this size.
Charter
The hire of a vessel for a specified period of time or to carry a cargo for a fixed fee from a loading port to a discharging port. The contract for a charter is called a charterparty.
Charterer
The individual or company hiring a vessel.
Charter Rate
The amount of money agreed between the charterer and the ship-owner accrued on a daily or monthly basis that is used to calculate the vessels charter hire.
Classification Society
An independent organization that certifies that a vessel has been built and maintained in accordance with the rules of such organization and complies with the applicable rules and regulations
of the country of residence of such vessel and the international conventions of which that country is a member. A vessel that receives its certification is referred to as being in class as of the date of issuance.
Contract of Affreightment
A contract of affreightment, or CoA, relates to the carriage of specific quantities of cargo with multiple voyages over the same route and over a specific period of time, which usually
spans a number of years. A CoA does not designate the specific vessels or voyage schedules that will transport the cargo, thereby providing both the charterer and ship owner greater operating flexibility than with
voyage charters alone. The charterer has the flexibility to determine the individual voyage scheduling at a future date while the ship owner may use different ships to perform these individual voyages. As a result
CoAs are mostly entered into by large fleet operators such as pools or ship owners with large fleets of the same vessel type. All of the ships operating, voyage and capital costs are borne by the ship owner while
the freight rate normally is agreed on a per cargo ton basis.
Deadweight Ton
dwt
A unit of a vessels capacity for cargo, fuel oil, stores and crew, measured in tons. A vessels dwt or total deadweight is the total weight the vessel can carry when loaded to a particular
load line.
Double-Hull
Hull construction design in which a vessel has an inner and outer side and bottom separated by void space, usually two meters in width.
Draft
Vertical distance between the waterline and the bottom of the vessels keel.
Drybulk
Non-liquid cargoes of commodities shipped in an unpackaged state.
Drybulk Vessels
Vessels that are specially designed and built to carry large volumes of cargo in bulk cargo form.
Drydocking
The removal of a vessel from the water for inspection and/or repair of those parts of a vessel which are below the water line. During drydockings, which are required to be carried out periodically,
certain mandatory classification society inspections are carried out and relevant certifications issued. All vessels are surveyed on a five-year cycle during which the intermediate survey occurs between the second
and the third year and the special survey occurs prior to the end of the fifth year. Most vessels are drydocked during the intermediate survey, however an in-water survey may be undertaken in lieu of drydocking
up to the tenth anniversary of vessel delivery, subject to certain conditions. All vessels are drydocked as part of their special survey.
Freight
Money paid to the ship-owner by a charterer for the use of a vessel under a voyage charter. Such payment is usually made on a lump-sum basis upon loading or discharging the cargo and is derived by
multiplying the tons of cargo loaded on board by the cost per cargo ton, as agreed to transport that cargo between the specific ports.
169
Gross Ton
Unit of 100 cubic feet or 2.831 cubic meters used in arriving at the calculation of gross tonnage.
Handymax
Handymax class vessels have a cargo carrying capacity of between 30,000 to 50,000
dwt. These vessels operate on a large number of geographically dispersed global trade routes, carrying primarily
grains and minor bulks. Vessels below 60,000 dwt are sometimes built with on-board cranes enabling them to load and discharge cargo in countries and ports with limited infrastructure.
Handysize
Handysize class vessels have a cargo carrying capacity of up to 30,000 dwt. These vessels carry exclusively minor bulk cargo. Increasingly, these vessels are operating on regional trading routes.
Handysize class vessels are well suited for small ports with length and draft restrictions that may lack the infrastructure for cargo loading and unloading.
Hull
The shell or body of a vessel.
International Maritime Organization
IMO
A United Nations agency that issues international trade standards for shipping.
Intermediate Survey
The inspection of a vessel by a classification society surveyor which takes place between two and three years before and after each special survey for such vessel pursuant to the rules of
international conventions and classification societies.
ISM Code
The International Management Code for the Safe Operation of Ships and for Pollution Prevention, as adopted by the IMO.
Kamsarmax
A Panamax class drybulk vessel with a cargo carrying capacity between 80,000 and 90,000 dwt.
Metric Ton
Mt
A unit of weight equal to 1,000 kilograms.
Newbuild
A newly constructed vessel.
Off-Hire
The period in which a vessel is unable to perform the services for which it is immediately required under a period time charter. Off-hire periods can include days spent on repairs, drydocking and surveys,
whether or not scheduled.
OPA
The United States Oil Pollution Act of 1990 (as amended).
Orderbook
A reference to currently placed orders for the construction of vessels (e.g., the Panamax orderbook).
Panamax
A drybulk vessel of approximately 60,000 to 100,000 dwt of maximum length, depth and draft, generally capable of passing fully loaded through the Panama Canal. The ability of most Panamax class
vessels to pass through the Panama Canal makes them more versatile than larger vessels. Panamax class vessels carry coal, grains, and, to a lesser extent, minor bulks, including steel products, forest products and
fertilizers. The term Panamax has become more broadly understood to include vessels with large dimensions, such as Kamsarmax class vessels and Post-Panamax class vessels, which are too large to traverse the
Panama Canal.
Period Time Charter
Contract for hire of a ship for a period of three months or longer under which the ship owner is paid charter rate on a per day basis for the period of time. Under a period time charter, the
vessel owner is responsible for providing the crew and paying operating costs while the charterer is responsible for paying the voyage costs. Any delays at port or during the voyages are the responsibility of the
charterer, save for certain specific exceptions such as loss of time arising from vessel breakdown and routine maintenance.
Post-Panamax
A Panamax class vessel with a cargo carrying capacity of between 80,000 and 100,000 dwt, with design specifications that prevent it from transiting the Panama Canal.
Protection and Indemnity Insurance
Insurance obtained through a mutual association formed by vessel owners to provide liability insurance protection from large financial loss to one member through contributions
towards that loss by all members.
Scrapping
The disposal of old or damaged vessel tonnage by way of sale as scrap metal.
Short-Term Period Time Charter
A period time charter which lasts less than approximately 12 months.
Single Hull
A hull construction design in which a vessel has only one hull.
170
Sister Ships
Vessels of the same class and specification that were built by the same shipyard.
SOLAS
The International Convention for the Safety of Life at Sea 1974, as amended, adopted under the auspices of the IMO.
Special Survey
The inspection of a vessel by a classification society surveyor which takes place a minimum of every four years and a maximum of every five years.
Spot Charter
A spot charter is an industry term referring to both voyage and trip time charters of a duration of three months or less. These charters are referred to as spot charters or spot market charters due to
their short-term duration, consisting mostly of a single voyage between one load port and one discharge port.
Spot Market
The market for immediate chartering of a vessel, usually for single voyages.
Strict Liability
Liability that is imposed without regard to fault.
Tanker
Vessel designed for the carriage of liquid cargoes in bulk with cargo space consisting of many tanks. Tankers carry a variety of products including crude oil, refined petroleum products and liquid
chemicals.
TCE
Period time charter equivalent, a standard industry measure of the average daily revenue performance of a vessel. The TCE rate achieved on a given voyage is expressed in U.S. dollars/day and is generally
calculated by subtracting voyage expenses, including bunkers and port charges, and commissions from revenue and dividing the net amount (period time charter equivalent revenues) by the round-trip voyage
duration. TCE is a standard seaborne transportation industry performance measure used primarily to compare period-to-period changes in a seaborne transportation companys performance despite changes in the mix
of charter types (i.e., spot charters, period time charters and bareboat charters) under which the vessels may be employed during specific periods.
Ton
1,000 kilograms.
Trip time charter
A trip time charter is a short-term period time charter where the vessel performs one or more voyages between load port(s) and discharge port(s) and the charterer pays a fixed daily hire rate on
a semi-monthly basis for use of the vessel. The difference between a trip time charter and a voyage charter is only in the form of payment for use of the vessel and the respective financial responsibilities of the
charterer and ship owner as described under period time charter and voyage charter.
Vessel Operating Expenses
The costs for crewing, insurance, lubricants, spare parts, provisions, stores, repairs, maintenance, statutory and classification expense, drydocking, intermediate and special surveys and
other miscellaneous items. Vessel operating expenses exclude fuel and port charges, which are known as voyage expenses. For a period time charter, the vessel owner pays vessel operating expenses.
Voyage Charter
A voyage charter involves the carriage of a specific amount and type of cargo from specific load port(s) to specific discharge port(s), subject to various cargo handling terms. Most of these charters
are of a single voyage nature between two specific ports, as trading patterns do not encourage round voyage trading. The owner of the vessel receives one payment derived by multiplying the tons of cargo loaded
on board by the cost per cargo ton, as agreed to transport that cargo between the specific ports. The owner is responsible for the payment of all expenses including voyage, operating and capital costs of the vessel.
The charterer is typically responsible for any delay at the loading or discharging ports.
Voyage Expenses
Expenses incurred in connection with a vessels traveling from a loading port to a discharging port, such as the cost of bunkers, port expenses, agents fees, canal dues, extra war risks insurance,
draft surveys, hold cleaning, postage and other miscellaneous expenses related to the cargo and voyage.
Weighted Average Age
The weighted average age of a fleet is the sum of the age of each vessel in the fleet in each year from its delivery from the builder, weighted by the vessels dwt in proportion to the total
dwt of the fleet or each respective year.
171
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
SAFE BULKERS, INC.
F-1
INDEX TO FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of the Predecessor Businesses of Safe Bulkers, Inc.:
We have audited the accompanying combined balance sheets of the Predecessor Businesses of Safe Bulkers, Inc. (the Company) as of December 31, 2006, and 2007, and the related combined statements
of operations, owners equity, and cash flows for each of the three years in the period ended December 31, 2007. The combined financial statements include the accounts of the companies as defined in Note 1 to
the Companys accompanying financial statements. These companies are under common ownership and management. These combined financial statements are the responsibility of the companies management. Our
responsibility is to express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The companies are not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the companies internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all material respects, the combined financial position of the Predecessor Businesses of Safe Bulkers Inc. as of December 31, 2006, and
2007, and the combined results of their operations and their combined cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in
the United States of America.
Deloitte
F-2
Hadjipavlou, Sofianos & Cambanis S.A.
Athens, Greece
May 15, 2008
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
December 31
(Audited)
(Unaudited)
Notes
2006
2007
Pro forma
ASSETS
CURRENT ASSETS:
Accounts receivable trade, net
1,445
1,717
1,717
Due from Manager
3
239,367
96,370
96,370
Inventories
633
792
792
Assets held for sale
6
40,504
Prepaid expenses and other current assets
72
4
4
Total current assets
282,021
98,883
98,883
FIXED ASSETS:
Vessels, net
4
202,601
254,817
254,817
Advances for vessel acquisition and vessels under construction
5
50,565
53,272
53,272
Other fixed assets, net
7
282
251
251
Total fixed assets
253,448
308,340
308,340
OTHER NON CURRENT ASSETS:
Deferred finance charges, net
8
314
434
434
Total assets
535,783
407,657
407,657
LIABILITIES AND OWNERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt
9
8,273
16,620
16,620
Liability directly associated with assets held for sale
23,705
Unearned revenue
1,287
4,127
4,127
Trade accounts payable
1,051
1,202
1,202
Accrued liabilities
17
1,938
9,472
9,472
Derivative liabilities
16
577
Advances from owners
10
135,444
10,086
10,086
Dividends payable
178,770
Total current liabilities
172,275
41,507
220,277
Derivative liabilities
16
242
242
Long-term debt, net of current portion
9
134,457
306,267
306,267
Time charter discount
18
2,766
2,766
COMMITMENTS AND CONTINGENCIES
13
OWNERS EQUITY/(DEFICIT):
Owners capital
11
Retained earnings/(deficit)
229,051
56,875
(121,895
)
Total owners equity/(deficit)
229,051
56,875
(121,895
)
Total liabilities and owners equity/(deficit)
535,783
407,657
407,657
The accompanying notes are an integral part of these predecessor combined statements.
F-3
PREDECESSOR COMBINED BALANCE SHEETS
DECEMBER 31, 2006 AND 2007
(In thousands of U.S. Dollars)
Note 21
2007
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
Notes
Year Ended December 31,
2005
2006
2007
REVENUES:
Revenues
14
82,877
99,040
172,057
Commissions
(3,211
)
(3,731
)
(6,209
)
Net revenues
79,666
95,309
165,848
EXPENSES:
Voyage expenses
(228
)
(420
)
(179
)
Vessel operating expenses
15
(10,366
)
(13,068
)
(12,429
)
Depreciation
4, 7
(7,610
)
(9,553
)
(9,583
)
General and administrative
3
(803
)
(1,006
)
(1,177
)
Early redelivery cost
18
(150
)
(21,438
)
Gain on sale of assets
4, 5, 6
26,785
37,015
112,360
Operating income
87,444
108,127
233,402
OTHER (EXPENSE)/INCOME:
Interest expense
9
(3,668
)
(6,140
)
(8,225
)
Other finance costs
(124
)
(116
)
(161
)
Interest income
692
775
1,290
Loss on derivatives
(3,171
)
(1,963
)
(704
)
Foreign currency gain/(loss)
13,477
(3,279
)
(13,759
)
Amortization and write-off of
8
(63
)
(180
)
(166
)
Net income
94,587
97,224
211,677
Pro forma earnings per share,
22
1.74
1.78
3.88
Pro forma weighted average
54,500,000
54,500,000
54,500,000
The accompanying notes are an integral part of these predecessor combined statements.
F-4
PREDECESSOR COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In thousands of U.S. Dollarsexcept for share and per share data)
expensesManagement fee to
related party
deferred finance charges
basic and diluted (unaudited) in $
number of shares, basic and
diluted (unaudited)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
Owners capital
Retained earnings
Total owners equity
Balance, January 1, 2005
37,240
37,240
Net income
94,587
94,587
Balance, December 31, 2005
131,827
131,827
Net income
97,224
97,224
Balance, December 31, 2006
229,051
229,051
Net income
211,677
211,677
Dividends paid
(383,853
)
(383,853
)
Balance, December 31, 2007
56,875
56,875
The accompanying notes are an integral part of these predecessor combined statements.
F-5
PREDECESSOR COMBINED STATEMENTS OF OWNERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In thousands of U.S. Dollars)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
December 31,
2005
2006
2007
Cash Flows from Operating Activities:
Net income
94,587
97,224
211,677
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation
7,610
9,553
9,583
Gain on sale of assets
(26,785
)
(37,015
)
(112,360
)
Amortization and write-off of deferred finance charges
63
180
166
Time charter discount
2,766
Unrealized foreign exchange loss/(gain)
(13,575
)
4,331
13,877
Unrealized loss/(gain) of derivatives
2,792
(1,824
)
(335
)
(Increase)/decrease in:
Accounts receivable trade
(2,315
)
1,014
(272
)
Due from Manager
(80,545
)
(82,961
)
142,997
Inventories
(67
)
(297
)
(159
)
Prepaid expenses and other current assets
466
265
68
(Decrease)/increase in:
Trade accounts payable
(279
)
(360
)
151
Accrued liabilities
634
1,069
7,507
Unearned revenue
(4,935
)
(3,985
)
2,840
Net Cash (Used in)/Provided by Operating Activities
(22,349
)
(12,806
)
278,506
Cash Flows from Investing Activities:
Vessel acquisitions including advances for vessels under construction and other fixed assets
(52,187
)
(110,211
)
(127,875
)
Proceeds from sale of assets
46,122
76,376
216,291
Net Cash (Used in)/Provided by Investing Activities
(6,065
)
(33,835
)
88,416
Cash Flows from Financing Activities:
Proceeds from long-term debt
74,447
60,400
199,000
Principal payments of long-term debt
(46,170
)
(58,474
)
(56,425
)
Advances from owners
51,910
110,049
83,997
Repayment of advances to owners
(51,616
)
(65,245
)
(209,355
)
Dividends paid
(383,853
)
Payment of deferred financing costs
(157
)
(89
)
(286
)
Net Cash Provided by/(Used in) Financing Activities
28,414
46,641
(366,922
)
Net increase/(decrease) in cash and cash equivalents
0
0
0
Cash and cash equivalents at beginning of year
0
0
0
Cash and cash equivalents at end of year
0
0
0
Supplemental cash flow information:
Cash paid for interest:
3,302
5,177
7,622
The accompanying notes are an integral part of these predecessor combined statements.
F-6
PREDECESSOR COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In thousands of U.S. Dollars)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
1. Basis of Presentation and General Information:
Safe Bulkers, Inc., referred to herein as Safe Bulkers, was formed on December 11, 2007 under the laws of the Marshall Islands for the purpose of acquiring an ownership interest in 19 companies, all
incorporated under the laws of the Republic of Liberia, that either currently own drybulk vessels or are scheduled to own drybulk vessels (the Subsidiaries) currently under the common control of Polys
Hajioannou and Nicolaos Hadjioannou. Together, these Subsidiaries own and operate a fleet of 11 drybulk vessels (the Existing Vessels) and are scheduled to acquire an additional eight newbuilds (the
Newbuilds).
In addition to the Subsidiaries, the accompanying predecessor combined financial statements include the financial statements of six companies (the Additional Companies), all incorporated under the laws
of the Republic of Liberia, that are under the common control of Polys Hajioannou and Nicolaos Hadjioannou and whose principal activity was the ownership of drybulk vessels. All vessels owned by the
Additional Companies, and the
Pedhoulas Farmer
, a vessel previously owned by the Subsidiary, Maxpente Shipping Corporation (Maxpente), were sold prior to December 31, 2007 (the Sold Vessels). None of
the Additional Companies will be contributed to Safe Bulkers. Maxpente, which previously owned the Sold Vessel, the
Pedhoulas Farmer
, has entered into a contract for the acquisition of a newbuild, and therefore
will be contributed to Safe Bulkers as a Subsidiary. The Subsidiaries and the Additional Companies are collectively referred to in the notes to the predecessor combined financial statements as the Company.
Safe Bulkers commenced preparation for an initial public offering of its common shares in the United States, and intends to list its shares on the New York Stock Exchange. Currently, no public market
exists for these shares. Under the Articles of Incorporation, as of December 31, 2007, the authorized capital stock of Safe Bulkers was 500 shares of common stock with par value of $0.001 per share. On May 9,
2008, the Articles of Incorporation were amended, so that the authorized capital stock of Safe Bulkers was increased to 200,000,000 shares of common stock with par value of $0.001 per share, none of which is
issued or outstanding. Following the date of the final prospectus, and prior to the closing of this offering, the shares of the Subsidiaries will be contributed to Safe Bulkers by Vorini Holdings Inc., a Marshall
Islands corporation controlled by Polys Hajioannou and Nicolaos Hadjioannou (Vorini Holdings), in exchange for the issuance of 100% of the outstanding shares of Safe Bulkers to Vorini Holdings (the
Reorganization).
Following the Reorganization, Safe Bulkers will own each of the Subsidiaries, and Vorini Holdings will be the sole stockholder of Safe Bulkers. Accordingly, the accompanying predecessor combined
financial statements of the Company have been presented as if the Subsidiaries and Additional Companies were consolidated subsidiaries of the Company for all periods presented and using the historical carrying
costs of the assets and the liabilities of the ship-owning companies listed below from their dates of incorporation, as these represent the entire vessel owning activities of Polys Hajioannou and Nicolaos
Hadjioannou.
Following the completion of the initial public offering, Vorini Holdings is expected to hold 78.9% of the outstanding shares of common stock of Safe Bulkers (assuming the underwriters exercise their over
allotment option), and accordingly, will hold 78.9% of the voting power, including the ability to control the Companys affairs and policies.
F-7
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
Existing Vessels
Ship-owning Entity
Date of Incorporation
Vessel Name
Type
Built
DWT
(1)
Efragel Shipping Corporation
September 9, 2002
Efrossini
Panamax
February 2003
76,000
Marindou Shipping Corporation
September 9, 2002
Maria
Panamax
April 2003
76,000
Avstes Shipping Corporation
November 7, 2003
Vassos
Panamax
February 2004
76,000
Kerasies Shipping Corporation
November 7, 2003
Katerina
Panamax
May 2004
76,000
Marathassa Shipping Corporation
August 2, 2004
Maritsa
Panamax
January 2005
76,000
Pemer Shipping Ltd.
January 3, 2006
Pedhoulas Merchant
Kamsarmax
March 2006
82,300
Petra Shipping Ltd.
January 3, 2006
Pedhoulas Trader
Kamsarmax
May 2006
82,300
Pelea Shipping Ltd.
January 11, 2007
Pedhoulas Leader
Kamsarmax
March 2007
82,300
Staloudi Shipping Corporation
September 1, 2005
Stalo
Post-Panamax
January 2006
87,000
Marinouki Shipping Corporation
September 1, 2005
Marina
Post-Panamax
January 2006
87,000
Soffive Shipping Corporation
April 11, 2007
Sophia
Post-Panamax
June 2007
87,000
Newbuilds
Ship-owning Entity
Date of Incorporation
Hull No.
Type
Built*
DWT
(1)
Eniaprohi Shipping Corporation
August 14, 2006
IHI 3254
Post-Panamax
2008
87,000
Eniadefhi Shipping Corporation
August 14, 2006
IHI 3255
Post-Panamax
2009
87,000
Maxpente Shipping Corporation
October 3, 2005
Rongsheng 1075
Capesize
2010
176,000
Eptaprohi Shipping Corporation
March 1, 2006
Rongsheng 1074
Capesize
2010
176,000
Maxdodeka Shipping Corporation
October 11, 2007
Sungdong 1039
Post-Panamax
2009
92,000
Maxdekatria Shipping Corporation
October 11, 2007
Sungdong 1050
Post-Panamax
2010
92,000
Maxdeka Shipping Corporation
September 24, 2007
STX 2054
Kamsarmax
2010
81,000
Maxenteka Shipping Corporation
September 24, 2007
STX 2055
Kamsarmax
2010
81,000
*
Estimated completion date
Sold Vessels
Ship-owning Entity
Date of Incorporation
Vessel Name
Type
Built
DWT
(1)
Disposal
Maripol Shipping Corporation
November 10, 2000
Marina
(hereinafter called
Old Marina
)
Panamax
May 2001
76,000
June 8, 2005
Pelodimous Shipping Corporation
December 11, 2000
Pelopidas
Panamax
May 2002
76,000
November 30, 2006
Sofikal Shipping Corporation
December 1, 2000
Sophia
(hereinafter called
Old Sophia
)
Panamax
January 2002
76,000
April 11, 2006
Maxpente Shipping Corporation
October 3, 2005
Pedhoulas Farmer
Kamsarmax
January 2007
82,300
January 9, 2007
Maxtria Shipping Corporation
March 8, 2004
Pedhoulas Fighter
Kamsarmax
January 2007
82,300
January 26, 2007
Kanastro Shipping Corporation
November 6, 2000
Kanaris
Panamax
March 2002
76,000
February 20, 2007
Eleoussa Shipping Corporation
August 2, 2004
Eleni
(hereinafter called
Old Eleni
)
Panamax
March 2005
76,000
March 26, 2007
(1)
Deadweight Ton (DWT). A unit of a vessels capacity for cargo, fuel oil, stores and crew, measured in metric tons of 1,000 kilograms. A vessels DWT is the total weight the vessel can carry when loaded to a particular load line.
The Companys principal business is the acquisition and operation of drybulk vessels. The Companys vessels operate worldwide, carrying drybulk cargo for the worlds largest consumers of marine
drybulk transportation services. Safety Management Overseas S.A., a company incorporated under the laws of the Republic of Panama (Safety Management or the Manager), a related party controlled by Polys
Hajioannou, provides technical, commercial and administrative services to the Company.
F-8
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
Date
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
For the years ended December 31, 2005, 2006 and 2007, the following charterers individually accounted for more than 10% of the Companys time charter and voyage charter revenues as follows:
December 31,
2005
2006
2007
Bunge S.A.
65.61
%
42.76
%
29.87
%
Cargill International S.A.
n/a
32.42
%
21.07
%
Daiichi Chuo Kisen Kaisha
18.24
%
Accounts receivable resulting from the above charterers as at December 31, 2005, 2006 and 2007 were as follows:
December 31,
2005
2006
2007
Bunge S.A.
274
382
707
Cargill International S.A.
450
697
8
Daiichi Chuo Kisen Kaisha
697
2. Significant Accounting Policies
Principles of Combination:
The accompanying predecessor combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(U.S. GAAP) and include the accounts of the legal entities comprising the Company as discussed in Note 1. All significant intra-group balances and transactions have been eliminated upon combination.
Use of Estimates:
The preparation of predecessor combined financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at the date of the predecessor combined financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Other Comprehensive Income (Loss):
The Company follows the provisions of Statement of Financial Accounting Standards (SFAS) No. 130
Statement of Comprehensive Income
(SFAS 130) which
requires separate presentation of certain transactions that are recorded directly as components of owners equity. The Company has no other comprehensive income/(loss) and accordingly comprehensive
income/(loss) equals net income for the periods presented.
Foreign Currency Translation:
The reporting and functional currency of the Company is the United States (U.S.) dollar. Transactions incurred in other currencies are translated into U.S. dollars using the
exchange rates in effect at the time of the transaction. At the balance sheet date monetary assets and liabilities, which are denominated in other currencies are translated to reflect the period end exchange rates.
Resulting gains or losses from foreign currency transactions are recorded within the Foreign currency gain/(loss) in the accompanying predecessor combined statements of operations in the period in which they
arise.
Cash and Cash Equivalents:
Cash and cash equivalents consist of current, call, time deposits and certificates of deposit with original maturities of three months or less and which are not restricted for use
or withdrawal. As part of the management agreement with the Manager, all of the Companys cash and cash equivalents is maintained in the name of the Manager and recorded within Due from Manager in the
accompanying predecessor combined balance sheet. As a result, cash and cash equivalents are not presented in the accompanying predecessor combined balance sheets.
Accounts Receivable Trade, Net:
Accounts receivable trade, net reflects the receivables from time or voyage charters, net of an allowance for doubtful accounts. At each balance sheet date, all potentially
uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. No allowance for doubtful accounts was recorded for any of the periods presented.
F-9
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
Inventories
: Inventories consist of lubricants remaining on board the vessels at the end of each reporting period, which are stated at the lower of cost or market. Cost is determined using the firstin, first-
out method.
Insurance
: Insurance claims represent the claimable expenses, net of deductibles, which are expected to be recovered from insurance companies. Any costs to complete the claims are included in accrued
liabilities. The Company accounts for the cost of additional premiums under its Protection and Indemnity (P&I) Club insurance in accordance with the SFAS No. 5
Accounting for Contingencies
based on the
Companys historical experience and the historical experience of the shipping industry. The Company did not have material insurance claims for any of the periods presented.
Vessels, Net:
Vessels are stated at their historical cost, which consists of the contracted purchase price and any direct material expenses incurred upon acquisition (including improvements, on site
supervision expenses incurred during the construction period, commissions paid, delivery expenses and other expenditures to prepare the vessel for her initial voyage) less accumulated depreciation. Financing costs
incurred during the construction period of the vessels are also capitalized and included in vessels cost based on the specific loan method. No interest was capitalized in any of the periods presented. Certain
subsequent expenditures for conversions and major improvements are also capitalized if it is determined that they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the
vessels.
Vessels Depreciation:
Depreciation is computed using the straight-line method over the estimated useful life of the vessels, after considering the estimated residual value. Management estimates the useful
life of the Companys vessels to be 25 years from the date of initial delivery from the shipyard.
Accounting for Special Survey and Drydocking Costs
: Special survey and drydocking costs are expensed in the period incurred and are included in vessel operating expenses in the accompanying
predecessor combined statements of operations.
Repairs and Maintenance:
All repair and maintenance expenses including major overhauling and underwater inspection expenses are expensed when incurred and are included in vessel operating expenses
in the accompanying predecessor combined statements of operations.
Impairment of Long-lived Assets:
The Company applies SFAS No. 144
Accounting for the Impairment or Disposal of Long-lived Assets
(SFAS 144), which addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. The standard requires that long-lived assets and certain identifiable intangibles held and used or disposed of by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by
the use of the asset is less than its carrying amount, the Company should evaluate the asset for an impairment loss. Measurement of the impairment loss is based on the fair value of the asset as provided by third
parties. In this respect, management regularly reviews the carrying amount of the vessels in connection with the estimated recoverable amount for each of the Companys vessels. No impairment loss was recorded
for any of the periods presented.
Assets Held for Sale:
The Company may dispose of certain of its vessels when suitable opportunities occur including prior to the end of their useful lives. The Company classifies assets as being held for
sale in accordance with SFAS 144 when the following criteria are met: (i) management is committed to sell the asset; (ii) the asset is available for immediate sale in its present condition; (iii) an active program to
locate a buyer and other actions required to complete the plan to sell the asset have been initiated; (iv) the sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a
completed sale within one year; and (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and actions required to complete the plan indicate that it is
unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
F-10
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
Long-lived assets classified as held for sale are measured at the lower of their carrying amount or fair value less cost to sell. These assets are no longer depreciated once they meet the criteria of being
held for sale. The gain or loss from the sale of assets is recorded in the predecessor combined statement of operations.
Deferred Financing Costs:
Financing fees incurred for obtaining new loans and credit facilities are deferred and amortized over the term of the respective loan or credit facility using the effective interest
rate method. Any unamortized balance of costs relating to loans repaid or refinanced is expensed in the period the repayment or refinancing is made, subject to the provisions of Emerging Issues Task Force
(EITF) EITF 96-19,
Debtors Accounting for a Modification or Exchange of Debt Instrument
(EITF 96-19) regarding debt extinguishment. Any unamortized balance of costs related to credit facilities repaid
is expensed in the period. Any unamortized balance of costs relating to credit facilities refinanced are deferred and amortized over the term of the respective credit facility in the period the refinancing occurs,
subject to the provisions of EITF 98-14,
Debtors Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements
.
Derivative Instruments:
The Company enters into foreign exchange forward contracts to create economic hedges for its exposure to currency exchange risk on payments relating to the acquisition of vessels
and on certain loan obligations. The Company also enters into interest rate derivatives to create economic hedges for its exposure to interest rate risk of its loan obligations (see also Notes 9, 13, 16 and 20). When
such derivatives do not qualify for hedge accounting under SFAS No. 133
Accounting for Derivative Instruments and Hedging Activities
(SFAS 133), the Company records these financial instruments in the
predecessor consolidated balance sheet at their fair value as either a derivative asset or liability, and recognizes the fair value changes thereto in the predecessor combined statement of operations. When the
derivatives do qualify for hedge accounting, depending upon the nature of the hedge, changes in fair value of the derivatives are either offset against the fair value of assets, liabilities or firm commitments through
income, or recognized in other comprehensive income/(loss) (effective portion) until the hedged item is recognized in the combined statement of operations. For the years ended December 31, 2006 and 2007, no
derivatives were accounted for as accounting hedges.
Financial Instruments:
The principal financial assets of the Company consist of amounts due from Manager and trade accounts receivable. The principal financial liabilities of the Company consist of
long-term bank loans, accounts payable and accrued liabilities.
(a)
Interest rate risk:
The Companys interest rates and long-term loan repayment terms are described in Note 9.
(b)
Concentration of credit risk:
Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of trade accounts receivable. The Company
limits its credit risk with accounts receivable by performing ongoing credit evaluations of its customers financial condition and generally does not require collateral for its trade accounts receivable.
(c)
Fair value:
The carrying values of trade accounts receivable, due from Manager, accounts payable and accrued liabilities are reasonable estimates of their fair value due to the short-term nature of these
financial instruments. The fair values of long-term bank loans approximate the recorded values, due to their variable interest rates. The fair value of over-the-counter foreign exchange forward contracts and
of the interest rate derivatives, discussed in Note 16, is based on a discounted cash flow analysis.
Accounting for Revenues and Related Expenses
: The Company generates its revenues from charterers for the charter hire of its vessels. Vessels are chartered mainly under time charter, where a contract is
entered into for the use of a vessel for a specific voyage or a specific period of time and at a specified daily charter rate. Time charter revenues are recorded over the term of the charter as service is provided.
Revenues from time charter may also include ballast bonus which is an amount paid by the charterer for repositioning the vessel at the charterers disposal (delivery point), which is recognized over
F-11
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
the term of the charter, and other miscellaneous revenues from vessel operations. Expenses relating to the Companys time charters are vessel operating expenses and certain voyage expenses, which are paid for by
the Company and recognized as incurred. Vessel operating expenses that are paid by the Company include costs for crewing, insurance, lubricants, spare parts, provisions, stores, repairs, maintenance, statutory and
classification expense, drydocking, intermediate and special surveys and other minor miscellaneous expenses. Voyage expenses which are also recognized as incurred and paid by the Company include costs for
draft surveys, hold cleaning, postage and other minor miscellaneous expenses related to the voyage. The charterer is responsible for paying the cost of bunkers and other voyage expenses (e.g., port expenses,
agents fees, canal dues, extra war risks insurance and any other expenses related to the cargo).
Vessels can also be chartered under voyage charter, where a contract is made for the use of a vessel under which the Company is paid freight on the basis of moving cargo from a loading port to a
discharge port. During the periods presented, there has been only one instance where a vessel was employed under voyage charter. Under a voyage charter, the revenues are recognized on a pro-rata basis over the
duration of the voyage from load port to discharge port. Probable losses on voyages are provided for in full at the time such losses can be estimated. Related expenses are operating expenses, bunkers and voyage
expenses, which are recognized as incurred and are all paid for by the Company. Demurrage income represents payments by the charterer to the vessel owner when loading or discharging time exceeds the
stipulated time in the voyage charter and is recognized when earned and collection is reasonably assured. Dispatch expense represents payments by the Company to the charterer when loading or discharging time is
less then the stipulated time in the voyage charter and is recognized as incurred.
Revenue is recognized when a charter agreement exists, the vessel is made available to the charterer and collection of the related revenue is reasonably assured. Unearned revenue represents cash received
prior to the balance sheet date relating to services to be rendered after the balance sheet date. Unearned revenue is amortized as earned in accordance with the related charter agreement. Commissions (address and
brokerage), regardless of charter type are always paid by the Company, are deferred and amortized over the related charter period and are presented as a separate line item in revenues to arrive at net revenues in
the accompanying predecessor combined statements of operations.
Pension and Retirement Benefit ObligationsCrew:
The Subsidiaries and Additional Companies included in the predecessor combined financial statements employ the crew on board under short-term
contracts (usually up to nine months) and accordingly, they are not liable for any pension or post retirement benefits.
Taxes
: Each of the Subsidiaries and Additional Companies is incorporated under the laws of the Republic of Liberia and is not subject to Liberian income, tonnage or registration taxes. However, each
Subsidiary and Additional Company is subject to registration and tonnage taxes under the laws of the Republic of Cyprus, where all the Companys vessels are registered, which is not an income tax. These Cypriot
taxes are recorded within Vessel operating expenses in the accompanying predecessor combined statements of operations.
Furthermore, the Company has been subject to a 4% United States federal tax in respect of its U.S. source shipping income (imposed on gross income without the allowance for any deductions) as it has
not previously met the requirements for an exemption from such tax provided by Section 883 of the U.S. Internal Revenue Code of 1986. As a result, the Company has filed U.S. federal tax returns and paid the
relevant U.S. federal tax on its U.S. source shipping income, which is not an income tax. Such taxes have been recorded within Vessel operating expenses in the accompanying predecessor combined statements of
operations. In many cases, these taxes are recovered from the charterers; such amounts recovered are recorded within Revenues in the accompanying predecessor combined statements of operations.
Dividends:
Dividends are recorded in the Companys predecessor combined financial statements in the period in which they are approved by the Companys owners.
Segment Reporting:
The Company reports financial information and evaluates its operations by total charter revenues and not by the type of ship employment for its customers. i.e. time or voyage charter.
F-12
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
The Company does not have discrete financial information to evaluate the operating results for each such type of charter. Although revenue can be identified for the different types of charters, management cannot
and does not identify expenses, profitability or other financial information by type of charter. As a result, management, including the chief operating decision makers, reviews operating results solely by revenue per
day and operating results of the fleet, and thus the Company has determined that it operates under one reportable segment. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to
trade the vessel worldwide and, as a result, the disclosure of geographic information is impracticable.
Recent Accounting Pronouncements:
In May 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections, a Replacement of APB Opinion No. 20 and SFAS 3
(SFAS 154). SFAS 154 requires retrospective
application to prior periods financial statements of a voluntary change in accounting principle unless it is impracticable. Accounting Principles Board (APB) Opinion No. 20,
Accounting Changes
, previously
required most voluntary changes in accounting principles be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS 154 was
effective for the Company as of December 31, 2006, and has not had a material impact on the Companys predecessor combined financial statements.
In June 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
(FIN 48), which supplements SFAS No. 109,
Accounting for Income Taxes
, by defining the
confidence level that a tax position must meet in order to be recognized in the financial statements. FIN 48 requires that the tax effects of a position be recognized only if it is more-likely-than-not to be
sustained based solely on its technical merits as of the reporting date. The more-likely-than-not threshold represents a positive assertion by management that a company is entitled to the economic benefits of a tax
position. If a tax position is not considered more-likely-than-not to be sustained based solely on its technical merits, no benefits of the position are to be recognized.
Moreover, the more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of a benefit. At adoption, companies must adjust their financial statements to
reflect only those tax positions that are more-likely-than-not to be sustained as of the adoption date. Any necessary adjustment would be recorded directly to retained earnings in the period of adoption and reported
as a change in accounting principle. FIN 48 is effective as of the beginning of the first fiscal year beginning after December 15, 2006. The adoption of FIN 48 did not have a material impact on the financial
position, results of operations or cash flows of the Company.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS 157)
. SFAS 157 addresses standardizing the measurement of fair value for companies that are required to use a
fair value measure of recognition for recognition or disclosure purposes. The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measure date. SFAS 157 is effective for the Company for financial statements issued for fiscal years beginning after November 15, 2007. The Companys adoption of SFAS 157
as from January 1, 2008 did not have any effect on our results of operations, financial position or cash flows.
In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements
(SAB 108). SAB 108 provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the
purpose of a materiality assessment. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of each of the companys balance sheet and statement of
operations and the related financial statement disclosures. SAB 108 permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15,
2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of
F-13
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the
nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. The adoption of SAB 108 did not have any effect on the Companys predecessor
combined financial statements.
In September 2006, the FASB Staff issued Financial Statement Position (FSP) No. AUG AIR-1,
Accounting for Planned Major Maintenance Activities
, (FSP No. AUG AIR-1). FSP No. AUG AIR-1
prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities in annual and interim financial reporting periods, if no liability is required to be recorded for an asset
retirement obligation based on a legal obligation for which the event obligating the entity has occurred. FSP No. AUG AIR-1 also requires disclosures regarding the method of accounting for planned major
maintenance activities and the effects of implementing the FSP. The guidance in FSP No. AUG AIR-1 was effective for the Company as of January 1, 2007. The adoption of FSP No. AUG AIR-1 did not have
any effect on the Companys predecessor combined financial statements as the Company does not utilize the accrue-in-advance method.
In February 2007, the FASB issued SFAS No. 159
The Fair Value Option for Financial Assets and Financial Liabilities
(SFAS 159), which permits entities to choose to measure many financial
instruments and certain other items at fair value. SFAS 159 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. The adoption of SFAS 159 did not have any effect
on the Companys results of operations, financial position or cash flows.
In December 2007, the FASB issued SFAS No. 141 (revised),
Business Combinations
(SFAS 141 (revised)). SFAS No. 141 (revised) relates to business combinations and requires the acquirer to
recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured
at
their fair values as of that date. This Statement applies prospectively to
business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The
Company must adopt this standard as of January 1, 2009. The Company is currently evaluating the impact, if any, of the adoption of SFAS No. 141 (revised) on its financial position, results of operations and cash
flows.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statementsan amendment of Accounting Research Bulletin No. 51
(SFAS 160), which establishes
accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest,
changes in a parents ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide
sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective as of the beginning of an entitys fiscal year that
begins after December 15, 2008, which will be our fiscal year beginning January 1, 2009. The Company is currently evaluating the impact, if any, of the adoption of SFAS 160 on its financial position, results of
operations and cash flows.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities
(SFAS 161) which requires enhanced disclosures in respect of derivative instruments
and hedging activities. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently evaluating
the impact, if any, of the adoption of SFAS 161 on its financial statements.
3. Transactions with Related Parties
Safety Management Overseas S.A., Panama (the Manager):
Each vessel-owning company, excluding the newbuilds, currently has a management agreement with Safety Management Overseas S.A., a
F-14
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
related party wholly-owned and controlled by Polys Hajioannou. Under these existing agreements (the Management Agreements), chartering, operations, technical and accounting services are provided to the
vessels by the Manager. Under the Management Agreements, the Manager receives a fixed annual fee of $50 plus 0.40% on gross freight, charter hire, ballast bonus and demurrage from each of the vessel owning
companies in exchange for these management services (the Management Fee). The Manager also receives a commission, to be separately agreed, on the contract price of the sale of a vessel. This had been fixed
at 1% for all the Sold Vessels.
In accordance with the Management Agreements, the Manager also undertakes the execution of all financial transactions on behalf of the Company with respect to third parties and the Companys owners.
All cash reserves of the Company are maintained on behalf of the Company in the name of the Manager. Interest received by the Manager is allocated back to the vessel owning companies and is recorded as
Interest income in the predecessor combined statement of operations.
Management Fees charged by the Manager for the years ended December 31, 2005, 2006 and 2007, amounted to $803, $1,006, and $1,177, respectively, and are recorded in the accompanying predecessor
combined statements of operations as Management fee to related party. The Management fee to the related party is classified as a general and administrative expense and represents all of the general and
administrative costs of the Company for all periods presented. Commissions on the contract price of vessels sold, charged by the Manager during the years ended December 31, 2005, 2006 and 2007, amounted to
$466, $781, and $2,202, respectively, and are recorded within Gain on sale of assets in the predecessor combined statement of operations.
The amounts due from the Manager, presented in the predecessor combined balance sheet as Due from Manager, represent net cash flows from operating, investing and financing (including surplus of bank
loans received for working capital) activities, which are retained by the Manager and are due to the Company.
Transactions with owners
: Transactions with owners, or Advances from owners, represent the receipt of funds to finance vessel acquisitions. The repayments of these advances are made either with funds
received from bank debt or proceeds of vessels sale. Refer to Note 10 for additional information.
Transactions with other related parties
: Three of the Additional Companies sold their respective vessels to unrelated third parties at prevailing market prices, realizing an aggregate profit of $67,753 for all
periods presented. The Gain on sale of assets was recorded in the accompanying predecessor combined statement of operations in the period in which the sale was consummated. Following completion of the
respective sales, the vessels were chartered for periods ranging from 10 months to 38 months by SafeFixing Corp. (SafeFixing), a related party wholly owned by Polys Hajioannou and Nicolaos Hadjioannou that
is involved in the business of chartering-in and chartering-out of unrelated third party vessels. All three charters entered into by SafeFixing were consistent with the then prevailing charter market rate. Details of
the sales transactions are as follows:
Additional Company
Vessel
Date sale agreed
Date sale concluded
Sale price
Gain on sale of asset
Maripol Shipping Corporation
Old Marina
February 10, 2005
June 8, 2005
46,600
26,785
Sofikal Shipping Corporation
Old Sophia
March 27, 2006
April 11, 2006
33,900
14,043
Kanastro Shipping Corporation
Kanaris
September 29, 2006
February 2, 2007
47,300
26,925
Total
67,753
The above Gain on sale of assets is included within the Gain on sale of assets presented in the Predecessor Combined Statement of Operations in the amounts of $26,785, $37,015 and $112,360 for the
years ended December 31, 2005, 2006 and 2007 respectively. Please refer to Notes 4, 5 and 6 for further information related to the other components of the total Gain on sale of assets balance.
F-15
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
4. Vessels, Net
Vessels, net, are comprised of the following:
Vessel
Accumulated
Net book
Balance, January 1, 2006
207,081
(18,821
)
188,260
Transfer from advances for vessel acquisitions
103,607
103,607
Vessel sales
(46,485
)
7,176
(39,309
)
Transfer to assets held for sale
(45,807
)
5,303
(40,504
)
Depreciation expense
(9,453
)
(9,453
)
Balance, December 31, 2006
218,396
(15,795
)
202,601
Transfer from advances for vessel acquisitions
61,704
61,704
Depreciation expense
(9,488
)
(9,488
)
Balance, December 31, 2007
280,100
(25,283
)
254,817
Transfer from Advances for vessel acquisitions represent advances paid in respect of the acquisition of vessels, which were under construction and delivered to the Company. For the periods presented, the
Company has acquired the following vessels:
During the year ended December 31, 2006:
Stalo
,
Marina
,
Pedhoulas Trader
and
Pedhoulas Merchant
; and
During the year December 31, 2007:
Pedhoulas Leader
and
Sophia
.
Vessel sales during the year ended December 31, 2006 represent the sale of the
Old Sophia
and the
Pelopidas
to unrelated third parties. The Company sold these vessels to take advantage of the increase
in vessel prices at that time. Memoranda of Agreement (MOAs) with respect to each of their sales were entered into on March 27, 2006 and August 17, 2006, respectively, and the vessels were delivered to the
respective buyers on April 11, 2006 and November 30, 2006 respectively. The vessels were sold for gross proceeds of $33,900 and $44,150, respectively. These sales realized a net gain of $14,043 and $22,972,
respectively, after taking into account commissions and other directly related expenses amounting to $346 and $1,328, respectively, and the net book value of other assets on board the vessels of $52 as discussed
in Note 7. The gain on sale of the vessels is presented as Gain on sale of assets in the predecessor combined statements of operations for the year ended December 31, 2006.
Transfers to Assets held for sale during the year ended December 31, 2006 relate to the intended sale of the vessels
Kanaris
and
Eleni
to unrelated third parties. MOAs with respect to each of their sales
were entered in on September 25, 2006 and November 17, 2006, respectively. The vessels were delivered to the buyers on February 20, 2007 and March 26, 2007, respectively.
Certain of the Companys vessels, with a total carrying value of $233,918 at December 31, 2007, have been provided as collateral to secure the Companys bank loans discussed in Note 9.
5. Advances for Vessel Acquisition and Vessels under Construction
Advances for vessel acquisition and vessels under construction are comprised of the following:
Balance, January 1, 2006
44,082
Advances paid
110,090
Transferred to vessel cost
(103,607
)
Balance, December 31, 2006
50,565
Advances paid
127,797
Vessel sales
(63,386
)
Transferred to vessel cost
(61,704
)
Balance, December 31, 2007
53,272
F-16
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
cost
depreciation
value
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
Advances for vessels under construction relate to payment of installments due to the respective shipyards relating to the construction of the following vessels:
During the year ended December 31, 2006:
Pedhoulas Merchant
,
Pedhoulas Trader
,
Marina
,
Stalo
,
Pedhoulas Leader
,
Sophia
,
Pedhoulas Farmer
,
Pedhoulas Fighter
and two IHI post Panamax
vessels,
Hull No. 3254
and
Hull No. 3255
(see Note 13); and
During the year ended December 31, 2007:
Pedhoulas Leader
and
Sophia
.
Transfers to vessel cost relate to the delivery to the Company from the respective shipyard of the following vessels:
During the year ended December 31, 2006: the vessels
Stalo, Marina, Pedhoulas Merchant
and
Pedhoulas Trader
; and
During the year ended December 31, 2007:
Pedhoulas Leader
and
Sophia
.
Vessel sales during the year ended December 31, 2007 represent the sale of two vessels under construction, the
Pedhoulas Farmer
and the
Pedhoulas Fighter,
to unrelated third parties for gross
consideration of $59,000 per vessel. MOAs with respect to each of their sales were both entered into on October 10, 2006. The completed vessels were delivered to their respective buyers on January 9, 2007 and
January 26, 2007, respectively. The Company disposed of these vessels in order to take advantage of the increase in vessel prices at that time. The resulting gain from the sale of the above vessels was $22,467
and $29,788, respectively, after taking into account commissions and other directly related expenses amounting to $1,195 and $1,164 respectively. The net gain on sale of the vessels is included in Gain on sale of
assets in the predecessor combined statements of operations for the year ended December 31, 2007.
6. Assets Held for Sale
Assets held for sale for the periods presented is comprised of the following:
Balance, January 1, 2006
Transferred from vessel cost
40,504
Balance, December 31, 2006
40,504
Vessel sales
(40,504
)
Balance, December 31, 2007
The activity presented above relates to the sale of the vessels
Kanaris
and
Old Eleni
to unrelated third parties. As described in Note 4, MOAs with respect to each of their sales were entered in on
September 25, 2006 and November 17, 2006, respectively. The Company decided to dispose of these vessels in order to take advantage of the increase in vessel prices at that time. The vessels were delivered to
the buyers on February 20, 2007 and March 26, 2007, respectively.
The
Kanaris
and the
Old Eleni
were sold for gross proceeds of $47,300 and $54,900, respectively. These sales realized a net gain of $26,925 and $33,180, respectively, after taking into account
commissions and other directly related expenses amounting to $775 for each vessel and the net book value of the other assets on board the vessels of $41 as discussed in Note 7. The gain on sale of these vessels
is included in Gain on sale of assets in the predecessor combined statements of operations for the year ended December 31, 2007.
F-17
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
7. Other Fixed Assets, Net
Other fixed assets represent minor movable equipment on board the vessels, which are depreciated on a straight-line basis over five years. Activity for the periods presented is as follows:
Other fixed
Accumulated
Net book
Balance, January 1, 2006
496
(183
)
313
Additions
121
121
Sales
(130
)
78
(52
)
Depreciation expense
(100
)
(100
)
Balance, December 31, 2006
487
(205
)
282
Additions
105
105
Sales
(81
)
40
(41
)
Depreciation expense
(95
)
(95
)
Balance, December 31, 2007
511
(260
)
251
8. Deferred Finance Charges, Net
Deferred finance charges are comprised of the following:
Balance, January 1, 2006
405
Additions
89
Write-off due to debt extinguishment
(129
)
Amortization expense
(51
)
Balance, December 31, 2006
314
Additions
286
Write-off due to debt extinguishment
(106
)
Amortization expense
(60
)
Balance, December 31, 2007
434
Amortization of deferred finance costs, together with the write-offs, is recorded as Amortization and write-off of deferred finance charges in the accompanying predecessor combined statements of
operations.
F-18
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
assets cost
depreciation
value
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
9. Bank Debt
Bank debt is comprised of the following:
Borrower
December 31,
2006
2007
Sofikal
Kanastro
Pelodimous
Efragel
24,324
23,812
Marindou
13,661
13,580
Kerasies
20,896
40,000
Marathassa
24,494
23,578
Eleoussa
23,705
Marinouki
29,749
30,432
Staloudi
29,606
30,428
Petra
38,445
Pemer
36,262
Pelea
41,350
Soffive
45,000
Total
166,435
322,887
Less: current portion
8,273
16,620
Less: liability directly associated with asset held for sale (Eleoussa loan)
23,705
Long-term portion
134,457
306,267
Maripol Loan A:
In June 2001, Maripol Shipping Corporation (Maripol) obtained a bank loan for Japanese Yen (JPY) 1,920,000,000 ($15,393) to finance the construction cost of the vessel
Old
Marina
(the Maripol loan A). The Maripol loan A bore interest at LIBOR plus a margin and was repayable over ten years in 20 semi-annual installments and a balloon payment at maturity. Prior to the end of
each interest period, the borrower could elect to convert at the beginning of the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using the spot
exchange rate applicable on the date of conversion: US Dollars (USD), Swiss Franc (CHF) or Euro (EUR). This election was exercised. The average interest rate (including the margin) during the year 2005
was 0.779%. The Maripol loan A was repaid in full on January 31, 2005 from the proceeds of the Maripol loan B described further below; hence the Maripol loan A is not included in the chart above.
Sofikal Loan:
In December 2001, Sofikal Shipping Corporation (Sofikal) obtained a bank loan for $18,000 to finance the purchase price of the vessel
Sophia
(the Sofikal loan). The Sofikal loan bore
interest at LIBOR plus a margin and was repayable over 12 years in 24 semi-annual installments and a balloon payment at maturity. Prior to the end of each interest period, the borrower could elect to convert at
the beginning of the following interest period the outstanding loan amount or any part to up to two of the following currencies, using the spot exchange rate applicable on the date of conversion: USD, JPY, CHF
and EUR. This election was exercised. The average interest rate (including the margin) during the years 2005 and 2006 was 1.785% and 1.309%, respectively. The Sofikal loan was repaid on March 31, 2006 as
the vessel was sold.
Kanastro Loan:
In April 2002, Kanastro Shipping Corporation (Kanastro) obtained a bank loan for JPY 2,480,000,000 ($18,720) to finance the purchase price of the vessel
Kanaris
(the Kanastro loan).
The Kanastro loan bore interest at LIBOR plus a margin and was repayable over 12 years in 24 semi-annual installments and a balloon payment at maturity. Prior to the end of each interest period, the borrower
could elect to convert at the beginning of the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using the spot exchange rate applicable on the date
of conversion: USD, CHF, EUR, Canadian Dollar (CAD) or Pound Sterling (GBP). This
F-19
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
election was exercised. The average interest rate (including the margin) during the years 2005 and 2006 was 0.818% and 0.841%, respectively. The Kanastro loan was repaid on October 12, 2006 in anticipation of
the intended sale of the vessel
Kanaris
, which was completed in February 20, 2007.
Pelodimous Loan:
In July 2002, Pelodimous Shipping Corporation (Pelodimous) obtained a bank loan for $17,300 to finance the cost of the vessel
Pelopidas
(the Pelodimous loan). The Pelodimous
loan bore interest at LIBOR plus a margin and was repayable over 12 years in 24 semi-annual installments and a balloon payment at maturity. Prior to the end of each interest period, the borrower could elect to
convert at the beginning of the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using either the spot exchange rate applicable on the date of
conversion, or the forward exchange rate on the date of conversion notice: USD, JPY, CHF, EUR, CAD or GBP. This election was exercised. The average interest rate (including the margin) during the years 2005
and 2006 was 1.647% and 2.139%, respectively. The Pelodimous loan was repaid on November 14, 2006 as the vessel was sold.
Efragel Loan:
In March 2003, Efragel Shipping Corporation (Efragel) obtained a bank loan for $16,000 to finance the purchase price of the vessel
Efrossini
. In November 2004, Efragel obtained a
reducing revolving credit facility for up to $30,000 (the Efragel credit facility) and repaid the $16,000 bank loan. The Efragel credit facility bore interest at LIBOR plus a margin and was repayable over ten
years in 20 semi-annual installments and a balloon payment at maturity. The ability to drawdown on the credit facility was reduced with each semi-annual repayment. Prior to the end of each interest period, the
borrower could elect to convert at the beginning of the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using the spot exchange rate applicable on
the date of conversion: USD, JPY, CHF or EUR. This election was exercised. The average interest rate (including the margin) during the years 2005, 2006 and 2007 was 4.005%, 4.618% and 3.530%, respectively.
As of December 31, 2007, the outstanding balance of the Efragel credit facility amounted to $23,812 (CHF 16,583,460 and JPY 1,021,660,000). The Efragel credit facility was repaid on January 17, 2008, through
a new reducing revolving credit facility in the amount of $42,000 (see Note 20).
Marindou Loan:
In May 2003, Marindou Shipping Corporation (Marindou) obtained a bank loan for $16,000 to finance the purchase price of the vessel
Maria
(the Marindou loan). The Marindou loan
bore interest at LIBOR plus a margin and was repayable over ten years in 20 semi-annual installments and a balloon payment at maturity. Prior to the end of each interest period, the borrower could elect to
convert at the beginning of the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using the spot exchange rate applicable on the date of conversion:
USD, JPY, CHF or EUR. This election was exercised. The average interest rate (including the margin) during the years 2005, 2006 and 2007 was 1.549%, 2.192% and 3.053%, respectively. As of December 31,
2007, the outstanding balance of the Marindou loan in the amount of $13,580 (CHF15,300,000) was payable in 11 semi-annual installments from May 2008 to May 2013 and a balloon payment payable in May
2013. The Marindou loan was refinanced on January 14, 2008, through a new reducing revolving credit facility in the amount of $42,000 (see Note 20).
Kerasies Loan:
In May 2004, Kerasies Shipping Corporation (Kerasies) obtained a bank loan for $28,000 to finance the purchase price of the vessel
Katerina
and obtain working capital (the Kerasies
loan). The Kerasies loan bore interest at LIBOR plus a margin and was repayable over 12 years in 24 semi-annual installments and a balloon payment at maturity. Prior to the end of each interest period, the
borrower could elect to convert at the beginning of the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using the spot exchange rate applicable on
the date of conversion: USD, JPY, CHF, EUR, CAD or GBP. This election was exercised. The average interest rate (including the margin) during the year 2005, 2006, and 2007 was 1.801%, 1.697% and 2.339%,
respectively. The Kerasies loan was repaid on December 14, 2007 through the proceeds of the New Kerasies loan described further below.
F-20
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
Maripol Loan B:
In January 2005, Maripol obtained a bank loan for $25,000 to refinance Maripol loan A and obtain working capital (the Maripol loan B). The Maripol loan B bore interest at LIBOR
plus a margin and was repayable over ten years in 20 semi-annual installments and a balloon payment at maturity. Prior to the end of each interest period, the borrower could elect to convert at the beginning of
the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using the spot exchange rate applicable on the date of conversion: USD, JPY, CHF or EUR.
This election was exercised. The average interest rate (including the margin) during the year 2005 was 0.803%. The Maripol loan B was repaid on April 18, 2005 as the vessel was sold; hence the Maripol loan B
is not included in the chart above.
Marathassa Loan:
In February 2005, Marathassa Shipping Corporation (Marathassa) obtained a bank loan for $28,000 to finance the purchase price of the vessel
Maritsa
and obtain working capital (the
Marathassa loan). The Marathassa loan bears interest at LIBOR plus a margin and is repayable over 12 years in 24 semi-annual installments and a balloon payment at maturity. Prior to the end of each interest
period, the borrower may elect to convert at the beginning of the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using the spot exchange rate
applicable on the date of conversion: USD, JPY, CHF, EUR, CAD or GBP. This election has been exercised. The average interest rate (including the margin) during the years 2005, 2006 and 2007 was 3.012%,
3.962% and 4.589%, respectively. As of December 31, 2007, the outstanding balance of the Marathassa loan in the amount of $23,578 ($11,613 and CHF13,481,600) was payable in 19 semi-annual installments
from February 2008 to February 2017, plus a balloon payment payable in February 2017.
Eleoussa Loan:
In September 2005, Eleoussa Shipping Corporation (Eleoussa) obtained a bank loan for $24,000 to finance the construction cost of the vessel
Eleni
(the Eleoussa loan). The Eleoussa
loan bore interest at LIBOR plus a margin and was repayable over 12 years in 24 semi-annual installments and a balloon payment at maturity. Prior to the end of each interest period, the borrower could elect to
convert at the beginning of the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using either the spot exchange rate applicable on the date of
conversion, or the forward exchange rate on the date of conversion notice; USD, CHF, EUR, CAD or GBP. This election was exercised. The average interest rate (including the margin) during the years 2005,
2006 and 2007 was 4.559%, 3.573%, and 3.410%, respectively. The Eleoussa loan was repaid on March 9, 2007 in anticipation of the intended sale of the vessel
Eleni
which was completed on March 26, 2007,
and the amount outstanding as of December 31, 2006 has been presented as a Liability directly associated with assets held for sale in the Predecessor Combined Balance Sheet.
Marinouki Loan:
In March 2006, Marinouki Shipping Corporation (Marinouki) obtained a bank loan for $30,400 to refinance the purchase price of the vessel
Marina
and obtain working capital (the
Marinouki loan). The Marinouki loan bears interest at LIBOR plus a margin and is repayable over 12 years in 24 semi-annual installments and a balloon payment. Prior to the end of each interest period, the
borrower may elect to convert at the beginning of the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using the spot exchange rate applicable on
the date of conversion: USD, JPY, CHF, EUR or GBP. This election was exercised. The average interest rate (including the margin) during the years 2006 and 2007 was 4.548% and 2.114%, respectively. As of
December 31, 2007, the outstanding balance of the Marinouki loan in the amount of $30,432 (JPY 3,419,059,940) was payable in 21 semi-annual installments from March 2007 to March 2018, plus a balloon
payment payable in March 2018. On March 19, 2008, the Company exercised its multi-currency conversion option and converted the remaining JPY loan outstanding to USD and subsequently entered into an
interest rate swap as further described in Note 20. The resulting loan on this date amounted to $32,620. An amendment was entered into to increase the loan facility by $4,000 as a result of exchange loss incurred
on conversion.
Staloudi Loan:
In May 2006, Staloudi Shipping Corporation (Staloudi) obtained a bank loan for $30,000 to finance the cost of the vessel
Stalo
(the Staloudi loan). The Staloudi loan bears interest at
LIBOR plus a margin and is repayable over ten years in 20 semi-annual installments and a balloon
F-21
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
payment at maturity. Prior to the end of each interest period, the borrower may elect to convert at the beginning of the following interest period up to 85% of the outstanding loan amount to up to two of the
following currencies, using either the spot exchange rate applicable on the date of conversion, or the forward exchange rate on the date of conversion notice; USD, JPY, CHF, EUR, CAD or GBP. This election
was exercised. The average interest rate (including the margin) during the years 2006 and 2007 was 3.444% and 3.542%, respectively. As of December 31, 2007, the outstanding balance of the Staloudi loan in the
amount of $30,428 was payable in 17 semi-annual installments from May 2008 to May 2016, plus a balloon payment payable in May 2016.
Petra Loan:
In January 2007, Petra Shipping Corporation (Petra) obtained a bank loan for $36,000 to finance the purchase price of the vessel
Pedhoulas Trader
(the Petra loan). The Petra loan bears
interest at LIBOR plus a margin and is repayable over 12 years in 24 semi-annual installments and a balloon payment at maturity. Prior to the end of each interest period, the borrower could elect to convert at the
beginning of the following interest period the outstanding loan amount or any part thereof to up to three of the following currencies, using the spot exchange rate applicable on the date of conversion: USD, JPY,
CHF, EUR or GBP. This election was exercised. The average interest rate (including the margin) during the year ended December 31, 2007 was 3.371%. As of December 31, 2007, the outstanding balance of the
Petra loan in the amount of $38,445 ($2,000 and CHF41,063,000) was payable in 23 semi-annual installments from January 2008 to January 2019, plus a balloon payment payable in January 2019. On January 18,
2008, the Company canceled the multi-currency conversion option after converting the remaining CHF loan outstanding to USD and subsequently entered into an interest rate swap as further described in Note 20.
Pemer Loan:
In March 2007, Pemer Shipping Corporation (Pemer) obtained a bank loan for $36,000 to finance the purchase price of the vessel
Pedhoulas Merchant
(the Pemer loan). The Pemer loan
bears interest at LIBOR plus a margin and is repayable over 12 years in 24 semi-annual installments and a balloon payment at maturity. Prior to the end of each interest period, the borrower may elect to convert
at the beginning of the following interest period the outstanding loan amount or any part thereof to up to three of the following currencies, using the spot exchange rate applicable on the date of conversion: USD,
JPY, CHF, EUR or GBP. This election was exercised. The average interest rate (including the margin) during the year ended December 31, 2007 was 1.500%. As of December 31, 2007, the outstanding balance of
the Pemer loan in the amount of $36,262 (JPY 4,074,000,000) was payable in 23 semi-annual installments from March 2008 to March 2019, plus a balloon payment payable in March 2019. On March 7, 2008, the
Company canceled the multi-currency conversion option after converting the remaining JPY loan outstanding to USD and subsequently entered into an interest rate swap as further described in Note 20.
Pelea Loan:
In June 2007, Pelea Shipping Corporation (Pelea) obtained a reducing revolving credit facility in the amount of $42,000 to finance the purchase price of the vessel
Pedhoulas Leader
(the
Pelea credit facility). The Pelea credit facility bears interest at LIBOR plus a margin and is repayable over 12 years in 24 semi-annual payments and a balloon at maturity. The ability to drawdown on the credit
facility is reduced with each semi-annual repayment. Prior to the end of each interest period, the borrower may elect to convert at the beginning of the following interest period the outstanding loan amount or any
part thereof to any of the following currencies, using the spot exchange rate applicable on the date of conversion: USD, JPY, CHF or EUR. The average interest rate (including the margin) during the year ended
December 31, 2007 was 6.008%. As of December 31, 2007, the outstanding balance of the Pelea credit facility amounted to $41,350, and no further amount was available for drawdown. The outstanding balance as
of December 31, 2007 was payable in 23 semi-annual installments from June 2008 to June 2019, plus a balloon payment payable in June 2019. Following the completion of the initial public offering, Safe Bulkers
will become the guarantor of the credit facility and as the guarantor, will be subject to certain financial covenants to be agreed to prior to the closing of the initial public offering.
Soffive Loan:
In November 2007, Soffive Shipping Corporation (Soffive) obtained a bank loan for $45,000 to finance the purchase price of the vessel
Sophia
(the Soffive loan) and repay owners
F-22
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
advances of certain Subsidiaries. The Soffive loan bears interest at LIBOR plus a margin and is repayable over 12 years in 24 semi-annual installments, from May 2008 to November 2019, and a balloon payment
at maturity. Prior to the end of each interest period, the borrower may elect to convert at the beginning of the following interest period the outstanding loan amount or any part thereof to any of the following
currencies, using the spot exchange rate applicable on the date of conversion: USD, JPY, CHF, EUR, CAD or GBP. The average interest rate (including the margin) during the year ended December 31, 2007 was
5.445%. As of December 31, 2007, the outstanding balance of the Soffive loan amounted to $45,000 which is payable in 24 semi-annual installments from May 2008 to November 2019, plus a balloon payment
payable in November 2019.
New Kerasies Loan:
In December 2007, Kerasies obtained a bank loan for up to $40,000 (the New Kerasies loan), which was used to repay the Kerasies loan, as well as to repay owners advances of
certain Subsidiaries. The New Kerasies loan bears interest at LIBOR plus a margin and is repayable over 12 years in 24 semi-annual installments and a balloon payment at maturity. Prior to the end of each
interest period, the borrower may elect to convert at the beginning of the following interest period the outstanding loan amount or any part thereof to up to two of the following currencies, using the spot exchange
rate applicable on the date of conversion: USD, JPY, CHF, EUR, CAD or GBP. The average interest rate (including the margin) during the year 2007 was 5.575%. As of December 31, 2007, the outstanding
balance of the New Kerasies loan amounted to $40,000 which is payable in 24 semi-annual installments from June 2008 to December 2019, plus a balloon payment payable in December 2019.
In all the above loans or credit facilities, no consideration has been or will be paid by any of the borrowers to the respective lenders in connection with the conversion option since the parties did not
ascribe value to the conversion option as the conversion options are always based on the market or spot rates at the time they are exercised. The exercise of the conversion option in any of the above loans or
credit facilities results in a change in both the currency denomination of the loan and the basis of the interest rate (that is, a USD-denominated loan bears interest based on USD LIBOR and, upon conversion into
a JPY-denominated loan, will bear interest based on JPY LIBOR). All other terms of the loans or credit facilities, including the margin (the interest rate spread over LIBOR) and the repayment terms, will remain
the same upon exercise of the currency conversion option.
The Company considered the guidance in paragraph 12 of SFAS 133, and concluded that the conversion options are embedded derivatives that would require bifurcation and separate accounting because of
the following:
(i) The economic characteristics and risks of an instrument in which the underlying is both a foreign currency and interest rate are not clearly and closely related to the economic characteristics and
risks of a debt host;
(ii) The borrowing arrangement that embodies both the conversion option and the debt host is not remeasured at fair value under otherwise applicable generally accepted accounting principles with
changes in fair value reported in earnings as they occur; and,
(iii) A separate instrument with the same terms as the conversion option would be a derivative instrument subject to the requirements of SFAS 133.
However, the Company believes that the conversion option under the borrowing arrangements have no fair value due to the fact that the conversion into a different currency, and, accordingly, into a
corresponding LIBOR interest rate, will always be at the prevailing foreign currency exchange rate (spot rate) and prevailing interest rate at the time of the conversion. Furthermore, both the Company and the bank
did not ascribe value to the currency conversion options as no consideration was sought by the bank and no value was paid by the Company, as noted above.
As such, all loans outstanding at the end of each period denominated in other currencies have been translated into USD using the spot rate applicable at each period end. Any resulting translation gain or
loss is recorded as Foreign currency gain/(loss) on the predecessor combined statement of operations.
F-23
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
In addition, the foregoing loans and credit facilities are secured as follows:
First priority mortgages over the vessels owned by the respective borrowers;
First priority assignment of all insurances and earnings of the mortgaged vessels; and
With respect to the Petra and Pemer loans, each loan is secured by a respective cash collateral deposit of $2,000 (or the equivalent amount in an optional currency) deposited on behalf of each
Petra and Pemer by the Manager, which will gradually be reduced after three years from the disbursement of each respective loan. On April 9, 2008, each of Petra and Pemer agreed with the
respective lenders to assume the obligation in respect of the cash collateral deposits, and thereby releasing the Manager from this obligation.
The loan and credit facility agreements contain debt covenants including restrictions as to changes in management and ownership of the vessels, additional indebtedness and mortgaging of vessels without
the respective lenders prior consent, restrictions on long-term employment of the vessels, as well as minimum hull cover ratio requirements. Certain borrowers are not permitted to pay any dividends to their
owners without the respective lenders prior consent. Certain other borrowers are permitted to pay dividends to their owners without the respective lenders prior consent, as long as no event of default under the
respective loan has occurred and has not been remedied. Under certain loans, in the event that the outstanding amounts in currencies other than the U.S. dollar exceed at any time 100% or 110% (as the case may
be) of the U.S. dollar equivalent amount that is specified in the relevant loan agreement for the applicable period, the lending bank has the option to require the borrower to either make a loan prepayment or
provide cash collateral security in an amount necessary for the outstanding to comply with the above calculation. Subject to the following sentence, as of December 31, 2006 and December 31, 2007, the Company
was either in compliance with all debt covenants or necessary waivers had been obtained from the respective banks. Although the Company was in breach of certain covenants as of December 31, 2007 prohibiting
the entry into charters for a term longer than the maximum specified duration, which resulted in the payment of dividends to shareholders being a breach of covenant under the applicable loan agreements, all of
these breaches were subsequently waived in writing by the relevant lenders in February 2008. The effect of these waivers is permanent with respect to the Companys existing charters, however, the Company will
still be required to comply with these covenants with respect to any new charters that it enters into, which may be at any time. The Company believes that it will not breach these covenants in the future, as
compliance with such covenants is within managements control and it is managements full intention to obtain, in each case, the lenders consent prior to entering into any new charter for a term longer than the
maximum duration specified in the relevant credit facility agreement.
Interest paid in other currencies has been translated into U.S. dollars using the spot exchange rate of the date that interest was incurred. Total interest incurred on long-term debt for the years ended
December 31, 2005, 2006 and 2007 amounted to $3,668, $6,140 and $8,225, respectively. The average interest rate (including the margin) for all loan facilities during the years 2005, 2006 and 2007 was 2.303%,
3.269%, and 3.353%, respectively.
The minimum annual principal payments, translated into U.S. dollars, required to be made after December 31, 2007, are as follows:
To December 31,
2008
16,620
2009
16,594
2010
17,014
2011
18,248
2012 and thereafter
254,411
Total
322,887
F-24
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
10. Advances from Owners
Advances from owners represent cash advanced by the owners of the Company to finance vessel acquisitions. The owners advances are non-interest bearing, unsecured and have no fixed terms of
repayment.
Activity for the Advances from owners for the periods presented is as follows:
Balance, January 1, 2006
90,640
Advances received
110,049
Repayment of advances
(65,245
)
Balance, December 31, 2006
135,444
Advances received
83,997
Repayment of advances
(209,355
)
Balance, December 31, 2007
10,086
Repayment of advances was funded from either bank debt obtained or from proceeds of sale of vessels if no bank debt had been obtained.
The average balance of the advances from owners during the years ended December 31, 2006 and 2007 was $123,457 and $101,906, respectively.
11. Owners Capital
Since their inception, the capital of each of the Subsidiaries and the Additional Companies consists of 100 authorized common shares with no par value, all of which have been issued and are outstanding.
The holders of the shares are entitled to one vote on all matters submitted to a vote of owners and to receive all dividends, if any.
Ship-owning Entity
Date of Incorporation
Kanastro Shipping Corporation
November 6, 2000
Maripol Shipping Corporation
November 20, 2000
Sofikal Shipping Corporation
December 1, 2000
Pelodimous Shipping Corporation
December 11, 2000
Efragel Shipping Corporation
September 9, 2002
Marindou Shipping Corporation
September 9, 2002
Avstes Shipping Corporation
November 7, 2003
Kerasies Shipping Corporation
November 7, 2003
Maxtria Shipping Corporation
March 8, 2004
Eleoussa Shipping Corporation
August 2, 2004
Marathassa Shipping Corporation
August 2, 2004
Staloudi Shipping Corporation
September 1, 2005
Marinouki Shipping Corporation
September 1, 2005
Maxpente Shipping Corporation
October 3, 2005
Pemer Shipping Ltd.
January 3, 2006
Petra Shipping Ltd.
January 3, 2006
Eptaprohi Shipping Corporation
March 1, 2006
Eniaprohi Shipping Corporation
August 14, 2006
Eniadefhi Shipping Corporation
August 14, 2006
Pelea Shipping Ltd.
January 11, 2007
Soffive Shipping Corporation
April 11, 2007
Maxdeka Shipping Corporation
September 24, 2007
Maxenteka Shipping Corporation
September 24, 2007
Maxdodeka Shipping Corporation
October 11, 2007
Maxdekatria Shipping Corporation
October 11, 2007
F-25
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
12. Cash Dividend
On December 31, 2007, the Subsidiaries and Additional Companies declared and distributed to their owners aggregate dividends in the amount of $383,853. No dividends were declared or paid in 2006.
13. Commitments and Contingencies
(a) Commitments under Shipbuilding Contracts
(i) In August 2006, Eniaprohi Shipping Corporation (Eniaprohi), a Subsidiary, signed a contract with Itochu Corporation (Itochu) for the construction of a Post-Panamax class vessel (
Hull No. 3254
).
Pursuant to the contract, the vessel was expected to be delivered to the Company on January 31, 2009. On November 14, 2007, Eniaprohi agreed with Itochu to expedite the delivery of
Hull No. 3254
, whereby
delivery is scheduled to occur on or before November 10, 2008. On vessel delivery, Eniaprohi will pay to Itochu an early delivery amount of JPY 591,500 ($5.3) per day, which is calculated from the actual
delivery date until January 31, 2009, and is estimated to be a total of $432. The contract price for the vessel is JPY 4,260,000,000 ($37,735). The contract provides for installment payments as follows:
First installment of JPY 550,000,000 ($4,714) upon issuance of the relevant bank refund guarantee provided by the shipyard (paid in August 2006),
Second installment of JPY 400,000,000 ($3,560) 18 months after the first payment (paid in March 2008),
Third installment of JPY 400,000,000 ($3,560) upon keel laying,
Fourth installment of JPY 400,000,000 ($3,560) upon launching, and
Final installment of JPY 2,510,000,000 ($22,341) upon delivery of the vessel, plus or minus any adjustments as provided in the contract for the construction of
Hull No. 3254
.
The first installment payment, made in August 2006, was funded by Advances from owners. The second installment of JPY 400,000,000, equivalent to $3,840 as at March 4, 2008 (the date of payment),
was financed through Advances received from the owners.
(ii) In August 2006, Eniadefhi Shipping Corporation (Eniadefhi), a Subsidiary, signed a contract with Itochu for the construction of a Post-Panamax class vessel (
Hull No. 3255
), which is expected to
be delivered to the Company in the first quarter of 2009. The contract price for the vessel is JPY 4,260,000,000 ($37,728). The contract provides for installment payments as follows:
First installment of JPY 550,000,000 ($4,707) upon issuance of the relevant bank refund guarantee provided by the shipyard (paid in August 2006),
Second installment of JPY 400,000,000 ($3,560) 18 months after the first payment (paid in March 2008),
Third installment of JPY 400,000,000 ($3,560) upon keel laying,
Fourth installment of JPY 400,000,000 ($3,560) upon launching, and
Final installment of JPY 2,510,000,000 ($22,341) upon delivery of the vessel, plus or minus any adjustments as provided in the contract for the construction of
Hull No. 3255
.
The first installment payment, made in August 2006, was funded by Advances from owners. The second installment of JPY 400,000,000, equivalent to $3,840 as at March 4, 2008 (the date of payment),
was financed through Advances received from the owners.
(iii) In December 2006, Eptaprohi Shipping Corporation (Eptaprohi), a Subsidiary, signed a contract with Jiangsu Rongsheng Heavy Industries Co. Ltd. for the construction of a Capesize class vessel
(
Hull H1074
), which is expected to be delivered to the Company in the first quarter of 2010. The contract price for the vessel is $81,000. The contract provides for installment payments as follows:
F-26
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
First installment of $16,200 upon issuance of the relevant bank refund guarantee provided by the shipyard,
Second installment of $16,200 upon steel cutting,
Third installment of $16,200 upon keel laying,
Fourth installment of $16,200 upon launching, and
Final installment of $16,200 upon delivery of the vessel, plus or minus any adjustments as provided in the contract for the construction of
Hull H1074
.
Simultaneously with the first installment payment, Eptaprohi is required to provide the shipyard with a bank performance guarantee, securing the payment by Eptaprohi to the shipyard of the second
installment. As of the date of the financial statements an installment payment had not yet been triggered, as the bank refund guarantee had not yet been issued. In fact, Eptaprohi has not yet arranged any bank
finance in connection with this contract.
(iv) In December 2006, Maxpente, a Subsidiary, signed a contract with Jiangsu Rongsheng Heavy Industries Co. Ltd. for the construction of a Capesize class vessel (
Hull H1075
), which is expected to
be delivered in the first quarter of 2010. The contract price for the vessel is $80,000. The contract provides for installment payments as follows:
First installment of $16,000 upon issuance of the relevant bank refund guarantee provided by the shipyard,
Second installment of $16,000 upon steel cutting,
Third installment of $16,000 upon keel laying,
Fourth installment of $16,000 upon launching, and
Final installment of $16,000 upon delivery of the vessel, plus or minus any adjustments as provided in the contract for the construction of
Hull H1075
.
Simultaneously with payment of the first installment payment, Maxpente is required to provide the shipyard with a bank performance guarantee, securing the payment by Maxpente to the shipyard of the
second installment. As of the date of the financial statements an installment payment had not yet been triggered, as the bank refund guarantee had not yet been issued. In fact, Maxpente has not yet arranged any
bank finance in connection with this contract.
(b) Commitments under MOAs
(i) In October 2007, Maxdodeka Shipping Corporation (Maxdodeka), a Subsidiary, signed a MOA with a third party seller for the acquisition of a Post-Panamax class vessel (
Hull No. 1039
) scheduled
for delivery in the third quarter of 2009 upon completion of construction. The contract price for the vessel is $73,500 plus or minus any adjustments as provided in the MOA. The agreement with the seller
provides for installment payments as follows:
First installment of $14,700 to a joint account held on the names of Maxdodeka and the seller upon signing of the MOA, and
Second installment of $58,800 upon delivery of the vessel, plus or minus any adjustments as provided in the MOA.
The first installment payment was triggered in October 2007 and was funded from surpluses from the operations of the Company during the second half of 2007. Maxdodeka has not yet arranged any bank
financing in connection with this vessel acquisition.
(ii) In October 2007, Maxdekatria Shipping Corporation (Maxdekatria), a Subsidiary, signed a MOA with a third party seller for the acquisition of a Post-Panamax class vessel (
Hull No. 1050
)
scheduled for delivery in the first quarter of 2010 upon completion of construction. The contract price for
F-27
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
the vessel is $73,500 plus or minus any adjustments as provided in the MOA. The agreement with the seller provides for installment payments as follows:
First installment of $14,700 to a joint account held on the names of Maxdodeka and the seller upon signing of the MOA, and
Second installment of $58,800 upon delivery of the vessel, plus or minus any adjustments as provided in the MOA.
The first installment payment was triggered in October 2007 and was funded from surpluses from the operations of the Company during the second half of 2007. Maxdekatria has not yet arranged any
bank financing in connection with this vessel acquisition.
(iii) In November 2007, Maxdeka Shipping Corporation (Maxdeka), a Subsidiary, signed a MOA with a third party seller for the acquisition of a Kamsarmax class vessel (
Hull No. 2054
) scheduled for
delivery in the first quarter of 2010 upon completion of construction. The contract price for the vessel is $48,080, plus or minus any adjustments as provided in the MOA, including reimbursing the interest
expenses of the seller; however the final contract price inclusive of such adjustments may not exceed $52,000. The agreement with the seller provides for installment payments as follows:
First installment of $7,212 to a joint account held on the names of Maxdodeka and the seller upon signing of the MOA, and
Second installment of $40,868 upon delivery of the vessel, plus or minus any adjustments as provided in the MOA, up to a maximum additional amount of $3,920.
The first installment payment was triggered in October 2007 and was funded from surpluses from the operations of the Company during the second half of 2007. Maxdeka has not yet arranged any bank
financing in connection with this vessel acquisition.
(iv) In November 2007, Maxenteka Shipping Corporation (Maxenteka), a Subsidiary, signed a MOA with a third party seller for the acquisition of a Kamsarmax class vessel (
Hull No. 2055
) scheduled
for delivery in the second quarter of 2010 upon completion of construction. The contract price for the vessel is $48,080, plus or minus any adjustments as provided in the MOA, including reimbursing the interest
expenses of the seller; however the final contract price inclusive of such adjustments may not exceed $52,000. The agreement with the seller provides for installment payments as follows:
First installment of $7,212 to a joint account held on the names of Maxdodeka and the seller upon signing of the MOA, and
Second installment of $40,868 upon delivery of the vessel, plus or minus any adjustments as provided in the MOA, up to a maximum additional amount of $3,920.
The first installment payment was triggered in October 2007 and was funded from surpluses from the operations of the Company during the second half of 2007. Maxenteka has not yet arranged any bank
financing in connection with this vessel acquisition.
The Company expects to settle the commitments under the shipbuilding contracts and MOAs described above as follows:
Commitments under
Commitments under MOAs
Year ending December 31
H3254
H3255
H1074
H1075
H1039
H1050
H2054
H2055
Total
2008
33,453
10,681
16,200
16,000
76,334
2009
22,340
48,600
48,000
58,800
177,740
2010
16,200
16,000
58,800
44,788
44,788
180,576
2011
2012 and thereafter
Total
33,453
33,021
81,000
80,000
58,800
58,800
44,788
44,788
434,650
F-28
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
Shipbuilding Contracts
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
(c) Other contingent liabilities
The Subsidiaries and Additional Companies have not been involved in any legal proceedings that may have, or have had a significant effect on their business, financial position, results of operations or
liquidity, nor is the Company aware of any proceedings that are pending or threatened which may have a significant effect on its business, financial position, results of operations or liquidity. From time to time
various claims, suits and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with
charterers, agents, insurance providers and other claims with suppliers relating to the operation of the Companys vessels. Management is not aware of any material claims or contingent liabilities, which should be
disclosed, or for which a provision should be established in the accompanying predecessor combined financial statements.
The Company accrues for the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. Management is not
aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the accompanying predecessor combined financial statements. A maximum of
$1,000,000 of the liabilities associated with the individual vessels actions, mainly for sea pollution, are covered by P&I Club insurance.
14. Revenues
Revenues are comprised of the following:
December 31,
2005
2006
2007
Time charter revenue
79,819
93,434
165,657
Voyage charter revenue
1,243
Ballast bonus
696
50
535
Other income
2,362
4,313
5,865
Total
82,877
99,040
172,057
15. Vessel Operating Expenses
Vessel operating expenses are comprised of the following:
December 31,
2005
2006
2007
Crew wages and related costs
5,421
6,597
6,784
Insurance
1,014
1,307
1,388
Repairs, maintenance and drydocking costs
884
534
324
Spares, stores and provisions
1,345
1,745
1,673
Lubricants
965
1,538
1,457
Taxes
163
461
247
Miscellaneous
574
886
556
Total
10,366
13,068
12,429
16. Derivatives
(a) Foreign Exchange Derivatives
The Company enters into foreign exchange forward contracts to create economic hedges for its exposure to currency exchange risk on payments relating to acquisition of vessels and on certain loan
obligations. Foreign exchange forward contracts are agreements entered into with a bank to exchange at a specified future date, currencies of different countries at a specific rate. These foreign exchange forward
contracts did not meet hedge accounting criteria under SFAS 133.
F-29
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
The following table presents the contract or notional amounts and the credit risk or fair value amounts as at December 31, 2006 and 2007 of the Companys derivative assets and liabilities held for trading
purposes. The derivative contracts are executed in the over-the-counter market. The credit risk amounts presented do not take into consideration the value of any collateral held.
December 31,
2006
2007
Foreign exchange forward contracts
Notional amount in USD 000
13,465
Foreign currency and amount
JPY 1,500,000,000
Derivative liabilities
577
(b) Interest Rate Derivatives
Effective December 14, 2007, the Company entered into an amortizing interest rate swap transaction with a bank in order to manage interest costs and the risk associated with changing interest rates with
respect to the New Kerasies loan. The interest rate swap transaction was entered into for a three year term from December 14, 2007 to December 14, 2010 and on an initial notional amount of $40,000 which
amortizes based on the expected principal outstanding under the New Kerasies loan.
Under the terms of the swap, the Company makes quarterly payments to the bank on the relevant notional amount at a fixed rate of 4.0925% per annum. The bank makes quarterly floating-rate payments
to the Company for the relevant amount based on the three month USD LIBOR. The swap transaction effectively converts the Companys expected floating-rate interest obligation under the New Kerasies loan for
the duration of the swap to 4.0925%, exclusive of the loan margin due to the lender. The interest rate swap did not meet hedge accounting criteria under SFAS 133 and as such is accounted for as a trading
derivative.
Under SFAS 133, the fair market value of the derivative is marked to market at the end of every period and the resulting gain or loss during the period is recorded as (Loss)/gain on derivatives in the
predecessor combined statement of operations. As at December 31, 2007, the fair value of the interest rate swap was a liability of $242 and was recorded as Derivative liabilities on the predecessor combined
balance sheet.
17. Accrued Liabilities
Accrued liabilities are comprised of the following:
December 31
2006
2007
Interest on long-term debt
1,420
2,023
Early redelivery cost payable
6,699
Vessels operating and voyage expenses
518
750
Total
1,938
9,472
18. Early Redelivery Cost
The Company incurs costs in connection with early redelivery of vessels from charterers, where the contracted daily fixed charter rates are substantially lower than the daily charter rates the vessels could
potentially earn in the current market. Early redelivery costs incurred during the periods presented where as follows:
F-30
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
Company
Date of Termination Agreement
December 31
2006
2007
Staloudi
March 9, 2007
14,382
Marinouki
October 17, 2007
5,467
Kerasies
September 20, 2007
1,089
Various
Various
150
500
Total
150
21,438
In all the above transactions, the total early termination costs were expensed and recorded as Early redelivery costs within the predecessor combined statement of operations, as no replacement charter
agreement was secured at the time of the termination agreement.
Details of the first three transactions in the above table are as follows:
(a) On March 9, 2007, Staloudi, agreed with the charterers of the
Stalo
to terminate the $13.5 daily fixed rate time charter which had commenced on January 18, 2006 and was not contractually due to
expire until May 2011. The termination agreement with the charterer provided for compensation of (a) cash payment to the charterer of an amount of $3,375 upon termination of the time charter and redelivery of
the vessel and (b) chartering by the charterers of the
Marina
,
Sophia
and
Pedhoulas Leader
under time charters at below market rates for periods of 14.5 months from March 26, 2007, 14.5 months from June 28,
2007 and 7.3 months from March 1, 2007, respectively. The impact of chartering these three vessels at below market rates for the agreed periods was determined to be $11,007 and was recorded as Time charter
discount within the predecessor combined balance sheet. Time charter discount represents the difference between the contracted charter rate contracted for each of the three vessels (all below market) and the
prevailing market charter rate at the time the early termination agreement with the charterer of the vessel, the
Stalo
, was entered into. When establishing prevailing market rates, the Company utilizes the industry
standard published daily charter rate (before commissions) for Panamax class vessel, as its size is the closest comparison available to the Companys vessels. The published daily charter rate is then adjusted
upwards to reflect the higher cargo capacity of the Companys vessels, and may be adjusted, if necessary, to reflect a later inception date, or changes in the market. For purposes of calculating the Time charter
discount, the difference between the prevailing market daily charter rate and the contracted daily charter rate was applied to the total charter days outstanding for each of the three vessels, the
Marina
,
Sophia
and
Pedhoulas Leader,
to arrive at a Time charter discount in the amount of $11,007.
The calculations described above were applied to determine the prevailing market rate for both the
Marina
and the
Sophia
, as neither vessel was subject to a recent charter agreement whereby a prevailing
market rate would have been established. However, the
Pedhoulas Leader
was previously subject to a charter partner agreement with the charterer on February 13, 2007. On March 1, 2007, the
Pedhoulas Leader
,
a newbuild, was delivered from a shipyard and commenced the time charter with the charterer. On March 9, 2007, in connection with the early termination of the charter for the vessel
Stalo
, an addendum to the
existing charter party was entered into reducing the daily charter rate and extending the charter period. Accordingly, the rate established on February 13, 2007 was utilized as the prevailing market rate and a new
calculation of prevailing market charter rate was not required.
The aggregate early redelivery cost amounted to $14,382, which was comprised of the $3,375 cash payment and the $11,007 impact of chartering the three vessels at below market rates, with a
corresponding recognition of Time charter discount of $11,007. The Time charter discount is recorded as a long term liability in the predecessor combined balance sheet, and is being amortized on a straight-line
basis to Revenue over the duration of the respective below market time charters. As at December 31, 2007, accumulated amortization amounted to $8,241 resulting in a remaining Time charter discount of $2,766.
(b) On October 17, 2007, Marinouki, agreed with the charterers of the
Marina
to terminate the $25.0 daily fixed rate time charter which had commenced on March 26, 2007, as part of the transaction
described in item (a) above, and was not contractually due to expire until June 3, 2008. As compensation for early redelivery, Marinouki agreed to pay the charterers an amount equal to $57.75 per day from the
F-31
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
date of redelivery through May 22, 2008. Such earlier redelivery is expected to occur in the first quarter of 2008, and the expected compensation amount to be paid to the charterers is $6,699. This amount has
been reduced by $1,232 which is the expected remaining unamortized portion of the deferred Time charter discount of the
Marina
under the transaction discussed in item (a) above from the expected date of
delivery until June 3, 2008, and hence the Early redelivery cost amounts to $5,467.
(c) On September 20, 2007, Kerasies agreed with the charterers of the
Katerina
to terminate the $23,125 daily fixed rate time charter which had commenced on August 9, 2006, and was not contractually
due to expire until November 9, 2007. As compensation for early redelivery, Kerasies agreed to pay the charterers an amount of $1,089.
19. Lease ArrangementsCharters-out:
The future minimum time charter revenue, net of commissions, based on vessels committed to noncancelable time charter contracts (including fixture recaps) with an initial or remaining charter period in
excess of one year as of December 31, 2007 are as follows:
December 31,
2008
93,743
2009
87,163
2010
65,688
2011
36,556
2012
35,313
Thereafter
47,945
Total
366,408
Future minimum time charter revenue excludes the future acquisitions of the vessels discussed in Note 13, since estimated delivery dates are not confirmed. Revenues from time charters are not generally
received when a vessel is off-hire, including time required for normal periodic maintenance of the vessel. In arriving at the minimum future charter revenues, an estimated off-hire time of 12 days to perform any
scheduled drydocking on each vessel has been deducted and it has been assumed that no additional off-hire time is incurred, although there is no assurance that such estimate will be reflective of the actual off-hire
in the future.
20. Subsequent Events
(a)
Initial public offering (Unaudited)
In July 2007, the Company commenced preparation for an initial public offering of the common shares of Safe Bulkers, Inc. in the United States and to list on the New York Stock Exchange. Following
the completion of the initial public offering it is expected that the existing owners, through Vorini Holdings, will own approximately 80% of the Companys outstanding shares of common stock and the same
percentage of the voting power associated with the Companys stock.
Following completion of the initial public offering, Safe Bulkers will become the guarantor of the reducing revolving credit facilities of Efragel Shipping Corporation, Marindou Shipping Corporation,
Avstes Shipping Corporation, Eniaprohi Shipping Corporation and Eniadefhi Shipping Corporation. As the guarantor, Safe Bulkers will be subject to certain financial covenants to be agreed prior to the closing of
the initial public offering, including a consolidated leverage ratio, consolidated interest coverage ratio, debt-to-cash flow and debt-to-EBITDA ratios, and minimum tangible net worth. In addition, there will be a
covenant that the Hajioannou family maintain its majority interest in Safe Bulkers.
By letters dated May 14, 2008, The Royal Bank of Scotland has confirmed its offer to Marathassa, Marinouki, Soffive and Kerasies (collectively referred to as RBS Borrowers), which has been accepted
by each of the RBS Borrowers, that RBS will agree to the proposed transfer of ownership of each of the RBS
F-32
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
Borrowers to Safe Bulkers subject to execution of a supplemental loan agreement prior to June 15, 2008 to include the following amendments: (a) Safe Bulkers will become the guarantor, following the completion
of this offering, of the loan obligations of each of the RBS Borrowers, (b) as the guarantor, Safe Bulkers will be subject to certain financial covenants, including (i) maintaining a minimum adjusted net worth of
$200,000 and minimum free liquidity of $500 per vessel, with RBS, (ii) ensuring that debt does not exceed 70% of adjusted total assets or 550% of the 12-month trailing EBITDA (as will be defined in the
relevant agreement), (iii) having the ability to pay dividends of up to 100% of free cash flow (as will be defined in the relevant agreement), subject to no event of default occurring and (iv) customary undertakings
with respect to the delivery of all information required by the Securities and Exchange Commission or pursuant to the Sarbanes Oxley Act and (c) the margin of the loan obligations of Marathassa and Marinouki
will increase to 0.75% from 0.675% and the margins for Soffive and Kerasies will increase to 0.75% from 0.575%.
(b)
New credit facilities:
(i) In January 2008, Marindou obtained a multi-currency reducing revolving credit facility for up to $42,000 (the New Marindou credit facility). The proceeds of the New Marindou credit facility in the
amount of $42,000 were used to fully prepay the outstanding balance of the Marindou loan, and the balance was utilized to repay advances from owners of certain Subsidiaries and fund dividends. The New
Marindou credit facility is secured by a first priority mortgage on the
Maria
and other usual maritime securities. The New Marindou credit facility bears interest at LIBOR plus a margin of 0.65% and is repayable
over ten years from loan drawdown in 20 semi-annual consecutive installments, from July 2008 to January 2018, the first six in the amount of $750, the following six in the amount of $1,000 and the remaining
eight in the amount of $1,688 and a balloon payment in the amount of $18,000 payable in January 2018.
(ii) In January 2008, Efragel obtained a multi-currency reducing revolving credit facility for up to $42,000 (the New Efragel credit facility). The proceeds of the New Efragel credit facility in the amount
of $42,000 were used to fully repay the outstanding balance of the Efragel credit facility, and the balance was utilized to repay advances from owners of certain Subsidiaries and fund dividends. The New Efragel
credit facility is secured by a first priority mortgage on the
Efrossini
and other usual maritime securities. The New Efragel credit facility bears interest at LIBOR plus a margin of 0.65% and is repayable over ten
years in 20 semi-annual consecutive installments, from July 2008 to January 2018, the first six in the amount of $750, the following six in the amount of $1,000 and the remaining eight in the amount of $1,688
and a balloon payment in the amount of $18,000 payable in January 2018.
(iii) On April 17, 2008, Avstes obtained a multi-currency reducing revolving credit facility for up to $36,000 (the Avstes credit facility). The proceeds of the Avstes credit facility in the amount of
$36,000 were used to fund the distribution of dividends to owners of the Subsidiaries. The Avstes credit facility is secured by a first priority mortgage over the
Vassos
and other usual maritime securities. The
Avstes credit facility bears interest at LIBOR plus a margin of 0.80%. Based on the accepted commitment letter, the margin that will apply following this offering will be agreed prior to the closing of this
offering. The facility is repayable over ten years in 20 semi-annual consecutive installments in the amount of $900 each, starting October 18, 2008, and a balloon payment in the amount of $18,000 payable in
October 2018.
(iv) In April 2008, Eniaprohi and Eniadefhi each accepted commitment letters for reducing revolving credit facilities of up to $45,000 each to be used to fund the acquisition of
Hull No. 3254 and Hull No
3255,
respectively, upon delivery from the shipyard and to provide additional working capital. These credit facilities will be secured by first mortgages on
Hull No. 3254
and
Hull No. 3255,
respectively, and other
usual maritime securities. The commitment letters provide that each credit facility will bear interest at LIBOR plus a margin of 0.90%, and the margin that will apply following this offering will be agreed prior to
the closing of this offering. Pursuant to the commitment letters, the credit facilities will be
F-33
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
repayable over ten years in 20 semi-annual consecutive installments of $1,125 each commencing six months after the delivery date, and a balloon payment of $22,500 payable with the final installment.
For all of the new credit facilities described above, the ability to drawdown on the credit facility will reduce with each semi-annual repayment. Prior to maturity of each interest period, the borrower may
elect to convert at the beginning of the following interest period the then outstanding loan amount or any part thereof to up to two of the following currencies, using the spot exchange rate applicable on the date
of conversion: USD, JPY, CHF or EUR.
(c)
Interest rate swaps:
Subsequent to December 31, 2007, the Company entered into the following interest rate swap transactions with certain banks in respect to loans and credit facilities in order to manage interest costs and
the risk associated with changing interest rates with respect to these loans and credit facilities.
Credit Facility
Initial notional
Inception
Expiry
Swap
New Marindou
$
42,000
January 14, 2008
January 14, 2013
3.950
%
New Efragel
$
42,000
January 17, 2008
January 17, 2013
3.650
%
Petra
$
38,171
February 19, 2008
January 18, 2013
2.885
%
Pemer
$
38,168
March 7, 2008
March 7, 2013
2.745
%
Marinouki
$
32,620
March 19, 2008
March 5, 2013
2.730
%
Avstes
$
36,000
April 25, 2008
April 18, 2013
3.890
%
The initial notional amounts of the above transactions are reduced during the term of the swap transactions based on the expected principal outstanding under the respective facility. In the Petra, Pemer and
Marinouki transactions, the respective bank has the right to cancel each swap on January 18, 2011, March 7, 2011 and March 5, 2011, respectively, and on six-month intervals thereafter.
Under all of the swap transactions described above, the bank will make semi-annual floating-rate payments to the Company for the relevant amount based on the six month USD LIBOR and the Company
will make semi-annual payments to the bank on the relevant amount at the respective fixed rates.
The above interest rate swap agreements do not qualify for hedge accounting under SFAS 133.
(d)
Amendment to Management Agreements:
On March 6, 2008, the Company amended the Management Agreements with the Manager discussed in Note 3 with respect to the Management Fee paid to the Manager (the Amended Management
Agreements). Under the Amended Management Agreements, effective January 1, 2008, the Manager receives a fixed daily fee of $0.575 plus 1.0% on gross freight, charter hire, ballast bonus and demurrage from
each of the vessel owning companies in exchange for these management services. In addition, the commission paid to the Manager on a sale of a vessel was fixed at 1.0% of the contract price of any vessels sold
on the Companys behalf.
(e)
New Management Agreements (unaudited):
Upon closing of the initial public offering discussed in item (a) above, the Company and each of the Subsidiaries will enter into new management agreements with the Manager (the New Management
Agreements). The New Management Agreements will replace the Amended Management Agreements relating to the Existing Vessels, and will also apply to new vessels. The financial terms of the New
Management Agreements will be as described in (d) above, and in addition, will include that the Manager receives (i) 1.0% of the contract price on each of the Newbuilds (refer to Note 1) with the exception of
Hulls No. 3244 and 3255
and (ii) a fee of $375 per Newbuild for the on-premises supervision of each Newbuild by the Manager.
F-34
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Continued)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
amount
rate
PREDECESSOR BUSINESSES OF SAFE BULKERS, INC.
(f)
Early redelivery:
On March 7, 2008, Petra agreed with the charterers of the
Pedhoulas Trader
to terminate the $54 daily fixed rate time charter which had commenced on February 9, 2008, and was due to expire by July
24, 2008. Petra estimates that the compensation payable to the charterer for early redelivery of the vessel, which is expected to occur on June 5, 2008, will be approximately $800.
(g)
Dividend:
On March 28, 2008, the Board of Directors of the Subsidiaries declared and subsequently paid aggregate dividends of $147,770 to their owners of record as of March 31, 2008.
21. Pro forma balance sheet (unaudited)
The pro forma adjustment to the December 31, 2007 balance sheet reflects the accrual of the dividend of $147,770 and resulting reduction in owners equity to reflect the impact of the dividend, as set out
in Note 20(g) above, as well as the intended declaration prior to the closing of the initial public offering of an estimated additional dividend in the amount of $31,000, reflecting a portion of estimated net income
earned from January 1, 2008 until the date immediately prior to the closing of the initial public offering.
22.
Pro forma earnings per share (unaudited)
Pro forma earnings per share gives retroactive effect to the Reorganization, which involves the issuance (following the date of the final prospectus and prior to the closing of this offering) of 54.5 million
shares of Safe Bulkers common stock to the selling stockholder in this offering, and resulting capital structure following the completion of this offering. This offering will not involve the issuance of additional
shares of Safe Bulkers common stock as all shares of common stock in this offering will be sold by the selling stockholder.
F-35
NOTES TO PREDECESSOR COMBINED FINANCIAL STATEMENTS(Concluded)
(In thousands of United States Dollarsexcept for share and per share data, unless otherwise stated)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Safe Bulkers, Inc.:
We have audited the accompanying balance sheet of Safe Bulkers, Inc. (the Company) as of December 31, 2007, and the related statement of operations, shareholders deficit, and cash flows for the
period from December 11, 2007 (inception) to December 31, 2007. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Safe Bulkers Inc. as of December 31, 2007, and the results of its operations and its cash flows for
the period from December 11, 2007 (inception) to December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.
Deloitte
F-36
Hadjipavlou, Sofianos & Cambanis S.A.
Athens, Greece
May 15, 2008
SAFE BULKERS, INC.
Notes
December 31,
ASSETS
CURRENT ASSETS:
Total current assets
FIXED ASSETS:
Total fixed assets
OTHER NON CURRENT ASSETS:
Deferred finance charges, net
Total assets
LIABILITIES AND SHAREHOLDERS DEFICIT
CURRENT LIABILITIES:
Accrued liabilities
2
1,803
Due to related party
3
674
Total current liabilities
2,477
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS DEFICIT:
Common stock, $0.001 par value; 500 shares authorized; 0 shares issued and outstanding
Additional paid-in capital
Accumulated deficit
(2,477
)
Total shareholders deficit
(2,477
)
Total liabilities and shareholders deficit
The accompanying notes are an integral part of these financial statements.
F-37
BALANCE SHEET
AS OF DECEMBER 31, 2007
(In thousands of U.S. Dollars)
2007
SAFE BULKERS, INC.
Notes
For the period
REVENUES:
Net revenues
EXPENSES:
General and administrative expenses
4
(2,477
)
Operating loss
(2,477
)
Net loss
(2,477
)
The accompanying notes are an integral part of these financial statements.
F-38
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 11, 2007 (inception) to DECEMBER 31, 2007
(In thousands of U.S. Dollars)
December 11,
2007
(inception) to
December 31,
2007
SAFE BULKERS, INC.
Common Stock
Additional paid-in
Accumulated
Total
Shares (#)
Amount ($)
Balance, December 11, 2007
Net loss
(2,477
)
(2,477
)
Balance, December 31, 2007
(2,477
)
(2,477
)
The accompanying notes are an integral part of these financial statements.
F-39
STATEMENT OF SHAREHOLDERS DEFICIT
FOR THE PERIOD DECEMBER 11, 2007 (inception) to DECEMBER 31, 2007
(In thousands of U.S. Dollars)
capital
deficit
shareholders
deficit
SAFE BULKERS, INC.
For the period
Cash Flows from Operating Activities:
Net loss
(2,477
)
Increase in:
Accrued liabilities
1,803
Due to related parties
674
Net Cash (Used in)/Provided by Operating Activities
0
Net Cash (Used in)/Provided by Investing Activities
0
Net Cash (Used in)/Provided by Financing Activities
0
Net increase/(decrease) in cash and cash equivalents
0
Cash and cash equivalents at beginning of year
0
Cash and cash equivalents at end of year
0
Supplemental cash flow information:
Cash paid for interest:
0
F-40
STATEMENT OF CASH FLOWS
FOR THE PERIOD DECEMBER 11, 2007 (inception) to DECEMBER 31, 2007
(In thousands of U.S. Dollars)
December 11, 2007
(inception) to
December 31, 2007
SAFE BULKERS, INC.
1. Nature of Operations
Safe Bulkers, Inc., referred to herein as Safe Bulkers or the Company, was formed on December 11, 2007 under the laws of the Marshall Islands for the purpose of acquiring an ownership interest in
19 companies, all incorporated under the laws of the Republic of Liberia, that either currently own drybulk vessels or are scheduled to own drybulk vessels (the Subsidiaries) currently under the common control
of Polys Hajioannou and Nicolaos Hadjioannou. Together, these Subsidiaries own and operate a fleet of 11 drybulk vessels (the Existing Vessels) and are scheduled to acquire an additional eight newbuilds (the
Newbuilds).
Safe Bulkers commenced preparation for an initial public offering of its common shares in the United States and intends to list its shares on the New York Stock Exchange. Currently, no public market
exists for these shares. Under the Articles of Incorporation, as of December 31, 2007, the authorized capital stock of Safe Bulkers was 500 shares of common stock with par value of $0.001 per share. On May 9,
2008, the Articles of Incorporation were amended, so that the authorized capital stock of Safe Bulkers was increased to 200,000,000 shares of common stock with par value of $0.001 per share, none of which is
issued or outstanding. Following the date of the final prospectus and prior to the closing of this offering, the shares of the Subsidiaries will be contributed to Safe Bulkers by Vorini Holdings Inc., a Marshall
Islands corporation controlled by Polys Hajioannou and Nicolaos Hadjioannou (Vorini Holdings), in exchange for the issuance of 100% of the outstanding shares of Safe Bulkers to Vorini Holdings (the
Reorganization). Following the Reorganization, Safe Bulkers will own each of the Subsidiaries and Vorini Holdings will be the sole stockholder of Safe Bulkers.
Following the completion of the initial public offering, Vorini Holdings is expected to hold 78.9% of the outstanding shares of common stock of Safe Bulkers, and accordingly, will hold 78.9% of the
voting power (assuming the underwriters exercise their over allotment option), including the ability to control the Companys affairs and policies.
2. Accrued liabilities
Accrued liabilities represent expenses incurred in preparation of the initial public offering. As of December 31, 2007, accrued liabilities are comprised of the following:
Legal expenses
1,070
Auditors expenses
733
Total
1,803
3. Transactions with related parties
Safety Management Overseas S.A., Panama:
Safety Management Overseas S.A., a company incorporated under the laws of the Republic of Panama (Safety Management), is a related party controlled by
Polys Hajioannou. Amounts due to Safety Management represent the expenses relating to the initial public offering of Safe Bulkers that have been paid by Safety Management. Following closing of the initial
public offering, Safe Bulkers will reimburse these expenses to Safety Management.
4. General and administrative expenses
General and administrative expenses represent those expenses incurred by Safe Bulkers, Inc. through December 31, 2007 in preparation of the initial public offering. As of December 31, 2007, general and
administrative expenses are comprised of the following:
F-41
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars)
Legal expenses
1,199
Auditors expenses
1,201
FINRA registration fee
21
Miscellaneous costs
56
Total
2,477
5. Subsequent Events (unaudited)
Agreements to be entered into in conjunction with the Initial Public Offering:
Concurrently with the closing of its initial public offering, Safe Bulkers will enter into several new agreements, including:
(a) An agreement with Polys Hajioannou, Nicolaos Hadjioannou, and Vorini Holdings, whereby Safe Bulkers will assume the ownership of the shares of the following vessel owing companies (the Subsidiaries);
|
|
|
|
|
|
|
|
|
|
|
|||||
Existing Vessels |
|
|
|
|
|
|
|||||||||
Ship-owning Entity |
Date of Incorporation |
Vessel Name |
Type |
Built |
DWT (1) |
||||||||||
Efragel Shipping Corporation |
September 9, 2002 |
Efrossini |
Panamax |
February 2003 |
|
76,000 |
|||||||||
Marindou Shipping Corporation |
September 9, 2002 |
Maria |
Panamax |
April 2003 |
76,000 |
||||||||||
Avstes Shipping Corporation |
November 7, 2003 |
Vassos |
Panamax |
February 2004 |
|
76,000 |
|||||||||
Kerasies Shipping Corporation |
November 7, 2003 |
Katerina |
Panamax |
May 2004 |
76,000 |
||||||||||
Marathassa Shipping Corporation |
August 2, 2004 |
Maritsa |
Panamax |
January 2005 |
|
76,000 |
|||||||||
Pemer Shipping Ltd. |
January 3, 2006 |
Pedhoulas Merchant |
Kamsarmax |
March 2006 |
82,300 |
||||||||||
Petra Shipping Ltd. |
January 3, 2006 |
Pedhoulas Trader |
Kamsarmax |
May 2006 |
|
82,300 |
|||||||||
Pelea Shipping Ltd. |
January 11, 2007 |
Pedhoulas Leader |
Kamsarmax |
March 2007 |
82,300 |
||||||||||
Staloudi Shipping Corporation |
September 1, 2005 |
Stalo |
Post-Panamax |
January 2006 |
|
87,000 |
|||||||||
Marinouki Shipping Corporation |
September 1, 2005 |
Marina |
Post-Panamax |
January 2006 |
87,000 |
||||||||||
Soffive Shipping Corporation |
April 11, 2007 |
Sophia |
Post-Panamax |
June 2007 |
|
87,000 |
|||||||||
Newbuilds |
|||||||||||||||
Ship-owning Entity |
Date of Incorporation |
Hull No. |
Type |
Built * |
|
DWT (1) |
|
|
|||||||
Eniaprohi Shipping Corporation |
August 14, 2006 |
IHI 3254 |
Post-Panamax |
2008 |
87,000 |
||||||||||
Eniadefhi Shipping Corporation |
August 14, 2006 |
IHI 3255 |
Post-Panamax |
2009 |
|
87,000 |
|||||||||
Maxpente Shipping Corporation |
October 3, 2005 |
Rongsheng 1075 |
Capesize |
2010 |
176,000 |
||||||||||
Eptaprohi Shipping Corporation |
March 1, 2006 |
Rongsheng 1074 |
Capesize |
2010 |
|
176,000 |
|||||||||
Maxdodeka Shipping Corporation |
October 11, 2007 |
Sungdong 1039 |
Post-Panamax |
2009 |
92,000 |
||||||||||
Maxdekatria Shipping Corporation |
October 11, 2007 |
Sungdong 1050 |
Post-Panamax |
2010 |
|
92,000 |
|||||||||
Maxdeka Shipping Corporation |
September 24, 2007 |
STX 2054 |
Kamsarmax |
2010 |
81,000 |
||||||||||
Maxenteka Shipping Corporation |
September 24, 2007 |
STX 2055 |
Kamsarmax |
2010 |
|
81,000 |
|
|
|
* |
Estimated completion date |
|
(1) |
Deadweight Ton (DWT). A unit of a vessels capacity for cargo, fuel oil, stores and crew, measured in metric tons of 1,000 kilograms. A vessels DWT is the total weight the vessel can carry when loaded to a particular load line. |
(b) A management agreement (the New Management Agreement) with Safety Management (the Manager) pursuant to which the Manager will agree to provide commercial, and technical management services to Safe Bulkers and to the Existing Vessels and the Newbuilds owned by the Subsidiaries.
Under the New Management Agreement, the Company will pay the Manager $0.575 per vessel per day, for certain commercial, technical and administrative services. In addition, the Company will pay the Manager a fee of 1.0% of the gross freight, charter hire, ballast bonus and demurrage collected from the employment of our ships, and 1.0% of the contract price of any vessels bought or sold on the Companys behalf, including the acquisition of the Newbuilds, with the exception of the acquisition of the Newbuild Hull Nos. 3244 and 3255 . The Company will also pay the Manager a fee
F-42
of $375 per newbuild, for the on-premises supervision of all newbuilds we have agreed to acquire pursuant to shipbuilding contracts, memoranda of agreement, or otherwise; and
(c) Following the completion of the initial public offering, the Company will become the guarantor of the Efragel Shipping Corporation, Marindou Shipping Corporation, Pelea Shipping Ltd., Avstes
Shipping Corporation, Eniaprohi Shipping Corporation and Eniadefhi Shipping Corporation credit facilities. As the guarantor, the Company will be subject to certain financial covenants to be agreed to prior to
the closing of the initial public offering. In addition, there will be a covenant that the Hajioannou Family maintain a majority interest in the Company.
(d) Following the completion of the initial public offering, the Company will also become the guarantor of the credit facilities of Marathassa Shipping Corporation, Marinouki Shipping Corporation,
Soffive Shipping Corporation and Kerasies Shipping Corporation. As the guarantor, Safe Bulkers will be subject to certain financial covenants, including (i) maintaining a minimum adjusted net worth of
$200,000 and minimum free liquidity of $500 per vessel with RBS, (ii) ensuring that debt does not execeed 70% of adjusted total assets or 550% of the 12-month trailing EBITDA (as will be defined in the
relevant agreements), (iii) having the ability to pay dividends of up to 100% of free cash flow (as will be defined in the relevant agreements), subject to no event of default occurring and (iii) customary
undertakings with respect to the delivery of all information required by the Securities and Exchange Commission or pursuant to the Sarbanes Oxley Act. Also, following the completion of the initial public
offering, the margin of the loan obligations of Marathassa and Marinouki will be amended to 0.75% from 0.675%, and the margins for Soffive and Kerasies will be amended to 0.75% from 0.575%.
F-43
Through and including
, 2008 (the 25th day after the date of this prospectus), all dealers effecting transactions in our common stock, whether or not participating in the offering, may be required to
deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to any unsold allotments or subscriptions.
10,000,000 Shares
Safe Bulkers, Inc.
PROSPECTUS
Merrill Lynch & Co.
, 2008
Common Stock
Credit Suisse
Jefferies & Company
Dahlman Rose & Company
Poten Capital Services LLC
DnB NOR Markets
PART II
Item 6.
Indemnification of Directors and Officers.
The Registrant is a Marshall Islands corporation. Section 60 of the Business Corporations Act of the Republic of the Marshall Islands (the BCA) provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of no contest, or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe his conduct was unlawful.
A Marshall Islands corporation also has the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys fees) actually and reasonably incurred by him or in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court
in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
To the extent that a director or officer of a Marshall Islands corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in the preceding paragraph,
or in the defense of a claim, issue or matter therein, he shall be indemnified against expenses (including attorneys fees) actually and reasonably incurred by him in connection therewith. Expenses incurred in
defending a civil or criminal action, suit or proceeding may be paid in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the specific case upon receipt of
an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized under Section 60 of the
BCA.
Section 60 of the BCA also permits a Marshall Islands corporation to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation or is or was serving at
the request of the corporation as a director or officer against any liability asserted against him and incurred by him in such capacity whether or not the corporation would have the power to indemnify him against
such liability under the provisions of Section 60 of the BCA.
The indemnification and advancement of expenses provided by, or granted pursuant to, Section 60 of the BCA are not exclusive of any other rights to which those seeking indemnification and advancement
of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such persons official capacity and as to action in another capacity while
holding such office. In this regard, the Registrants Bylaws provide that such expenses (including attorneys fees) incurred by former directors and officers may be so paid upon such terms and conditions, if any, as
the Registrant deems appropriate, and the board of directors may authorize the Registrants legal counsel to
II-1
INFORMATION NOT REQUIRED IN PROSPECTUS
represent a present or former director or officer in any action, suit or proceeding, whether or not the Registrant is a party to such action, suit or proceeding. The Registrants Bylaws further provide for
indemnification of directors and officers on the basis described above as being permitted by Section 60 of the BCA and provide, to the extent authorized from time to time by the board of directors of the
Registrant, rights to indemnification and to the advancement of expenses to employees and agents of the corporation similar to those conferred to directors and officers of Registrant.
The Articles of Incorporation of the Registrant provide that no director shall have personal liability to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director,
but the liability of a director is not limited or eliminated (a) for any breach of the directors duty of loyalty to the Corporation or its stockholders; (b) for acts or omissions not undertaken in good faith or which
involve intentional misconduct or a knowing violation of law; or (c) for any transaction from which the director derived an improper personal benefit.
Section 6 of the Underwriting Agreement, the form of which will be filed as Exhibit 1.1 hereto, provides that the underwriters named therein will indemnify us and hold us harmless and each of our
directors, officers or controlling persons from and against certain liabilities, including liabilities under the Securities Act. Section 7 of the Underwriting Agreement also provides that such underwriters will
contribute to certain liabilities of such persons under the Securities Act.
Item 7.
Recent Sales of Unregistered Securities.
Following the date of the final prospectus, and prior to the closing of this offering, we intend to issue 54,500,000 shares of our common stock to Vorini Holdings Inc. in exchange for its contribution to us
of all the outstanding shares of the Subsidiaries. We expect this issuance to be exempt from registration as a transaction that will not involve an offer or sale and, in any event, as a transaction not involving an
offering in the United States under Regulation S of the Securities Act.
Item 8.
Exhibits and Financial Statement Schedules.
(a) Exhibits
II-2
Exhibit
Description
10.10
Loan Agreement, dated March 1, 2006, to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc
10.11
Letter Agreement, dated March 10, 2008, Amending Loan Agreement, dated March 1, 2006, to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc
10.12
Supplemental Letter Agreement, dated April 24, 2008, Amending Loan Agreement, dated March 1, 2006, to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc
10.13
Letter Agreement, dated May 14, 2008, Amending Loan Agreement, dated March 1, 2006, to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc
10.14
Loan Agreement, dated May 29, 2006, to Staloudi Shipping Corporation provided by Deutsche Schiffsbank Aktiengesellschaft
10.15
Letter Agreement, dated December 3, 2007, Amending Loan Agreement, dated May 29, 2006, to Staloudi Shipping Corporation provided by Deutsche Schiffsbank Aktiengesellschaft
10.16
Supplemental Letter Agreement, dated May 2008, Amending Loan Agreement, dated May 29, 2006, to Staloudi Shipping Corporation provided by Deutsche Schiffsbank Aktiengesellschaft
10.17
Loan Agreement, dated January 11, 2007, to Petra Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank Aktiengesellschaft
10.18
Letter Agreement, dated January 18, 2008, Amending Loan Agreement, dated January 11, 2007, to Petra Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank Aktiengesellschaft
10.19
Loan Agreement, dated March 7, 2007, to Pemer Shipping Ltd provided by Bayerische Hypo-Und Vereinsbank Aktiengesellschaft
10.20
Letter Agreement, dated March 5, 2008, Amending Loan Agreement, dated March 7, 2007, to Pemer Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank Aktiengesellschaft
10.21
Loan Agreement, dated June 12, 2007, to Pelea Shipping Ltd provided by DnB NOR BANK ASA
10.22
Loan Agreement, dated November 18, 2007, to Soffive Shipping Corporation provided by The Royal Bank of Scotland plc
10.23
Letter Agreement, dated May 14, 2008, Amending Loan Agreement, dated November 18, 2007, to Soffive Shipping Corporation provided by The Royal Bank of Scotland plc
10.24
Loan Agreement, dated December 13, 2007, to Kerasies Shipping Corporation provided by The Royal Bank of Scotland plc
10.25
Letter Agreement, dated May 14, 2008, Amending Loan Agreement, dated December 13, 2007, to Kerasies Shipping Corporation provided by The Royal Bank of Scotland plc
10.26
Loan Agreement, dated January 11, 2008, to Marindou Shipping Corporation provided by DnB NOR Bank ASA
10.27
Loan Agreement, dated January 11, 2008, to Efragel Shipping Corporation provided by DnB NOR Bank ASA
10.28
Loan Agreement, dated April 17, 2008, to Avstes Shipping Corporation provided by DnB NOR Bank ASA
10.29
Shipbuilding Contract, dated August 28, 2006, with Itochu Corporation for the
HN
3254
10.30
Shipbuilding Contract, dated August 28, 2006, with Itochu Corporation for
HN
3255
10.31
Shipbuilding Contract, dated December 6, 2006, with Jiangsu Rongsheng Heavy Industries Group Co., Ltd for
HN
1074
10.32
Shipbuilding Contract, dated December 6, 2006, with Jiangsu Rongsheng Heavy Industries Group Co., Ltd for the
HN
1075
10.33
Memorandum of Agreement, dated October 26, 2007, for the
HN
1039
10.34
Memorandum of Agreement, dated October 26, 2007, for the
HN
1050
10.35
Memorandum of Agreement, dated November 10, 2007, for the
HN
2054
10.36
Memorandum of Agreement, dated November 10, 2007, for the
HN
2055
21.1
Subsidiaries
23.1
Consent of Independent Registered Public Accounting Firm
23.2
Consent of Cravath, Swaine & Moore LLP (included in Exhibit 5.2 and Exhibit 8.1)
23.3
Consent of Cozen OConnor, Marshall Islands and Liberian Counsel (included in Exhibit 5.1 and Exhibit 8.2)
23.4
Consent of Drewry Shipping Consultants Ltd.
23.5
Consent of Ole Wikborg, Nominee for Director
23.6
Consent of Basil Sakellis, Nominee for Director
23.7
Consent of Frank Sica, Nominee for Director
24.1
Power of Attorney (included on the signature page hereto)
*
To be provided by amendment.
II-3
Number
(b) Financial Statement Schedules
The financial statement schedules are omitted because they are inapplicable or the requested information is shown in the combined financial statements of Safe Bulkers, Inc. or related notes thereto.
Item 9.
Undertakings
The undersigned registrant hereby undertakes:
To provide to the underwriters at the closing specified in the underwriting agreement, share certificates in such denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
(2)
That for purposes of determining any liability under the Securities Act of 1933, as amended (the Act), the information omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3)
That for the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(4)
Each prospectus filed pursuant to Rule 424(b) as part of this registration statement, other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in this
registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in this registration statement or any prospectus that is part of this registration
statement or made in a document incorporated or deemed incorporated by reference into this registration statement or any prospectus that is part of this registration statement will, as to a
purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in this registration statement or prospectus that was part of this registration
statement or made in any such document immediately prior to such date of first use.
(5)
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser
and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the
undersigned registrant; and
(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6)
That insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities
II-4
(1)
II-5
(other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Athens, Greece, on the 16th day of May, 2008.
S
AFE
B
ULKERS
, I
NC
.
By:
/s/ P
OLYS
H
AJIOANNOU
Name: Polys Hajioannou
K
NOW
A
LL
P
ERSONS
B
Y
T
HESE
P
RESENTS
, that each person whose signature appears below constitutes and appoints each of Polys Hajioannou,
Loukas Barmparis, Nicolaos Hadjioannou and Konstantinos
Adamopoulos his or her true and lawful attorney-in-fact and agent, with full powers of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this registration statement, including any subsequent registration statement for the same offering which may be filed under Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 16th day of May, 2008.
Signature
Title
/s/ P
OLYS
H
AJIOANNOU
Polys Hajioannou
Chairman and Chief Executive Officer
/s/ L
OUKAS
B
ARMPARIS
Dr. Loukas Barmparis
President and Director
/s/ N
ICOLAOS
H
ADJIOANNOU
Nicolaos Hadjioannou
Chief Operating Officer and Director
/s/ K
ONSTANTINOS
A
DAMOPOULOS
Konstantinos Adamopoulos
(Principal Financial and Accounting Officer)
II-6
Title: Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer and Director
Authorized Representative
Pursuant to the requirement of the Securities Act of 1933, the undersigned, the duly undersigned representative in the United States of the Registrant, has signed this registration statement in the City of
Newark, State of Delaware, on May 16, 2008.
P
UGLISI
&
A
SSOCIATES
By:
/
S
/ D
ONALD
J. P
UGLISI
Name: Donald J. Puglisi
II-7
Title: Managing Director
EXHIBIT INDEX
Set forth below is a list of exhibits that are being or will be filed with this Registration Statement on Form F-1.
Exhibit
Description
1.1
Form of Underwriting Agreement*
3.1
Amended and Restated Articles of Incorporation
3.2
Amended and Restated Bylaws
4.1
Specimen Share Certificate
4.2
Form of Registration Rights Agreement between Safe Bulkers, Inc. and Vorini Holdings Inc.*
5.1
Opinion of Cozen OConnor, Marshall Islands counsel, as to the validity of the common stock being issued
5.2
Opinion of Cravath, Swaine & Moore LLP, United States counsel to Safe Bulkers, Inc., with respect to New York law
8.1
Opinion of Cravath, Swaine & Moore LLP, United States counsel to Safe Bulkers, Inc., with respect to certain tax matters
8.2
Opinion of Cozen OConnor, Marshall Islands and Liberian counsel, with respect to certain tax matters
10.1
Form of Management Agreement between Safety Management Overseas S.A. and Safe Bulkers, Inc.
10.2
Form of Restrictive Covenant Agreement among Safe Bulkers, Inc., Polys Hajioannou, Vorini Holdings Inc., SafeFixing Corp and Machairiotissa Holdings Inc.
10.3
Form of Restrictive Covenant Agreement between Safe Bulkers, Inc. and Polys Hajioannou
10.4
Form of Restrictive Covenant Agreement between Safe Bulkers, Inc. and Nicolaos Hadjioannou
10.5
Stockholder Rights Agreement
10.6
Form of Contribution, Conveyance and Assumption Agreement between Safe Bulkers, Inc., Vorini Holdings, Inc., Polys Hajioannou and Nicolaos Hadjioannou
10.7
Loan Agreement, dated February 16, 2005, to Marathassa Shipping Corporation provided by The Royal Bank of Scotland plc
10.8
Letter Agreement, dated April 19, 2006, Amending Loan Agreement, dated February 16, 2005, to Marathassa Shipping Corporation provided by The Royal Bank of Scotland plc
10.9
Letter Agreement, dated May 14, 2008, Amending Loan Agreement, dated February 16, 2005, to Marathassa Shipping Corporation provided by The Royal Bank of Scotland plc
10.10
Loan Agreement, dated March 1, 2006, to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc
10.11
Letter Agreement, dated March 10, 2008, Amending Loan Agreement, dated March 1, 2006, to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc
10.12
Supplemental Letter Agreement, dated April 24, 2008, Amending Loan Agreement, dated March 1, 2006, to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc
10.13
Letter Agreement, dated May 14, 2008, Amending Loan Agreement, dated March 1, 2006, to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc
10.14
Loan Agreement, dated May 29, 2006, to Staloudi Shipping Corporation provided by Deutsche Schiffsbank Aktiengesellschaft
10.15
Letter Agreement, dated December 3, 2007, Amending Loan Agreement, dated May 29, 2006, to Staloudi Shipping Corporation provided by Deutsche Schiffsbank Aktiengesellschaft
10.16
Supplemental Letter Agreement, dated May 2008, Amending Loan Agreement, dated May 29, 2006, to Staloudi Shipping Corporation provided by Deutsche Schiffsbank Aktiengesellschaft
10.17
Loan Agreement, dated January 11, 2007, to Petra Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank Aktiengesellschaft
10.18
Letter Agreement, dated January 18, 2008, Amending Loan Agreement, dated January 11, 2007, to Petra Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank Aktiengesellschaft
10.19
Loan Agreement, dated March 7, 2007, to Pemer Shipping Ltd provided by Bayerische Hypo-Und Vereinsbank Aktiengesellschaft
10.20
Letter Agreement, dated March 5, 2008, Amending Loan Agreement, dated March 7, 2007, to Pemer Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank Aktiengesellschaft
10.21
Loan Agreement, dated June 12, 2007, to Pelea Shipping Ltd provided by DnB NOR BANK ASA
10.22
Loan Agreement, dated November 18, 2007, to Soffive Shipping Corporation provided by The Royal Bank of Scotland plc
Number
Exhibit
Description
10.23
Letter Agreement, dated May 14, 2008, Amending Loan Agreement, dated November 18, 2007, to Soffive Shipping Corporation provided by The Royal Bank of Scotland plc
10.24
Loan Agreement, dated December 13, 2007, to Kerasies Shipping Corporation provided by The Royal Bank of Scotland plc
10.25
Letter Agreement, dated May 14, 2008, Amending Loan Agreement, dated December 13, 2007, to Kerasies Shipping Corporation provided by The Royal Bank of Scotland plc
10.26
Loan Agreement, dated January 11, 2008, to Marindou Shipping Corporation provided by DnB NOR Bank ASA
10.27
Loan Agreement, dated January 11, 2008, to Efragel Shipping Corporation provided by DnB NOR Bank ASA
10.28
Loan Agreement, dated April 17, 2008, to Avstes Shipping Corporation provided by DnB NOR Bank ASA
10.29
Shipbuilding Contract, dated August 28, 2006, with Itochu Corporation for the
HN
3254
10.30
Shipbuilding Contract, dated August 28, 2006, with Itochu Corporation for
HN
3255
10.31
Shipbuilding Contract, dated December 6, 2006, with Jiangsu Rongsheng Heavy Industries Group Co., Ltd for
HN
1074
10.32
Shipbuilding Contract, dated December 6, 2006, with Jiangsu Rongsheng Heavy Industries Group Co., Ltd for the
HN
1075
10.33
Memorandum of Agreement, dated October 26, 2007, for the
HN
1039
10.34
Memorandum of Agreement, dated October 26, 2007, for the
HN
1050
10.35
Memorandum of Agreement, dated November 10, 2007, for the
HN
2054
10.36
Memorandum of Agreement, dated November 10, 2007, for the
HN
2055
21.1
Subsidiaries
23.1
Consent of Independent Registered Public Accounting Firm
23.2
Consent of Cravath, Swaine & Moore LLP (included in Exhibit 5.2 and Exhibit 8.1)
23.3
Consent of Cozen OConnor, Marshall Islands and Liberian Counsel (included in Exhibit 5.1 and Exhibit 8.2)
23.4
Consent of Drewry Shipping Consultants Ltd.
23.5
Consent of Ole Wikborg, Nominee for Director
23.6
Consent of Basil Sakellis, Nominee for Director
23.7
Consent of Frank Sica, Nominee for Director
24.1
Power of Attorney (included on the signature page hereto)
*
Number
To be provided by amendment.
EXHIBIT 3.1
FIRST AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SAFE BULKERS, INC.
PURSUANT TO
THE MARSHALL ISLANDS BUSINESS CORPORATIONS ACT
ADOPTED MAY 9, 2008
Safe Bulkers, Inc. (the Corporation), a corporation organized and existing under the laws of the Marshall Islands Business Corporations Act (the BCA), hereby certifies as follows:
ARTICLE I
Name
SECTION 1.01. Name . The name of the Corporation is Safe Bulkers, Inc.
ARTICLE II
Address; Registered Agent
SECTION 2.01. Address; Registered Agent . The registered address of the Corporation in the Republic of the Marshall Islands is Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960. The name of the Corporations registered agent at such address is The Trust Company of the Marshall Islands, Inc. However, the Board of Directors of the Corporation (the Board of Directors) may establish branches, offices or agencies in any place in the world and may appoint legal representatives anywhere in the world. The Corporation may transfer its corporate domicile from the Marshall Islands to any other place in the world.
ARTICLE III
Purpose
SECTION 3.01. Purpose . The purpose of the Corporation is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the BCA.
2
ARTICLE IV
Capital Stock
SECTION 4.01. Authorized Capital Stock . The total number of shares of capital stock that the Corporation shall have authority to issue is Two hundred and twenty million (220,000,000) registered shares, consisting of Two hundred million (200,000,000) registered shares of common stock, par value of US$0.001 per share ( Common Stock ), and Twenty million (20,000,000) registered shares of preferred stock, par value of $0.01 per share ( Preferred Stock ).
SECTION 4.02. Preferred Stock . The Board of Directors is hereby expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers (if any) of the shares of such series and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series of Preferred Stock at any time outstanding.
SECTION 4.03. No Preemptive Rights . Shareholders of the Corporations common stock shall have no conversion, redemption or preemptive rights to subscribe to any of the Corporations securities.
ARTICLE V
Board of Directors; Shareholders; Bylaws
For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation, of its Board of Directors and of its shareholders or any class thereof, as the case may be, it is further provided that:
A. Board of Directors.
SECTION 5.01. Powers; Number of Directors. The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. The number of directors which shall constitute the entire Board of Directors shall be fixed by the Board of Directors in the manner provided in the bylaws of the Corporation.
SECTION 5.02. Election of Directors. The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors such that Class I, Class II and Class III shall each consist of an equal number of directors to the extent practicable. At the first annual meeting of shareholders
3
following the Effective Date (as defined below), the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of shareholders following the Effective Date, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of shareholders following the Effective Date, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of shareholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting. Cumulative voting, as defined in Division 7, Section 71(2) of the BCA, shall not be used to elect directors.
SECTION 5.03. Change in Number of Directors. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain a number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office.
SECTION 5.04. Removal of Directors. (a) Notwithstanding any other provisions of these Articles of Incorporation or the bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the bylaws of the Corporation), any director or the entire Board of Directors may be removed at any time, but only for cause and only by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock of the Corporation entitled to vote generally in the election of directors cast at a meeting of the shareholders called for that purpose. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of this Section 5.04 shall not apply with respect to the director or directors elected by such holders of Preferred Stock.
(b) In order to remove a director, a special meeting shall be convened and held in accordance with these Articles of Incorporation and the bylaws of the Corporation. Notice of such a meeting convened for the purpose of removing a director shall contain a statement of the intention to do so and be served on such director not less than fourteen days before the meeting and at such meeting the director shall be entitled to be heard on the motion for such directors removal.
(c) For the purpose of this Section 5.04, cause means (i) conviction of a felony, indictable offence or similar criminal offence or (ii) breach of duty of loyalty to the Corporation or other willful misconduct that results in material injury (monetary or otherwise) to the Corporation or any of its subsidiaries.
4
SECTION 5.05. Vacancies. Any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall be filled by a majority of the members of the Incumbent Board then in office, even though less than a quorum of the Board of Directors, and not by the shareholders. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board of Directors until the vacancy is filled. Any director elected in accordance with this section shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such directors successor shall have been elected and qualified. The Incumbent Board shall mean those directors of the Corporation who, as of the Effective Date, constitute the Board of Directors of the Corporation, provided that (i) any person becoming a director subsequent to such date whose election, or nomination for election by the Corporations shareholders, is approved by a vote of at least a majority of the directors then comprising the Incumbent Board or (ii) any person appointed by the Incumbent Board to fill a vacancy, shall also be considered a member of the Incumbent Board of the Corporation.
B. Action by Shareholders.
SECTION 5.06. Special Meetings. Special meetings of the shareholders of the Corporation, for any purpose or purposes, may be called at any time by the Chief Executive Officer of the Corporation or Chairman of the Board of Directors and shall be called by the Chief Executive Officer or the Secretary of the Corporation at the request in writing of a majority of the Board of Directors. Special meetings of the shareholders of the Corporation may not be called by any other person or persons.
SECTION 5.07. No Shareholder Action Without A Meeting. Except for as provided in Section 5.08, no action shall be taken by the shareholders of the Corporation except at duly called annual or special meeting of shareholders of the Corporation.
SECTION 5.08. Shareholder Action By Unanimous Written Consent. Any action required to be taken or which may be taken at any annual or special meeting of shareholders of the Corporation may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all of the shareholders entitled to vote with respect to the subject matter thereof.
SECTION 5.09. Advance Notice. Advance notice of shareholder nominations for the election of directors and of business to be brought by shareholders before any meeting of the shareholders of the Corporation shall be given in the manner provided in the bylaws of the Corporation.
C. Bylaws.
SECTION 5.10. Amendment by the Board of Directors. In furtherance and not in limitation of the powers conferred by the laws of the Marshall Islands, the
5
Board of Directors is expressly authorized to make, adopt, alter, amend, change or repeal the bylaws of the Corporation by resolutions adopted by the affirmative vote of a majority of the entire Board of Directors, subject to any bylaw requiring the affirmative vote of a larger percentage of the members of the Board of Directors.
SECTION 5.11. Amendment by Shareholders. Shareholders may not make, adopt, alter, amend, change or repeal the bylaws of the Corporation except upon the affirmative vote of at least 75% of the votes entitled to be cast by the holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class.
ARTICLE VI
Perpetual Existence
SECTION 6.01. Perpetual Existence . The Corporation is to have perpetual existence.
ARTICLE VII
Limitation of Director Liability
SECTION 7.01. Limitation of Director Liability . A director shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except, if required by the BCA, as amended from time to time, for (a) liability for any breach of the directors duty of loyalty to the Corporation or its shareholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law or (c) for any transaction from which the director derived an improper personal benefit. Neither the amendment nor repeal of this Article VII shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article VII would accrue or arise, prior to such amendment or repeal.
ARTICLE VIII
Amendment; Repeal
SECTION 8.01. Amendment; Repeal . The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the shareholders herein are granted subject to this reservation. Notwithstanding the foregoing, no amendment, alteration, change or repeal may be made to Article V or this Article VIII without the affirmative vote of the holders of at least 75% of the votes entitled to be cast by the holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class.
* * *
EXHIBIT 3.2
FIRST AMENDED AND RESTATED BYLAWS
SECTION 1.01.
Address; Registered Agent.
The registered address of Safe Bulkers, Inc. (the Corporation) in
the Republic of the Marshall Islands is Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960. The name of the Corporations registered agent at such address is The Trust Company of the Marshall Islands, Inc.
SECTION 1.02.
Other Offices.
The principal place of business of the Corporation shall be at such place or places as the
Board of Directors of the Corporation (the Board of Directors) shall from time to time determine. The Corporation may also have an office or offices at such other places within or outside of the Republic of the Marshall Islands, as the
Board of Directors may from time to time appoint or as the business of the Corporation may require.
ARTICLE II
SECTION 2.01.
Corporate Seal.
The Board of Directors may adopt a corporate seal. The corporate seal shall consist of a
die bearing the name of the Corporation, the year of its organization, and the inscription, Marshall Islands. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE III
SECTION 3.01.
Location of Meetings.
Meetings of stockholders shall be held at any place within or outside the Republic
of the Marshall Islands designated by the
2
Board of Directors. In the absence of any such designation, stockholders meetings shall be held at the principal executive office of the Corporation.
SECTION 3.02.
Notice of Stockholders Meetings.
Whenever stockholders are required or permitted to take any action
at a meeting, a written notice of the meeting shall be given, which notice shall state the place, date and hour of the meeting, the person or persons calling such meeting, and, in the case of a special meeting, the purpose or purposes for which the
meeting is called. The written notice of any meeting shall be given to each stockholder entitled to vote at such meeting not less than fifteen nor more than sixty days before the date of the meeting. If mailed, notice is given when deposited in the
mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.
SECTION 3.03.
Annual Meetings of Stockholders.
(a) The annual meeting of stockholders shall be held each year on a date
and a time designated by the Board of Directors. At each annual meeting directors shall be elected and only such other business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual
meeting, business (including the nominations of persons for election to the Board of Directors and any other business to be considered by the stockholders) must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by any stockholder of the Corporation.
(b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a) of this Section 3.03, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholders notice (a Stockholder Notice) shall be
delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the ninetieth day nor earlier than the close of business on the one hundred twentieth day prior to the first
anniversary of the preceding years annual meeting. In the event the annual general meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the stockholder or stockholders must be given not
later than ten days following the earlier of the date on which notice of the annual general meeting was mailed to stockholders or the date on which public disclosure of the date of the annual general meeting was made. In no event shall the public
announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a Stockholder Notice as described above. Such Stockholder Notice shall set forth: (i) as to each person whom
the shareholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to Section 14 of the United
3
States Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations promulgated thereunder applicable to issuers that are not foreign private issuers; (ii) as to any other
business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration
and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (A) the name and address of
such stockholder, as they appear on the Corporations books, and of such beneficial owner, (B) the class and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial
owner, (C) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, (D) any material
interest of the stockholder in such business and (E) a representation whether the stockholder or the beneficial owner, if any, intends, or is part of a group which intends to: (1) deliver a proxy statement and/or form of proxy to holders of at least
the percentage of the Corporations outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (2) otherwise solicit proxies from stockholders in support of such proposal or nomination. Notice as to each
person whom a shareholder proposes to nominate for election as a director must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. The Corporation may require any proposed
nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.
(c) Notwithstanding anything in the second sentence of paragraph (b) of this Section 3.03 to the contrary, in the event that the number of directors to be elected to the Board of Directors at
an annual meeting is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least one hundred days prior to the first anniversary of the
preceding years annual meeting, a stockholders notice required by this Section 3.03 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Corporation not later than the close of business on the fifteenth day following the day on which such public announcement is first made by the Corporation.
(d) For purposes of this Section 3.03, public announcement shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable U.S. or
Marshall Islands news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
4
SECTION 3.04.
Special Meetings.
(a) Special meetings of the stockholders, for any purpose or purposes, unless otherwise
prescribed by statute, may only be called in accordance with the provisions of the Articles of Incorporation of the Corporation (the Articles of Incorporation). Business transacted at any special meeting of stockholders shall be limited
to only such business brought before the meeting pursuant to the Corporations notice of meeting.
(b) Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected by or at the direction of the Board of
Directors in accordance with the Articles of Incorporation.
SECTION 3.05.
Compliance with Procedures.
Only such persons who are nominated in accordance with the procedures set
forth in Section 3.03 or Section 3.04, as applicable, shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance with the procedures set forth in Section 3.03 or Section 3.04, as applicable. Except as otherwise provided by law, the Articles of Incorporation or these Bylaws, the chairman of the meeting
shall have the power and duty to (a) whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in Section 3.03 or Section 3.04, as applicable,
and (b) if any proposed nomination or business is not in compliance with Section 3.03 or Section 3.04, as applicable (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicits (or is
part of a group which solicits), or fails to so solicit, as the case may be, proxies in support of such stockholders proposal in compliance with such stockholders representation as required by Section 3.03 (b)(ii)(E), to declare that
such defective nomination shall be disregarded or that such proposed business shall not be transacted.
SECTION 3.06.
Compliance With Exchange Act.
Notwithstanding the provisions of Section 3.03 and Section 3.04, a
stockholder shall also comply with all applicable requirements of the Exchange Act, and the rules and regulations thereunder, with respect to the matters set forth in Section 3.03 and Section 3.04.
SECTION 3.07.
Quorum, Adjournment.
A majority of the stock issued and outstanding and entitled to vote at any meeting of
stockholders, the holders of which are present in person or represented by proxy, shall constitute a quorum for the transaction of business except as otherwise provided by law, by the Articles of Incorporation, or by these Bylaws. A quorum, once
established, shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue to transact business until adjournment. If, however, such quorum shall not be present or represented at any meeting of
the stockholders, a majority of the voting stock represented in person or by proxy may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after
5
the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote thereat.
SECTION 3.08.
Vote Required.
When a quorum is present at any meeting, the vote of the holders of a majority of voting
power held by the stockholders present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes, the Articles of Incorporation, these Bylaws,
or a contractual right, a different vote is required, in which case such express provision shall govern and control the decision of such question. At all meetings of stockholders for the election of directors, directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.
SECTION 3.09.
Voting Procedures.
At each meeting of the stockholders, each stockholder having the right to vote may vote
in person or may authorize another person or persons to act for him by proxy
provided
,
however
, that no
proxy shall be valid after the expiration of eleven months from the date such proxy was authorized unless otherwise provided in the proxy. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in the law of the Republic of the Marshall Islands to support an irrevocable power. A shareholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. All proxies must be filed with the Secretary of the Corporation at the beginning of each meeting in order to be
counted in any vote at the meeting. Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the Corporation on the record date set by the Board of Directors as provided in, Section
7.04.
SECTION 3.10.
Stockholders Entitled to Vote.
The officer who has charge of the stock ledger of the Corporation shall
prepare and make, at least fifteen days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least fifteen days prior to the meeting, either at
a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 3.11.
Stockholder Action By Unanimous Written Consent
Without A Meeting.
Any action required to be taken or which may be taken at any annual or special meeting of the shareholders of the Corporation may be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all of the shareholders entitled to vote with respect to the subject matter thereof.
6
ARTICLE IV
SECTION 4.01.
Number.
The number of directors which shall constitute the Entire Board of Directors shall be not less
than three (3) and not more than fifteen (15). Entire Board means the total number of directors entitled to vote which the Corporation would have if there were no vacancies. The exact number of directors shall be determined from time to
time by resolution adopted by affirmative vote of a majority of the Entire Board of Directors. Directors need not be stockholders of the Corporation. The provisions of this Section 4.01 may be amended only with the approval of 75% of the members of
the Entire Board of Directors.
SECTION 4.02.
Powers.
The powers of the Corporation shall be exercised, its business conducted and its property
controlled by the Board of Directors, except as may be otherwise provided by statute or by the Articles of Incorporation.
SECTION 4.03.
Election And Tenure.
Each director shall be elected in the manner specified in the Articles of
Incorporation and shall hold office until such time as is set forth therein.
SECTION 4.04.
Vacancies.
Any vacancies on the Board of Directors shall be filled only in the manner specified in the
Articles of Incorporation.
SECTION 4.05.
Resignation.
Any director may resign at any time by delivering his or her notice in writing or by
electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed
effective at the pleasure of the Board of Directors.
SECTION 4.06.
Removal.
Except as otherwise provided by applicable laws, directors may only be removed by the
shareholders in accordance with the provisions of the Articles of Incorporation.
SECTION 4.07.
Meetings.
(a)
Regular Meetings.
Unless otherwise restricted by the Articles of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or outside of the Republic of the Marshall Islands which has been
designated by the Board of Directors and publicized among all directors, either orally or in writing. The directors may have one or more offices and keep the books of the Corporation outside of the Republic of the Marshall Islands.
(b)
Special Meetings.
Unless otherwise restricted by the Articles of Incorporation, special meetings of the Board of
Directors may be held at any time and place within or outside of the Republic of the Marshall Islands whenever called by the Chairman of the Board, the Chief Executive Officer or a majority of the members of the Board of Directors.
7
(c)
Meetings by Electronic Communications Equipment.
Any member of the Board of Directors, or of any committee thereof,
may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in
person at such meeting.
(d)
Notice of Special Meetings.
Notice of the time and place of all special meetings of the Board of Directors shall be
given, orally or in writing, by telephone, facsimile, telegraph or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting. If notice is sent by mail, it
shall be sent by first class mail, postage prepaid at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
(e)
Waiver of Notice.
The transaction of all business at any meeting of the Board of Directors, or any committee
thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present who did
not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.
SECTION 4.08.
Quorum and Voting.
(a) Except as may be otherwise specifically provided by statute, the Articles of
Incorporation or these Bylaws, a quorum of the Board of Directors shall consist of a majority of the Entire Board of Directors;
provided
,
however
, at any meeting, whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of
Directors, without notice other than by announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless
a different vote be required by law, the Articles of Incorporation or these Bylaws.
SECTION 4.09.
Action Without Meeting.
Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Entire Board of Directors or committee, as the case may be, consent thereto in
writing or by electronic transmission, and such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained
in paper form and shall be in electronic form if the minutes are maintained in
8
electronic form provided that such form complies with the relevant provisions of the BCA.
SECTION 4.10.
Fees And Compensation.
Non-employee Directors shall be entitled to such compensation for their services as
may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any
meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation
therefor.
SECTION 4.11.
Committees.
The Board of Directors may, by resolution passed by a majority of the Entire Board, designate
one or more committees, each such committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation as are allowed under the BCA and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the Articles of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of
the Corporations property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws; and, unless the resolution or the Articles of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
ARTICLE V
SECTION 5.01.
Officers Designated.
The officers of the Corporation shall include, if and when designated by the Board of
Directors, a Chief Executive Officer, a President, a Chief Financial Officer and a Secretary, all of whom shall be elected at the annual meeting of the Board of Directors. The Board of Directors may also appoint other officers as are desired,
including a Chairman of the Board of Directors, a Chief Operating Officer, a Controller, a Treasurer, one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such other officers and agents
9
as may be appointed in accordance with the provisions of Section 5.03(h) . The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. In the event there are two or
more Vice Presidents, then the directors may, at the time of the election of the officers, by resolution determine the order of their rank. Any one person may hold any number of offices of the Corporation at any one time unless specifically
prohibited therefrom by law.
SECTION 5.02.
Compensation of Officers.
The salaries and other compensation of the officers of the Corporation shall be
fixed by or in the manner designated by the Board of Directors.
SECTION 5.03.
Tenure and Duties of Officers.
(a)
Election and
Vacancies.
All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless
their earlier resignation or removal. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.
(b)
Duties of Chairman of the Board of Directors.
The Chairman of the Board of Directors, if such an officer is elected,
when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such
other powers as the Board of Directors shall designate from time to time. If there is no Chief Executive Officer, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the Corporation and shall have the
powers and duties prescribed in paragraph (c) of this Section 5.03.
(c)
Duties of Chief Executive Officer.
The Chief Executive Officer shall preside at all meetings of the stockholders and
at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. The Chief Executive Officer shall, subject to the control of the Board of Directors, have general day-to-day supervision,
direction and control of the business and officers of the Corporation. The Chief Executive Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d)
Duties of President.
The President shall perform duties commonly incident to the office and shall also perform such
other duties and have such other powers as the Board of Directors or the Chief Executive Officer shall designate from time to time.
(e)
Duties of Secretary.
The Secretary shall attend all meetings of the stockholders and of the Board of Directors,
shall record all acts, proceedings, and votes thereof in the minute book of the Corporation and shall perform like duties for the standing committees when required by the Board of Directors. The Secretary shall give notice in conformity with these
Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in these Bylaws and other duties
10
commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The Secretary shall keep in safe custody the seal of the
Corporation, and when authorized by the Board of Directors, affix the same to any instrument requiring it, and when so affixed it shall be attested by his or her signature or by the signature of an Assistant Secretary. The Board of Directors may
give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from
time to time.
(f)
Duties of Chief Financial Officer.
The Chief Financial Officer shall have the custody of the corporate funds and
securities, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the Corporation, in such depositories as
may be designated by the Board of Directors. The Chief Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements and shall render to the Board of
Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his or her transactions as Chief Financial Officer and of the financial condition of the Corporation. The Chief Financial Officer shall perform other
duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer shall designate from time to time.
(g)
Duties of Treasurer.
The Chief Executive Officer may direct the Treasurer or any Assistant Treasurer, if any shall
be elected, or the Controller or any Assistant Controller, if any shall be elected to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant
Treasurer, if any shall be elected and each Controller and Assistant Controller, if any shall be elected shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of
Directors or the Chief Executive Officer shall designate from time to time.
(h)
Duties of Subordinate Officers.
The Board of Directors may appoint such other officers and agents as it shall deem
necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.
SECTION 5.04.
Delegation of Authority.
The Board of Directors may from time to time delegate the powers or duties of any
officer to any other officer or agent, notwithstanding any provision hereof.
SECTION 5.05.
Resignations.
Any officer may resign at any time by giving notice in writing or by electronic transmission
to the Board of Directors, the Chief Executive Officer or the Secretary. Any such resignation shall be effective when
11
received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice,
the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the Corporation under any contract with the resigning officer.
SECTION 5.06.
Removal.
Any officer may be removed from office at any time, either with or without cause, by the
affirmative vote of a majority of the Board of Directors, or by the unanimous written consent of the Board of Directors, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
Execution of Corporate Instruments and Voting of
SECTION 6.01.
Execution of Corporate Instruments.
The Board of Directors may, in its discretion, determine the method
and designate the signatory officer or officers, or other person or persons, to execute on behalf of the Corporation any corporate instrument or document, to sign on behalf of the Corporation the corporate name without limitation or to enter into
contracts on behalf of the Corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the Corporation.
All checks and drafts drawn on banks or other depositaries on funds to the credit of the Corporation or in special accounts of the Corporation shall be signed by such person or persons as the
Board of Directors shall authorize so to do.
Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any
contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
SECTION 6.02.
Voting of Securities Owned by the Corporation.
All stock and other securities of other corporations owned
or held by the Corporation for itself, or for other parties in any capacity, shall, if permitted by law, be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or,
in the absence of such authorization, by the Chief Executive Officer, the Chairman of the Board of Directors, if elected, or the President.
12
ARTICLE VII
SECTION 7.01.
Form and Execution of Certificates.
Certificates for the shares of stock of the Corporation shall be in
such form as is consistent with the Articles of Incorporation and applicable law. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board of Directors,
if elected, or the Chief Executive Officer, the President or any Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the number of shares owned by such holder in the Corporation. Any
or all of the signatures on the certificate may be facsimiles if the certificate is countersigned by the transfer agent for the Corporation. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.
SECTION 7.02.
Lost Certificates.
A new certificate or certificates shall be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. The Corporation may
require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owners legal representative, to agree to indemnify the Corporation in such
manner as it shall require or to give the Corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
SECTION 7.03.
Transfers.
The Board of Directors shall have the power and authority to make such rules and regulations as
it may deem expedient concerning the issuance, registration and transfer of certificates representing shares of the Corporations stock, and may appoint transfer agents and registrars thereof.
SECTION 7.04.
Fixing Record Dates.
In order that the Corporation may determine the stockholders entitled to notice of or
to vote at any meeting of the stockholders, or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or
exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date which shall not be more than 60 nor less than 15 days before the date of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided
,
however
, that the Board of Directors may fix a new record date for the adjourned meeting.
13
SECTION 7.05.
Registered Stockholders.
The Corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it
shall have express or other notice thereof, except as otherwise provided by the laws of the Marshall Islands.
ARTICLE VIII
Other Securities of the Corporation
SECTION 8.01.
Execution of other Securities.
All bonds, debentures and other corporate securities of the Corporation, if
any, other than stock certificates (covered in Section 7.01) may be signed by the Chairman of the Board of Directors, if elected, the Chief Executive Officer, the President, any Vice-President or such other person as may be authorized by the Board
of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary, the Chief Financial Officer, if elected, the Treasurer, or such other person as may be authorized by
the Board of Directors;
provided
,
however
, that where any such bond, debenture or other corporate
security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons
signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer of the Corporation or such other person as may be authorized by the Board of Directors, and bear imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate
security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the Corporation.
ARTICLE IX
SECTION 9.01.
Declaration of Dividends.
Dividends upon the capital stock of the Corporation, subject to the provisions
of the Articles of Incorporation and applicable law, if any, may be declared by the Board of Directors at any regular or special
14
meeting. Dividends may be paid in cash, in property, or in shares of capital stock, subject to the provisions of the Articles of Incorporation and applicable law.
SECTION 9.02.
Dividend Reserve.
Before payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, to equalize dividends, or to repair or maintain any property
of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
SECTION 10.01.
Fiscal Year.
The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.
ARTICLE XI
SECTION 11.01.
Indemnification.
(a)
Right to Indemnification.
The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a Covered Person) who was or is made or is
threatened to be made a party to or a witness in or is otherwise involved in any action, suit, claim, inquiry or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of the Corporation) and
whether formal or informal (a Proceeding), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director, officer, employee, trustee or agent of another corporation or of a partnership, joint venture, trust, nonprofit entity or other entity (including service with respect to
employee benefit plans) against all liability and loss suffered, and expenses (including attorneys fees) actually and reasonably incurred, by such Covered Person in connection with such Proceeding. Notwithstanding the preceding sentence,
except as otherwise provided in Section 11.01(c), the Corporation shall be required to indemnify or advance expenses to a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person (and not by way of defense)
only if the commencement of such Proceeding (or part thereof) by the Covered Person (i) was authorized in the specific case by the Board, or (ii) was brought to establish or enforce a right to indemnification under these Bylaws, the Articles of
Incorporation, any agreement, the BCA or otherwise.
15
(b)
Prepayment of Expenses.
The Corporation shall, to the fullest extent not prohibited by applicable law, pay the
expenses (including attorneys fees) actually and reasonably incurred by a Covered Person who was or is made or is threatened to be made a party to or a witness in or is otherwise involved in any Proceeding, by reason of the fact that he or
she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer,
employee, trustee or agent of another corporation or of a partnership, joint venture, trust, nonprofit entity or other entity (including service with respect to employee benefit plans) in advance of its final disposition,
provided
,
however
, that, to the extent required by law, such payment of expenses in advance of the final disposition of the
Proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article XI or otherwise.
(c)
Claims.
If a claim for indemnification (following the final disposition of such action, suit or Proceeding) or
advancement of expenses under this Article XI is not paid in full within thirty days after a written claim therefor by the Covered Person has been presented to the Corporation, the Covered Person may file suit against the Corporation to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In addition, the Covered Person may file suit against the Corporation to establish a right to indemnification or
advancement of expenses. In any such action the Corporation shall have the burden of proving by clear and convincing evidence that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law.
(d)
Nonexclusivity of Rights.
The rights conferred on any Covered Person by this Article XI shall not be exclusive of
any other rights which such Covered Person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, these Bylaws, agreement, vote of shareholders or disinterested directors or otherwise.
(e)
Other Sources.
The Corporations obligation, if any, to indemnify or to advance expenses to any Covered Person
who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced to the extent such Covered Person has otherwise actually
received payment (under any insurance policy or otherwise) of the amounts otherwise payable by the Corporation.
(f)
Amendment or Repeal.
Any repeal or modification of the provisions of this Article XI shall not adversely affect any
right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification.
(g)
Other Indemnification and Prepayment of Expenses.
This Article XI shall not limit the right of the Corporation, to
the extent and in the manner
16
permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.
(h)
Insurance.
The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or
was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of any other entity against any liability asserted against such person and incurred by such person in such capacity whether
or not the Corporation would have the power to indemnify such person against such liability by law or under the provisions of these Bylaws.
ARTICLE XII
SECTION 12.01.
Notices.
(a)
Notice to Stockholders.
Written notice to stockholders of stockholder meetings shall be given as provided in Section 3.02. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such
stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by mail or internationally recognized (and, if possible, overnight) courier, or by facsimile, telegraph or
by electronic mail or other electronic means.
(b)
Notice to Directors.
Any notice required to be given to any director may be given by the method stated in subsection
12.01(a), or as provided for in Section 4.07. If such notice is not delivered personally, it shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post
office address of such director.
ARTICLE XIII
SECTION 13.01.
Amendments.
These Bylaws may be altered, amended or repealed or new bylaws may be adopted by the Board of
Directors or by the stockholders only in accordance with the provisions of the Articles of Incorporation. The power to adopt, amend or repeal bylaws conferred upon the Board of Directors by the Articles of Incorporation shall not divest or limit the
power of the stockholders to adopt, amend or repeal bylaws as set forth therein.
OF
SAFE BULKERS, INC.
PURSUANT TO
THE MARSHALL ISLANDS BUSINESS CORPORATIONS ACT ("BCA")
ADOPTED MAY 8, 2008
ARTICLE I
Offices and Record
Corporate Seal
Stockholders Meetings
Directors
Officers
Securities Owned by the Corporation
Shares of Stock
Dividends
Fiscal Year
Indemnification
Notices
Amendments
|
|
|
|
SPECIMEN |
EXHIBIT 4.1 |
COMMON STOCK
COMMON STOCK
SAFE BULKERS, INC.
INCORPORATED UNDER THE LAWS OF THE REPUBLIC OF THE MARSHALL ISLANDS
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP Y7388L 10 3
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $0.001 PAR VALUE PER SHARE, OF
SAFE BULKERS, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid
until countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated:
SECRETARY
CHIEF EXECUTIVE OFFICER
SAFE BULKERS, INC.
The Corporation will furnish without charge to each stockholder who so requests a statement of the designations, powers, preferences and relative participating, optional or other special rights of each class of stock or series thereof of the Corporation and the qualifications, limitations or restrictions of such preferences and/or rights. Such request may be made to the Secretary of the Corporation or the Transfer Agent.
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A STOCKHOLDERS RIGHTS AGREEMENT BETWEEN SAFE BULKERS, INC. AND AMERICAN STOCK TRANSFER & TRUST COMPANY, AS THE RIGHTS AGENT (THE RIGHTS AGREEMENT), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF SAFE BULKERS, INC. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. SAFE BULKERS, INC. WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
|
|
|
|
|
|
|
TEN COM |
|
as tenants in common |
|
UNIF GIFT MIN ACT _________________ Custodian __________________ |
||
TEN ENT |
|
as tenants by the entireties |
|
|
(Cust) |
(Minor) |
JT TEN |
|
as joint tenants with right of survivorship |
|
|
under Uniform Gifts to Minors |
|
|
|
and not as tenants in common |
|
|
Act ________________________________________ |
|
COM PROP |
|
as community property |
|
|
(State) |
|
|
|
UNIF TRF MIN ACT _________________ Custodian (until age __________) |
||||
|
|
|
(Cust) |
|||
|
|
|
________________________ under Uniform Transfers |
|||
|
|
|
(Minor) |
|||
|
|
|
to Minors Act ________________________________ |
|||
|
|
|
(State) |
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ___________________________ hereby sell, assign and transfer unto
|
|
|
PLEASE
INSERT SOCIAL SECURITY OR OTHER
|
|
|
|
|
|
|
|
|
|
||
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) |
||
|
||
|
||
|
||
|
||
|
||
_________________________________________________________________________________________________________________ Shares |
||
of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint |
||
|
||
________________________________________________________________________________________________________________ Attorney |
||
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. |
||
|
||
Dated _________________________________ |
|
|
|
|
|
|
|
NOTICE: |
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. |
|
|
|
Signature(s) Guaranteed |
|
|
|
|
|
|
By |
|
|
|
|
|
|
|
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. |
|
|
EXHIBIT 5.1
May 16, 2008
Safe Bulkers, Inc.
32 Avenue Karamanli
16605 Voula
Athens, Greece
Re: Safe Bulkers, Inc.
Dear Sirs:
We have acted as special counsel as to matters of the law of the Republic of the Marshall Islands ( Marshall Islands Law ) to Safe Bulkers, Inc. (the Company ) in connection with the Companys Registration Statement on Form F-1 (the Registration Statement ) filed by the Company with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the Act ), and the rules and regulations thereunder, with respect to the sale by Vorini Holdings Inc. (Vorini), who will become the sole shareholder of the Company as contemplated in the Registration Statement, of up to 10,000,000 shares (the Shares ) of common stock, par value $0.001 per share, of the Company, including 1,500,000 Shares that may be sold pursuant to the exercise of an over-allotment option, and related preferred stock purchase rights (the Rights ) under a Stockholder Rights Agreement dated as of May 14, 2008 (the Stockholder Rights Agreement ) between the Company and American Stock Transfer & Trust Company, as rights agent.
In so acting, we have examined originals, or copies, certified or otherwise identified to our satisfaction, of (i) the Registration Statement and the prospectus (the Prospectus ) included therein, (ii) the purchase agreement (the Purchase Agreement ) to be executed among the Company, Vorini and the underwriters named therein in the form filed by the Company as an exhibit to the Registration Statement, (iii) the Stockholder Rights Agreement,
Safe Bulkers, Inc.
May 16, 2008
Page 2
______________________________________
and (iv) originals, or copies certified or otherwise identified to our satisfaction, of all such records of the Company, agreements and other documents, certificates of public officials, officers and representatives of the Company and other appropriate persons, and such other documents as we have deemed necessary as a basis for the opinions hereinafter expressed. In such examination, we have assumed without independent investigation, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity with the original documents of all documents submitted to us as photostatic or facsimile copies, and the accuracy of the factual representations made to us by officers and other representatives of the Company. We have also assumed the power, authority and legal right of all parties (other than the Company) to the Purchase Agreement and the Stockholder Rights Agreement to enter into and perform their respective obligations thereunder and the due authorization, execution and delivery of such documents by such parties.
This opinion is limited to Marshall Islands Law as of the date hereof. In rendering our opinion in Paragraph E below we have, with your permission, relied on the opinion addressed to you dated the date hereof of Cravath, Swaine & Moore LLP, U.S. counsel to the Company, with respect to the Stockholder Rights Agreement. In rendering our opinion as to the valid existence in good standing of the Company, we have relied solely on a Certificate of Goodstanding issued by the Registrar of Corporations of the Republic of the Marshall Islands on the date hereof.
Based on the foregoing and having regard to legal considerations which we deem relevant, we are of the opinion that:
A. | The Company is a corporation duly incorporated, validly existing and in good standing under the law of the Republic of The Marshall Islands. | |
B. | The Company has the corporate power and corporate authority to enter into, execute, deliver and perform the Stockholder Rights Agreement. | |
C. | The Company has taken all corporate action required to authorize the Shares and when the Shares are issued and delivered against payment therefore as contemplated in the Registration Statement, Shares will be validly issued, fully paid and non-assessable. | |
D. | The Company has taken all corporate action required to authorize the execution and delivery of the Stockholder Rights Agreement and the issuance of the Rights, and the Stockholder Rights Agreement has been duly executed and delivered by a duly authorized signatory of the Company. | |
E. | When issued in accordance with the terms of the Stockholder Rights Agreement, the Rights will have been validly issued and constitute valid and binding obligations of the Company. |
Our opinion in Paragraph E above is subject to the qualification that the rights and remedies of any party to the Stockholder Rights Agreement(a) may be limited by bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting generally the
Safe Bulkers, Inc.
May 16, 2008
Page 3
______________________________________
enforcement of creditors rights from time to time in effect, and (b) are subject to general principles of equity (regardless of whether such rights and remedies are considered in a proceeding in equity or at law), including application by a court of competent jurisdiction of principles of good faith, fair dealing, commercial reasonableness, materiality, unconscionability and conflict with public policy or other similar principles.
We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our name in the Prospectus. In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
COZEN O'CONNOR /s/ Cozen OConnor |
EXHIBIT 5.2
[Letterhead of]
C R A V A T H, S W A I N E & M O O R E L L P
[New York Office]
May 16, 2008
Safe Bulkers, Inc.
Registration Statement on Form F-1
Ladies and Gentlemen:
We have acted as special United States counsel for Safe Bulkers, Inc., a Marshall Islands corporation (the Company), in connection with the filing of the registration statement on Form F-1 referenced above (the Registration Statement), filed with the Securities and Exchange Commission (the Commission) under the Securities Act of 1933, as amended (the Securities Act), with respect to the registration of 11,500,000 shares of common stock, par value $0.001 per share of the Company (and associated preferred stock purchase rights), covering the offer and sale by Vorini Holdings Inc. (the "Selling Stockholder") of up to 11,500,000 to the underwriters (the Underwriters) pursuant to the terms of the underwriting agreement (the Underwriting Agreement) to be executed by the Company and Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner and Smith, Inc., as Representatives of the Underwriters, and the Selling Stockholder.
In that connection, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the Registration Statement and the exhibits thereto and such documents, corporate records and other instruments as we have deemed necessary or appropriate for the purposes of this opinion, including, without limitation, (a) the First Amended and Restated Certificate of Incorporation of the Company, (b) the First Amended and Restated Bylaws of the Company; (c) the Stockholders Rights Agreement (the Stockholder Rights Agreement) made and entered into as of May 14, 2008 by and between the Company and American Stock Transfer & Trust Company, as Rights Agent.
2
Based on the foregoing and subject to the qualifications set forth herein, we are of the opinion as follows:
Assuming that under the laws of the Republic of the Marshall Islands, the Stockholder Rights Agreement has been duly authorized, validly executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors rights generally and by general principles of equity (regardless of whether such enforceability is considered in proceeding in equity or at law), then, to the extent governed by the laws of the State of New York, the Stockholder Rights Agreement has been duly authorized, validly executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors rights generally and by general principles of equity (regardless of whether such enforceability is considered in proceeding in equity or at law).
We express no opinion with respect to compliance with, or the application or effect of, any laws or regulations relating to admiralty or the ownership or operation of shipping vessels to which the Company or any of its subsidiaries is subject or the necessity of any authorization, approval or action by, or any notice to, consent of, order of, or filing with, any governmental authority, pursuant to any such laws or regulations.
We are admitted to practice in the State of New York, and we express no opinion as to matters governed by any laws other than the laws of the State of New York, the General Corporation Law of the State of Delaware and the Federal laws of the United States of America. The reference and limitation to Delaware General Corporation Law includes the statutory provisions and all applicable provisions of the Delaware Constitution and reported judicial decisions interpreting these laws. In particular, we do not purport to pass on any matter governed by the laws of the Republic of the Marshall Islands, Liberia, Greece, Cyprus, Panama or England.
3
We hereby consent to the filing of this opinion with the Commission as Exhibit 5.2 to the Registration Statement. We also consent to the reference to our firm under the caption Legal Matters in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission.
Very truly yours, | ||
/s/ Cravath, Swaine & Moore LLP | ||
Safety Management Overseas S.A. | ||
32 Avenue Karamanlis | ||
16605 Voula | ||
Athens, Greece | ||
120A | ||
O |
EXHIBIT 8.1
[Letterhead of]
C R A V A T H, S W A I N E & M O O R E L L P
[New York Office]
May 16, 2008
Ladies and Gentlemen:
We have acted as United States counsel to Safe Bulkers, Inc., a company incorporated under the laws of the Marshall Islands (the Company), in connection with the registration by the Company of its common stock, par value $0.001 per share, under the Securities Act of 1933, as amended (the Securities Act), on a Registration Statement on Form F-1 filed with the Securities and Exchange Commission (the Commission), and all amendments thereto (such registration statement, as so amended, being hereinafter referred to as the Registration Statement).
In rendering our opinion, we have reviewed the Registration Statement and have examined such records, representations, documents, certificates or other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below. In this examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed, or photostatic copies, and the authenticity of the originals of such copies. In making our examination of documents executed, or to be executed, by the parties indicated therein, we have assumed that each party, including the Company, is duly organized and existing under the laws of the applicable jurisdiction of its organization and had, or will have, the power, corporate or other, to enter into and perform all obligations thereunder, and we have also assumed the due authorization by all requisite action, corporate or other, and execution and delivery by each party indicated in the documents and that such documents constitute, or will constitute, valid and binding obligations of each party.
In rendering our opinion, we have considered the applicable provisions of the Internal Revenue Code of 1986, as amended (the Code), regulations promulgated thereunder by the U.S. Department of Treasury (the Regulations), pertinent judicial authorities, rulings of the Internal Revenue Service, and such other authorities as we have
2
considered relevant, in each case as in effect on the date hereof. It should be noted that the Code, Regulations, judicial decisions, administrative interpretations and other authorities are subject to change at any time, possibly with retroactive effect. It should also be noted that (as discussed in the Registration Statement) there is no direct legal authority addressing certain of the issues relevant to our opinion in particular, the issue regarding whether the Company is currently a passive foreign investment company. A material change in any of the materials or authorities upon which our opinion is based could affect the conclusions set forth herein. There can be no assurance, moreover, that any opinion expressed herein will be accepted by the Internal Revenue Service, or if challenged, by a court.
Based upon the foregoing, although the discussion in the Registration Statement under the heading Tax Considerations United States Federal Income Tax Considerations does not purport to discuss all possible United States federal income tax consequences of the acquisition, ownership and disposition of Company common stock, we hereby confirm that the statements of law (including the qualifications thereto) under such heading represent our opinion of the material United States federal income tax consequences of the acquisition, ownership and disposition of Company common stock, subject to certain assumptions expressly described in the Registration Statement under such heading.
We express no other opinion, except as set forth above. We disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or subsequent changes in applicable law. Any changes in the facts set forth or assumed herein may affect the conclusions stated herein.
We hereby consent to the filing of this opinion with the Commission as Exhibit 8.1 to the Registration Statement. We also consent to the reference to our firm under the caption Legal Matters in the prospectus forming a part of the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission.
Very truly yours,
/s/ Cravath, Swaine & Moore LLP
Safe Bulkers, Inc.
32 Avenue Karamanli, P.O. Box 70837
16605 Voula
Athens, Greece
EXHIBIT 8.2
May 16, 2008
Safe Bulkers, Inc.
32 Avenue Karamanli
16605 Voula
Athens, Greece
Re: Safe Bulkers, Inc.
Dear Sirs:
You have requested our opinion regarding the consequences of Marshall Islands taxation and Liberian taxation to Safe Bulkers, Inc. (the Company ) and the holders of common stock of the Company.
In rendering our opinion as to such tax consequences, we have examined such documents as we have deemed necessary, including the Registration Statement and the prospectus (the Prospectus ) included therein (such Registration Statement, as amended at the effective date thereof, being referred to herein as the Registration Statement ) filed by the Company on Form F-1 with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the Act ), and the rules and regulations thereunder, with respect to the sale by Vorini Holdings Inc., who will become the sole shareholder of the Company as provided for in the Registration Statement, of up to 10,000,000 shares of common stock of the Company. We also have obtained such additional information as we have deemed relevant and necessary, including originals, or copies or otherwise identified to our satisfaction, of all such records of the Company, agreements and other documents, certificates of public officials, officers and representatives of the Company and other appropriate persons, and such other documents as we have deemed necessary as a basis for the opinions hereinafter expressed. In such examinations, we have assumed without independent investigation, (a) the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as photostatic or facsimile copies, and the authenticity of the
Safe Bulkers, Inc.
May 16, 2008
Page 2
______________________________________
originals of such copies and (b) the accuracy of the factual representations made to us by officers and other representatives of the Company.
This opinion is limited to the tax laws of the Republic of the Marshall Islands and the tax laws of the Republic of Liberia and is as of the effective date of the Registration Statement. Capitalized terms not defined herein have the meanings ascribed to them in the Registration Statement.
Based on the facts as set forth in the Prospectus and, in particular, on the representations, covenants, assumptions, conditions and qualifications described under the caption Tax Considerations therein, and having regard to legal considerations which we deem relevant, we hereby confirm that the opinions attributed to Cozen OConnor set forth in the Prospectus under the captions Marshall Islands Tax Considerations and Liberian Tax Considerations, are the opinions of Cozen OConnor and accurately state our views as to the tax matters discussed in such sections of the Prospectus. In addition, such opinions fairly present the information expected to be relevant to holders of the common stock of the Company offered pursuant to the Prospectus and fairly summarize the matters referred to therein.
Our opinions as set forth in the Prospectus are based on the current provisions of Marshall Island law and Liberian law, which may changed at any time with retroactive effect. No opinion is expressed on any matters other than those specifically referred to above.
We consent to the filing of this opinion as an exhibit to the Registration Statement to our name in the Prospectus under the captions Marshall Islands Tax Considerations and Liberian Tax Considerations. In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
COZEN O'CONNOR /s/ Cozen OConnor |
EXHIBIT 10.1
|
|
|
|
SAFE BULKERS, INC. |
|
|
|
- and - |
|
|
SAFETY MANAGEMENT OVERSEAS S.A. |
|
|
|
MANAGEMENT AGREEMENT |
|
|
|
TABLE OF CONTENTS
|
|
|
|
|
Page |
|
|
|
ARTICLE I |
INTERPRETATION |
1 |
ARTICLE II |
APPOINTMENT |
5 |
ARTICLE III |
THE PARENTS GENERAL OBLIGATIONS |
6 |
ARTICLE IV |
THE MANAGERS GENERAL OBLIGATIONS |
7 |
ARTICLE V |
ADMINISTRATIVE SERVICES |
9 |
ARTICLE VI |
COMMERCIAL SERVICES |
11 |
ARTICLE VII |
INSURANCE |
12 |
ARTICLE VIII |
AVAILABILITY OF OFFICERS |
12 |
ARTICLE IX |
MANAGEMENT FEES AND EXPENSES |
13 |
ARTICLE X |
BUDGETS, CORPORATE PLANNING AND EXPENSES |
16 |
ARTICLE XI |
LIABILITY AND INDEMNITY |
18 |
ARTICLE XII |
RIGHTS OF THE MANAGER, RESTRICTIONS ON THE |
|
|
MANAGERS AUTHORITY, AND NON-COMPETE |
|
|
PROVISIONS |
19 |
ARTICLE XIII |
TERMINATION OF THIS AGREEMENT |
20 |
ARTICLE XIV |
CHANGE IN CONTROL OF THE MANAGER AND |
|
|
RIGHT OF FIRST OFFER |
23 |
ARTICLE XV |
NOTICES |
24 |
ARTICLE XVI |
APPLICABLE LAW |
25 |
ARTICLE XVII |
ARBITRATION |
25 |
ARTICLE XVIII |
MISCELLANEOUS |
27 |
|
|
|
APPENDIX I |
|
Form of Hajioannou Restrictive Covenant Agreement |
APPENDIX II |
|
Form of Other Restrictive Covenant Agreement |
APPENDIX III |
|
Form of Shipmanagement Agreement |
APPENDIX IV |
|
Form of Supervision Agreement |
-i-
THIS MANAGEMENT AGREEMENT (this Agreement ) is made on the [] the day of [], 2008, BY AND BETWEEN:
(1) SAFE BULKERS, INC., a company organized and existing under the laws of the Republic of the Marshall Islands (the Parent ); and
(2) SAFETY MANAGEMENT OVERSEAS S.A., a company organized and existing under the laws of the Republic of Panama (the Manager ).
WHEREAS:
(A) The Parent directly or indirectly wholly owns or will wholly own (i) the corporations identified on Schedule A hereto, as such Schedule A may be amended from time to time (the Shipowning Subsidiaries ), each of which owns or will own one or more Drybulk Vessels (as defined below) (the Vessels ) and (ii) the corporations identified on Schedule B hereto, as such Schedule B may be amended from time to time (together with the Shipowning Subsidiaries, the Subsidiaries ).
(B) The Manager has the benefit of expertise in the technical and commercial management of Drybulk Vessels and administration of shipowning companies generally.
(C) The Parent and the Manager desire to adopt this Agreement, pursuant to which the Manager shall represent the Group (as defined below) in its dealings with third parties and provide either directly or through a Submanager (as defined below) technical, commercial, administrative and certain other services to the Group as specified herein in connection with the management and administration of the business of the Group.
NOW, THEREFORE, THE PARTIES HEREBY AGREE:
ARTICLE I
INTERPRETATION
SECTION 1.1. In this Agreement, unless the context otherwise requires:
Affirmative Response shall have the meaning set forth in Section 14.4(b).
Affiliates means, with respect to any Person as at any particular date, any other Persons that directly or indirectly, through one or more intermediaries, are Controlled by, Control or are under common Control with the Person in question, and Affiliate means any one of them.
Agreement shall have the meaning set forth in the preamble.
2
Approved Budget shall have the meaning set forth in Section 10.3.
Board of Directors means the board of directors of the Parent as the same may be constituted from time to time.
Business Days means a day (excluding Saturdays and Sundays) on which banks are open for business in Athens, Greece; Cyprus; and New York, New York.
Change in Control of the Parent means the occurrence of any of the following events: (a) if any person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act (other than one or more Hajioannou Entities) (collectively, an Acquiring Person ), becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 40% or more of the total voting power of the outstanding voting securities of the Parent, and such percentage represents a higher percentage of such voting power than the Hajioannou Entities, collectively; or (b) the approval by the shareholders of the Parent of a proposed merger, consolidation, recapitalization or similar transaction, as a result of which any Acquiring Person becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 40% or more of the total voting power of the outstanding voting securities of the resulting entity following such transaction, and such percentage represents a higher percentage of such voting power than the Hajioannou Entities, collectively; or (c) a change in directors after which a majority of the members of the Board of Directors are not Continuing Directors. For purposes of this definition, such person or group shall be deemed to beneficially own any outstanding voting securities of a corporation held by any other corporation (the parent corporation) so long as such person or group beneficially owns, directly or indirectly, in the aggregate a majority of the total voting power of the outstanding voting securities of such parent corporation.
Control or Controlled means, with respect to any Person, the right to elect or appoint, directly or indirectly, a majority of the directors of such Person or a majority of the Persons who have the right, including any contractual right, to manage and direct the business, affairs and operations of such Person, or the possession of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise.
Consent of the Parent means the prior written consent of a majority of the Independent Directors of the Parent.
Continuing Directors means, as of any date of determination, any member of the Board of Directors who (i) was a member of the Board of Directors immediately after the Effective Date, or (ii) was nominated for election or elected to the Board of Directors with the approval of a majority of the directors then still in office who were either directors immediately after the Effective Date or whose nomination or election was previously so approved.
3
Crew shall have the meaning set forth in clause 1 of each Shipmanagement Agreement.
Draft Budget shall have the meaning set forth in Section 10.1.
Drybulk Vessel means any ocean-going vessel (including any Newbuild) that is intended to be used primarily to transport non-liquid cargoes of commodities shipped in an unpackaged state.
Drybulk Vessel Business means any business involved in the ownership or operation of Drybulk Vessels.
Effective Date means the date upon which the initial public offering of the Parent is consummated.
Exchange Act means the U.S Securities Exchange Act of 1934, as amended.
Executive Officers means the Chief Executive Officer, the President, the Chief Operating Officer and the Chief Financial Officer of the Parent, and/or such other officers that may be agreed by the parties hereto after the date of this Agreement from time to time.
First Offer Notice shall have the meaning set forth in Section 14.4(a).
First Offer Period shall have the meaning set forth in Section 14.4(b).
Force Majeure shall have the meaning set forth in Section 11.1.
Group means, at any time, the Parent and the Subsidiaries at such time taking into account the Schedule A and Schedule B in effect at such time and member of the Group shall be construed accordingly.
Hajioannou Entities means Polys Hajioannou, Nicolaos Hadjioannou, Vorini Holdings Inc. and Machairiotissa Holdings Inc. and any entity controlled by, or under common control with, any such individual or entity or any trust established for the benefit thereof.
Hajioannou Restrictive Covenant Agreement means the Restrictive Covenant Agreement substantially in the form attached hereto as Appendix I among Polys Hajioannou, Vorini Holdings Inc., Machairiotissa Holdings Inc., SafeFixing Corp and the Parent.
Independent Directors means those members of the Board of Directors that qualify as independent directors within the meaning of Rule 10A-3 promulgated under the Exchange Act and the rules adopted thereunder and the listing criteria of the New York Stock Exchange.
4
Initial Term shall have the meaning set forth in Section 13.1.
Management Fee shall have the meaning set forth in Section 9.1.
Management Services shall have, in relation to a Vessel, the meaning set forth in clause 1 of the Shipmanagement Agreement applicable to such Vessel.
Manager shall have the meaning set forth in the preamble.
Manager Competitive Acti vities shall have the meaning set forth in Section 12.4(a).
Manager Related Parties shall have the meaning set forth in Section 11.2.
Manager Restricted Period shall have the meaning set forth in Section 12.4(a).
Negative Response shall have the meaning set forth in Section 14.4(b).
Newbuild means a new vessel to be or which has just been constructed, or is under construction, which a member of the Group has agreed to acquire pursuant to a shipbuilding contract, memorandum of agreement or otherwise.
Other Restrictive Covenant Agreements means the Restrictive Covenant Agreements substantially in the form attached as Appendix II to be entered into by the Parent and each of Polys Hajioannou and Nicolaos Hadjioannou.
Parent shall have the meaning set forth in the preamble.
Person means an individual, corporation, limited liability company, partnership, joint venture, trust or trustee, unincorporated organization, association, governmental authority or other entity.
Proposed Change in Control of the Manager means (a) the approval by the board of directors of the Manager or the shareholders of the Manager of a proposed sale of all or substantially all of the assets or property of the Manager necessary for the performance of its services under this Agreement, (b) the approval by the shareholders of the Manager of a proposed sale of the Managers shares that would result in the Hajioannou Entities owning less than 80% of the outstanding voting securities of the Manager or (c) the approval by the shareholders of the Manager of a proposed merger, consolidation, recapitalization or similar transaction, as a result of which the Hajioannou Entities would beneficially own less than 80% of the outstanding voting securities of the resulting entity following such transaction.
Questioned Items shall have the meaning set forth in Section 10.2.
Services shall have the meaning set forth in Section 2.3.
5
Shipmanagement Agreement shall have the meaning set forth in Section 3.2.
Shipowning Subsidiaries shall have the meaning set forth in the recitals.
STCW 95 means the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended in 1995 or any subsequent amendment thereto.
Submanager shall have the meaning set forth in Section 2.4.
Subsequent Term shall have the meaning set forth in Section 13.1.
Subsidiaries shall have the meaning set forth in the recitals.
Supervision Agreement shall have the meaning set forth in Section 3.3.
Term shall have the meaning set forth in Section 13.1.
Vessels shall have the meaning set forth in the recitals.
SECTION 1.2. The headings of this Agreement are for ease of reference and do not limit or otherwise affect the meaning hereof.
SECTION 1.3. All the terms of this Agreement, whether so expressed or not, shall be binding upon the parties hereto and their respective successors and assigns.
SECTION 1.4. In the event of any conflict between this Agreement, any Shipmanagement Agreement or any Supervision Agreement, the provisions of this Agreement shall prevail.
SECTION 1.5. Unless otherwise specified, all references to money refer to the legal currency of the United States of America.
SECTION 1.6. Unless the context otherwise requires, words in the singular include the plural and vice versa.
ARTICLE II
APPOINTMENT
SECTION 2.1. The Manager is hereby appointed by the Parent as the administrative manager of the Group and hereby accepts any such appointment on the terms and conditions of this Agreement.
SECTION 2.2. The Manager shall be appointed by (a) each Shipowning Subsidiary pursuant to the provisions of Section 3.3 hereof as the technical and commercial manager of each such Shipowning Subsidiarys Vessel on the terms and
6
conditions of the relevant Shipmanagement Agreement and this Agreement and (b) each member of the Group acquiring a Newbuild, as the supervisor of the construction thereof on the terms and conditions of the relevant Supervision Agreement and this Agreement.
SECTION 2.3. The Manager undertakes to use its best endeavors to provide:
|
|
|
(a) the services specified in Articles V, VI, VII and VIII of this Agreement; |
|
|
|
(b) the services specified in each Supervision Agreement; and |
|
|
|
(c) the Management Services in respect of each Vessel specified in each Shipmanagement Agreement (the services to be provided under Sections 2.3(a), 2.3(b) and 2.3(c) collectively the Services ). |
SECTION 2.4. The Manager may upon notice to the Parent appoint any Person (a Submanager ) at any time throughout the duration of this Agreement to discharge any of the Managers duties under this Agreement, provided that if such Person is not an Affiliate of the Manager, the Manager shall obtain the Consent of the Parent prior to such appointment (such Consent of the Parent not to be unreasonably withheld or delayed).
SECTION 2.5. The Managers power to delegate performance of any provision of this Agreement hereunder is without prejudice to the Managers liability to the Parent to perform this Agreement with the intention that the Manager shall remain responsible to the Parent for the due and timely performance of all duties and responsibilities of the Manager hereunder PROVIDED HOWEVER that to the extent that any Submanager has performed any such duty, the Manager shall not be under any obligation to perform again the same duty.
ARTICLE III
THE PARENTS GENERAL OBLIGATIONS
SECTION 3.1. The Parent shall notify the Manager as soon as possible of any purchase of any vessel (whether the same is a second-hand vessel or a Newbuild), the delivery of any Newbuild from the relevant builder or intermediate seller to the relevant member of the Group to take ownership of such Newbuild, the sale of any Vessel, the purchase or creation of any direct or indirect subsidiary of the Parent or the sale or divestiture of any Subsidiary and shall promptly amend Schedule A and Schedule B hereto, as applicable, to be reflective of any such development. Such amended Schedule A or Schedule B shall be effective on any such day as mutually agreed by the Parent and the Manager, which date shall be no later than five Business Days after delivery of such amended Schedule A and/or Schedule B to the Manager by the Parent.
7
SECTION 3.2. For each Vessel the Parent shall cause the Shipowning Subsidiary that owns such Vessel to enter with the Manager into a contract substantially in the form attached hereto as Appendix III (each a Shipmanagement Agreement and, collectively, the Shipmanagement Agreements ), with such alterations and additions as are agreed by the Manager and such Shipowning Subsidiary to be appropriate; provided that any alterations or additions which materially vary from such form shall require the approval of the Board of Directors.
SECTION 3.3. For each Newbuild the Parent shall, or shall procure that the relevant member of the Group that owns or has agreed to acquire such Newbuild shall, enter with the Manager into a contract substantially in the form attached hereto as Appendix IV (each a Supervision Agreement and, collectively, the Supervision Agreements ), with such alterations and additions as are agreed by the Manager and such member of the Group to be appropriate, having regard to the terms and conditions of the particular shipbuilding contract, memorandum of agreement or other agreement relating to the acquisition of the relevant Newbuild; provided that any alterations or additions which materially vary from such form shall require the approval of the Board of Directors.
SECTION 3.4. The Parent shall pay, or shall cause another member of the Group to pay, all sums due to the Manager punctually in accordance with the terms of this Agreement, any Shipmanagement Agreement and/or any Supervision Agreement.
SECTION 3.5. The Parent shall procure that each other member of the Group (a) performs its obligations under any Shipmanagement Agreement or any Supervision Agreement to which it is a party and (b) does not take any action or omits to take any action the effect of which is to cause the Parent or the Manager or any Submanager to be in breach of this Agreement, any Shipmanagement Agreement and/or any Supervision Agreement.
ARTICLE IV
THE MANAGERS GENERAL OBLIGATIONS
SECTION 4.1. In the exercise of its duties hereunder, the Manager shall act fully in accordance with the reasonable policies, guidelines and instructions from time to time communicated to it in writing by any member of the Group, exercising skill and diligence to carry out its duties under this Agreement according to sound technical and commercial shipmanagement standards.
SECTION 4.2. The Manager shall act and do all and/or any of the following acts or things described in this Agreement and the relevant Shipmanagement Agreement or, as the case may be, Supervision Agreement applicable to each Vessel in the name and/or on behalf of the Parent and/or, as the context may require, the relevant Subsidiary.
SECTION 4.3. The Manager acknowledges that the services it will provide pursuant to the Shipmanagement Agreements and the Supervision Agreements are not
8
limited to the services described in such agreements and include those set forth in this Agreement.
SECTION 4.4. The Manager shall ensure that all material property of any member of the Group is clearly identified as such, held separately from the property of the Manager and, where applicable, held in safe custody.
SECTION 4.5. The Manager shall ensure that adequate manpower is employed by it to perform its obligations under this Agreement, PROVIDED HOWEVER, that the Manager, in the performance of its responsibilities under this Agreement, shall be entitled to have regard to its overall responsibilities in relation to the management of its clients and in particular, without prejudice to the generality of the foregoing, the Manager shall be entitled to allocate available resources and services in such manner as in the prevailing circumstances the Manager considers to be fair and reasonable.
SECTION 4.6. Notwithstanding anything to the contrary contained in this Agreement, any Shipmanagement Agreement or any Supervision Agreement, the Manager agrees that any and all decisions of a material nature relating to the Parent, any Subsidiary, or any Vessel shall be reserved to the Parent, such decisions including, but not being limited to:
|
|
|
(a) the purchase and/or sale of shares in any entity or other assets of a material nature; |
|
|
|
(b) the purchase or formation of subsidiaries; |
|
|
|
(c) the entry into guarantees or loans or other forms of financing and any and all financial undertakings and commitments connected therewith; |
|
|
|
(d) the entry into and/or termination or amendment of any contractual relationships between any member of the Group and a third party or another member of the Group; and |
|
|
|
(e) the presentation, negotiation, settlement, prosecution or defense of any claim, demand or petition for an amount exceeding $100,000 or its equivalent. |
SECTION 4.7. During the Term, the Manager shall promote the business of the Group in accordance with the directions of the authorized representative of the respective member of the Group and shall at all times use its best efforts to conform to and comply with the lawful and reasonable directions, regulations or recommendations made by such authorized representative, and in the absence of any specific directions or recommendations as aforesaid and, subject to the terms and conditions of this Agreement, shall provide general administrative and advisory services in connection with the management of the business of the Group.
9
SECTION 4.8. The Manager, in the performance of its responsibilities under this Agreement, any Supervision Agreement or any Shipmanagement Agreement, shall ensure that any purchases of products or services from any of its affiliates or any other related entity shall be on terms no less favorable to the Manager than the market prices for products or services that the Manager could obtain on an arms-length basis from unrelated third parties.
SECTION 4.9. During the term hereof, the Manager agrees that, except as provided in Section 12.4(b), it will provide the services in this Agreement to the Group on an exclusive basis and, without receiving the Consent of the Parent, it will not provide any Services or other services contemplated herein to any entity other than the Parent and each Subsidiary.
SECTION 4.10. If a Vessel and a Drybulk Vessel directly or indirectly owned or operated by any of the Hajioannou Entities (other than through the Parent or to the extent that such Hajioannou Entity is no longer subject to a Restrictive Covenant Agreement) are both available and meet the criteria for a charter being fixed by the Manager, the Vessel shall receive such charter.
SECTION 4.11. The Manager shall at all times maintain and keep true and correct accounts as regards the Services and shall make the same available for inspection and auditing by the Parent at such times as may be mutually agreed by the Manager, on the one hand, and the Parent, on the other hand.
ARTICLE V
ADMINISTRATIVE SERVICES
SECTION 5.1. The Manager shall provide certain general administrative services to the Group, including, but not limited to, the following:
|
|
|
|
|
(a) keeping all books and records of things done and transactions performed on behalf of any member of the Group as it may require from time to time, including, but not limited to, liaising with accountants, lawyers and other professional advisors; |
||
|
|
||
|
(b) except as otherwise contemplated herein, representing any member of the Group generally in its dealings and relations with third parties; |
||
|
|
||
|
(c) maintaining the general ledgers of the Group, reconciliation of the Groups bank accounts, preparation of periodic financial statements, including, but not limited to, those required for governmental and regulatory or self-regulatory agency filings and reports to shareholders, arranging for the audit of any such financial statements and the provision of related data processing services; |
10
|
|
|
|
(d) providing assistance in the preparation of periodic and other reports, proxy statements, registration statements and other documents and reports required by applicable law or the rules of any securities exchange or inter-dealer quotation system on which the securities of the Parent or any member of the Group may be listed or quoted; |
|
|
|
|
|
(e) preparing and providing all tax returns required by any law or regulatory authority and developing, maintaining and monitoring internal audit controls, disclosure controls and information technology for the Group; |
|
|
|
|
|
(f) appointing lawyers, at the Parents cost, for providing all legal services to ensure that each member of the Group is in compliance with all applicable laws, including all relevant securities laws, and owns or possesses all licenses, patents, copyrights and trademarks which are necessary and used in the operation of its business; |
|
|
|
|
|
(g) appointing lawyers, at the Parents cost, for providing for the presentation, negotiation, settlement, prosecution or defense of any claim, demand or petition on behalf of any member of the Group arising in connection with the business of any member of the Group for an amount not exceeding $100,000 or its equivalent, including the pursuit by any member of the Group of any rights of indemnification or reimbursement; |
|
|
|
|
|
(h) providing advice to the Group with respect to financing, including entering into negotiations with banks or other financial institutions for the purpose of arranging financing for the Parent and its Subsidiaries and the monitoring and administration of compliance with any applicable financing terms and conditions in effect with investors, banks or other financial institutions; |
|
|
|
|
|
(i) assisting with arranging board meetings, director accommodation and travel for board meetings and preparing meeting materials and detailed papers and agendas for scheduled meetings of the Board of Directors or the board of directors of any other member of the Group (and any and all committees thereof) that, where applicable, contain such information as is reasonably available to the Manager to enable the Board of Directors or such other board of directors (and any such committees) to base their opinion; |
|
|
|
|
|
(j) preparing or causing to be prepared reports to be considered by the Board of Directors (or any applicable committee thereof) in accordance with the Parents internal policies and procedures on any acquisition, investment or sale of any part of the business; |
11
|
|
|
|
(k) administering payroll services, benefits and directors or consultants fees, as applicable, for any employee, officer, consultant or director of any member of the Group; |
|
|
|
|
|
(l) at the request of the Parent, negotiating and arranging for cash management services, financing and hedging arrangements relating to interest rates, currency exchange rates and commodity prices; |
|
|
|
|
|
(m) handling general and administrative expenses of the Parent, which are related to its operation as public company and, upon being provided by the Parent with funds in accordance with the terms of Article X of this Agreement, arranging for the payment of the same; |
|
|
|
|
|
(n) appointing lawyers, at the Parents cost, for handling all administrative and clerical matters in respect of (i) the calling and arrangement of all annual and/or special meetings of shareholders of the Parent, (ii) the preparation of all materials (including notices of meetings and information circulars) in respect thereof and (iii) the submission of all such materials to the Parent in sufficient time prior to the dates upon which they must be mailed, filed or otherwise relied upon so that the Parent has full opportunity to review, approve, execute and return them to the Manager for filing or mailing or other disposition as the Parent may require or direct; |
|
|
|
|
|
(o) providing, at the request and under the direction of the Parent, such communications to the transfer agent for the Parent as may be necessary or desirable; and |
|
|
|
|
|
(p) providing any such other administrative services as the Parent, the authorized Executive Officers or any other representative of the Parent may request and the Manager may agree to provide from time to time. |
ARTICLE VI
COMMERCIAL SERVICES
SECTION 6.1. The Manager shall provide the following commercial services to the Group:
|
|
|
|
(a) performing class records review and physical inspections in connection with any vessel to be purchased by a member of the Group; |
|
|
|
|
|
(b) at the request and under the direction of the Parent, providing administrative services in connection with the purchase of a second-hand vessel or the acquisition or sale of a Newbuild, in either case by any member of the Group, including, if specifically instructed by the Parent |
12
|
|
|
|
in writing, signing any agreed form of memorandum of agreement, shipbuilding contract or other similar contract for and on behalf of the relevant member of the Group; and |
|
|
|
|
|
(c) at the request of the Parent, providing certain services in connection with a member of the Group taking physical delivery of a vessel or registering a vessel or deleting a Vessel from the applicable port of registry on behalf of the relevant member of the Group. |
ARTICLE VII
INSURANCE
SECTION 7.1. In addition to any duties of the Manager to insure the Vessels as provided in clause 3.4 of each Shipmanagement Agreement, the Manager shall:
|
|
|
|
(a) arrange either directly or, through insurance brokers appointed by the Manager, to effect Directors & Officers Liability insurance for the Board of Directors and Executive Officers with such insurance companies, at such rates and otherwise on such other terms as the Parent shall have instructed and/or agreed upon; |
|
|
|
|
|
(b) on request, provide the Parent with a copy of any insurance claims and any reports prepared by the relevant insurers; and |
|
|
|
|
|
(c) subject to having been provided with funds by the Parent in accordance with Article X ensure that all premiums on the Parents D&O insurance are paid in a timely fashion. |
ARTICLE VIII
AVAILABILITY OF OFFICERS
SECTION 8.1. The Manager shall provide the Group with the services of those Executive Officers from time to time agreed with the Parent, with the remuneration for such Executive Officers to be reflected in the Management Fee and paid by the Manager. Initially such Executive Officers shall consist of the Chief Executive Officer, the Chief Operating Officer, the President and the Chief Financial Officer.
SECTION 8.2. The Executive Officers are entitled to direct the Manager to remove and replace any individual made available to any member of the Group by the Manager serving as an officer or any senior manager serving as head of a business unit, in either case, of that member of the Group other than any Executive Officer, from such position. The Board of Directors, in its sole discretion, shall be entitled to direct the Manager to remove any individual made available to the Parent by the Manager serving as an Executive Officer from such position and to appoint such other individual to serve as
13
successor as the Board of Directors shall approve. Furthermore, the Manager agrees that it will not remove any individual made available to any member of the Group by the Manager serving as an officer or senior manager of that member of the Group from his or her position without the consent of the Executive Officers and, in the case of any Executive Officer, the Board of Directors. If any officer or senior manager who is made available to the Parent by the Manager resigns, is terminated or otherwise vacates his or her office, the Manager shall, as soon as practicable after acceptance of any resignation or after termination, use reasonable best efforts to identify suitable candidates for replacement of such officer.
SECTION 8.3. The Parent may employ directly, at its sole cost, any other officers, senior managers or employees as it may deem necessary, and such individuals will not be subject to this Agreement.
SECTION 8.4. The Manager will report to the Parent and the Board of Directors through any one or more of the Executive Officers.
ARTICLE IX
MANAGEMENT FEES AND EXPENSES
SECTION 9.1. In consideration of the Manager providing the Services to the Group, during the Initial Term, the Parent shall pay the Manager the following fees (together, the Management Fees and, on a per Vessel basis, the Management Fee ):
|
|
|
(a) Subject to paragraph (b) below, a fee of $575 per day per Vessel, payable monthly in arrears (pro rated to reflect the number of days that the Parent (or any Subsidiary) owns or charters-in each Vessel during the applicable month); |
|
|
|
(b) a fee of $250 per day per Vessel chartered-out to a third party on a bareboat charter basis payable monthly in arrears (pro rated to reflect the number of days that the Parent (or any Subsidiary) owns each such Vessel during the applicable month); |
|
|
|
(c) a fee equal to 1% calculated on the aggregate of the gross freight, demurrage, charter hire and ballast bonus obtained for the employment of each Vessel during the Term, payable to the Manager monthly in arrears, but only to the extent such freight, demurrage, charter hire or ballast bonus, as the case may be, is recognized as revenue; |
|
|
|
(d) a commission equal to 1% calculated on the price set forth in the memorandum of agreement or other sale and purchase contract of (i) the Newbuilds set forth on Schedule C hereto (the Commission Newbuilds), payable upon delivery of the Newbuilds to the relevant member of the Group; and (ii) any other vessel (including the Vessels), other than the Newbuilds set forth on Schedule D hereto (the Itochu |
14
|
|
|
Newbuilds ), bought or sold by the Parent or any Subsidiary, payable upon final delivery of such vessel to the relevant member of the Group or the relevant purchaser, as applicable; and |
|
|
|
(e) a fee of $375,000 per Newbuild for the services rendered by the Manager under the Supervision Agreement in respect of such Newbuild, payable in accordance with the terms of such Supervision Agreement. |
SECTION 9.2. The Manager shall have the right to demand the Management Fee payable in relation to each Vessel from either the Parent or the relevant member of the Group owning such Vessel under the terms of the relevant Shipmanagement Agreement or Supervision Agreement, as applicable.
SECTION 9.3. In the event that a Shipmanagement Agreement is terminated, other than by reason of default by the Manager, the Management Fee payable to the Manager under Section 9.1(a) or, as the case may be, Section 9.1(b) for the Vessel subject to such Shipmanagement Agreement shall be payable in respect of such Vessel for a further period of three calendar months from the termination date. In addition:
|
|
|
(a) The relevant member of the Group shall continue to pay Crew Support Costs (as such term is defined in the relevant Shipmanagement Agreement) for the relevant Vessel during the said further period of three calendar months; and |
|
|
|
(b) the relevant member of the Group shall pay any Severance Costs (as such term is defined in the relevant Shipmanagement Agreement) for the relevant Vessel which may materialize. |
All amounts payable to the Manager under this Section 9.3 shall be paid promptly by the Parent to the Manager following receipt by the Parent of a final accounting of funds due from the Parent or any other member of the Group in accordance with Section 13.6.
SECTION 9.4. (a) The Management Fee for each Vessel will be fixed throughout the Initial Term and shall not be subject to adjustment for euro/U.S. dollar exchange rate fluctuations or inflation during such period.
(b) For each Subsequent Term (as defined below), the Management Fee for each Vessel will be set at a mutually agreed-upon rate between the Parent and the Manager no later than 30 days prior to the commencement of the relevant Subsequent Term.
(c) If the Parent and the Manager are unable to agree on the Management Fee for any Subsequent Term pursuant to Section 9.4(b) hereof, the Management Fee for such Subsequent Term will be determined by arbitration pursuant to the terms of Article XVII hereof.
15
SECTION 9.5. The Manager shall, at no additional cost to any member of the Group, provide the Group with office accommodation, office staff (including secretarial, accounting and administrative assistance), facilities and stationery, and shall, subject to Section 9.6 and Section 10.8, pay for all printing, postage, domestic telephone and all other usual office expenses incurred by it as the Manager (it being understood that the services of the Executive Officers shall be provided pursuant to Section 8.1.).
SECTION 9.6. The Parent hereby acknowledges that no capital expenditures, financial costs, operating expenses for each Vessel or general and administrative expenses of the Group are covered by the Management Fees and any such costs, expenditure and expenses shall be paid fully by the Parent or, as the case may be, the applicable member of the Group, whether directly to third parties or by payment to such third parties through the Manager and, without prejudice to Section 10.8, to the extent incurred by the Manager, shall be reimbursed to it by the Parent and/or any member of the Group from which the Manager, in its discretion, seeks reimbursement. Such capital expenditures, financial costs, operating expenses for each Vessel and general and administrative expenses of the Group include, without limiting the generality of the foregoing, items such as:
|
|
|
(a) fees, interest, principal and any other costs due to the Groups financiers and their respective advisors; |
|
|
|
(b) all voyage expenses and vessel operating expenses directly relating to the operation and management of the Vessels (including Crew costs, surveyors attendance fees, bunkers, lubricant oils, spares, survey fees, classification society fees, maintenance and repair costs, vetting expenses, etc.); |
|
|
|
(c) any commissions, fees, remuneration or disbursements due to lawyers, brokers, agents, surveyors, consultants, financial advisors, investment bankers, insurance advisors or any other third parties whatsoever appointed by the Manager whether in its own name or on behalf and/or in the name of any member of the Group; |
|
|
|
(d) any commissions, fees, remuneration or disbursements due to lawyers, brokers, agents, surveyors, consultants, financial advisors, investment bankers, insurance advisors or any other third parties whatsoever sub-contracted to the Manager in the normal and reasonable course of meeting the Managers duties and obligations under this Agreement including, without limiting the generality of the foregoing, the duties provided in Articles V, VI and VII of this Agreement; |
|
|
|
(e) deductibles, insurance premiums (including D&O insurance) and/or P&I calls; and |
|
|
|
(f) postage, communication, traveling, victualling and other out of pocket expenses of the Manager and/or its personnel, incurred in |
16
|
|
|
providing the Services, save for any such expenses incurred by the Manager under a Supervision Agreement. |
ARTICLE X
BUDGETS, CORPORATE PLANNING AND EXPENSES
SECTION 10.1. On or before October 20 of each calendar year, the Manager shall prepare and submit to the Executive Officers and Board of Directors a detailed draft budget for the next calendar year in a format acceptable to the Executive Officers and Board of Directors and generally used by the Manager which shall include a statement of estimated revenue, estimated general and administrative expenses of the Group and a proposed budget for capital expenditures, repairs or alterations, including proposed expenditures in respect of dry-docking, together with an analysis as to when and why such replacements, improvements, renovations or expenditures may be required (collectively, the Draft Budget ).
SECTION 10.2. For a period of 15 days after receipt of the Draft Budget, the Executive Officers or Board of Directors from time to time, may request further details and submit written comments on the Draft Budget. If the Executive Officers or Board of Directors do not agree with any item of the Draft Budget, they will, within the same 15-day period, give the Manager notice of any inquiries to the Draft Budget, which notice will include the list of items under consideration (the Questioned Items ) and a proposal for the resolution of each such Questioned Item. The Executive Officers, the Board of Directors and the Manager will endeavor to resolve any such differences between them with respect to the Questioned Items, and any such differences that are not resolved within 15 days after notice of such difference being given to the Manager will be settled by arbitration pursuant to the terms of Article XVII hereof. If the Executive Officers or Board of Directors do not present any Questioned Items within such 15-day period, they will be deemed to have accepted the Draft Budget and such Draft Budget shall be deemed to be the Approved Budget (as defined in Section 10.3 below).
SECTION 10.3. By November 20 of the relevant calendar year the Manager will prepare and deliver to the Parent a revised budget that has been approved by the Board of Directors, in consultation with the Executive Officers (the Approved Budget ).
SECTION 10.4. The Manager may, from time to time, in any calendar year propose amendments to the Approved Budget upon 15 days notice to the Parent, in which event the Executive Officers (or, in the case of a change of 7.5% or more, the Board of Directors) will have the right to approve the amendments in accordance with the process set out in Section 10.2 with the relevant time periods being amended accordingly and provided that any Questioned Items are resolved within 45 days of receipt of the notice by the Parent.
17
SECTION 10.5. Once the Approved Budget has been delivered, the Manager shall prepare and present to the Parent its estimate of the working capital requirements of the Vessels and the Group and the Manager shall each month update this estimate. Based on such estimate, the Manager shall each month make a request to the Parent and/or, as the case may be, the relevant members of the Group, in writing for the funds required to provide the Services to the Group and to operate each Vessel for the ensuing month, including the payment of any occasional or extraordinary item of expenditure, such as emergency repair costs, additional insurance premiums, bunkers or provisions. Such funds shall be received by the Manager within ten calendar days after the receipt by the Parent or, as the case may be, the relevant member of the Group of the Managers written request and shall be held to the credit of the Parent or, in the Managers discretion, the relevant member of the Group in a separate bank account. At the end of each quarter or, if the Manager from time to time so requires, at the end of each month, the Manager shall preliminarily reconcile the amounts advanced to it by the Parent or, as the case may be, the relevant member of the Group with the amounts actually expended by it for the operation of each of the Vessels, and (a) the Manager shall remit to the Parent, or credit to the Parent amounts to be advanced to it hereunder for future months, any unused portion of the amounts previously advanced by the Parent or, as the case may be, any member of the Group, or (b) the Parent shall pay to the Manager any amounts properly expended by the Manager in excess of the amounts previously advanced by the Parent or, as the case may be, any member of the Group. The Parent and the Manager shall reconcile any amounts due to the Parent by the Manager or due to the Manager by the Parent for each fiscal year of the Parent as promptly as practicable following the close of each such fiscal year. Without prejudice to Section 10.8, any expenses incurred by the Manager under the terms of this Agreement on behalf of any member of the Group may be debited against the account of the respective member of the Group, but shall in any event remain payable by the Parent and the relevant member of the Group to the Manager on demand.
SECTION 10.6. The Manager shall produce a monthly comparison between budgeted and actual expenditures to the Executive Officers. The Manager shall also maintain the records of all costs and expenses incurred, including any invoices, receipts and supplementary materials as are necessary or proper for the settlement of accounts.
SECTION 10.7. Insofar as any moneys are collected by the Manager under the terms of this Agreement, any Shipmanagement Agreement and/or any Supervision Agreement (other than moneys payable by a member of the Group to the Manager), such moneys and any interest thereon shall be held to the credit of the relevant member of the Group in a separate bank account in the name thereof, but operated by the Manager and the Parent jointly. Interest on any such bank account shall be for the benefit of the relevant member of the Group.
SECTION 10.8. Notwithstanding anything contained herein to the contrary, the Manager shall in no circumstances be required to use or commit its own funds to finance the provision of the Services, other than (i) as contemplated by Section 8.1 hereof or (ii) with respect to the employees employed by the Manager in the ordinary course of business.
18
ARTICLE XI
LIABILITY AND INDEMNITY
SECTION 11.1. Save for the obligation of the Parent to pay any moneys due to the Manager hereunder, neither any member of the Group nor the Manager shall be under any liability to the other for any failure to perform any of their obligations hereunder by reason of Force Majeure. Force Majeure shall mean any cause whatsoever of any nature or kind beyond the reasonable control of the relevant member of the Group or the Manager, including, without limitation, acts of God, acts of civil or military authorities, acts of war or public enemy, acts of any court, regulatory agency or administrative body having jurisdiction, insurrections, riots, strikes or other labor disturbances, embargoes or other causes of a similar nature.
SECTION 11.2. The Manager, including its officers, directors, employees, shareholders, agents, sub-contractors and any Submanager (the Manager Related Parties ), shall be under no liability whatsoever to any member of the Group or to any third party (including the Crew) for any loss, damage, delay or expense of whatsoever nature, whether direct or indirect (including but not limited to loss of profit arising out of or in connection with detention of or delay to a Vessel), and howsoever arising in the course of the performance of this Agreement, any Shipmanagement Agreement or any Supervision Agreement, unless and to the extent that the same is proved to have resulted solely from the gross negligence or willful misconduct of the Manager, its officers, employees, agents, sub-contractors or any Submanager.
SECTION 11.3. The Parent shall indemnify and hold harmless the Manager Related Parties against all actions, proceedings, claims, demands or liabilities whatsoever or howsoever arising which may be brought against them or incurred or suffered by them arising out of or in connection with the performance of this Agreement, any Shipmanagement Agreement or any Supervision Agreement and against and in respect of any loss, damage, delay or expense of whatsoever nature (including legal costs and expenses on a full indemnity basis), whether direct or indirect, incurred or suffered by any Manager Related Party arising out of or in connection with the performance of this Agreement, any Shipmanagement Agreement and any Supervision Agreement, unless incurred or suffered due to the gross negligence or willful misconduct of any Manager Related Party.
SECTION 11.4. It is hereby expressly agreed that no employee or agent of the Manager (including any sub-contractor from time to time employed by the Manager) shall in any circumstances whatsoever be under any liability whatsoever to any member of the Group or any third party for any loss, damage or delay of whatsoever kind arising or resulting directly or indirectly from any act, neglect or default on his part while acting in the course of or in connection with his employment and, without prejudice to the generality of the foregoing provisions in this Article XI, every exemption, limitation, condition and liberty herein contained and every right, exemption from liability, defense and immunity of whatsoever nature applicable to the Manager or to which the Manager is entitled hereunder shall also be available and shall extend to protect every such employee
19
or agent of the Manager acting as aforesaid, and for the purpose of all the foregoing provisions of this Article XI, the Manager is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all Persons who are or might be their servants or agents from time to time (including sub-contractors as aforesaid) and all such Persons shall to this extent be or be deemed to be parties to this Agreement. Nothing in this Section 11.4 shall be construed so as to further limit any liability the Manager may have to the Group under Section 11.2 hereof.
SECTION 11.5. The provisions of this Article XI shall survive any termination of this Agreement.
ARTICLE XII
RIGHTS OF THE MANAGER, RESTRICTIONS ON THE MANAGERS
AUTHORITY, AND NON-COMPETE PROVISIONS
SECTION 12.1. Except as may be provided in this Agreement or in any separate written agreement between the Parent or any other member of the Group and the Manager, the Manager shall be an independent contractor and not the agent of the Parent or any other member of the Group and shall have no right or authority to incur any obligation on behalf of any member of the Group or to bind any member of the Group in any way whatsoever. Nothing in this Agreement shall be deemed to make the Manager or any of its subsidiaries or employees an employee, joint venturer or partner of any member of the Group.
SECTION 12.2. The Parent acknowledges that the Manager shall have no responsibility hereunder, direct or indirect, with regard to the formulation of the business plans, policies, management or strategies (financial, tax, legal or otherwise) of any member of the Group, which is solely the responsibility of each respective member of the Group. Each member of the Group shall set its corporate policies independently through its respective board of directors and executive officers and nothing contained herein shall be construed to relieve such directors or officers of each respective member of the Group from the performance of their duties or to limit the exercise of their powers.
SECTION 12.3. Notwithstanding the other provisions of this Agreement:
|
|
|
(a) the Manager may act with respect to a member of the Group upon any advice, resolutions, requests, instructions, recommendations, direction or information obtained from such member of the Group or any banker, accountant, broker, lawyer or other Person acting as agent of or adviser to such member of the Group and the Manager shall incur no liability to such member of the Group for anything done or omitted or suffered in good faith in reliance upon such advice, instruction, resolution, recommendation, direction or information made or given by such member of the Group or its agents, in the absence of gross negligence or willful misconduct by the Manager or its servants, and |
20
|
|
|
shall not be responsible for any misconduct, mistake, oversight, error of judgment, neglect, default, omission, forgetfulness or want of prudence on the part of any such banker, accountant, broker, lawyer, agent or adviser or other Person as aforesaid; |
|
|
|
(b) the Manager shall not be under any obligation to carry out any request, resolution, instruction, direction or recommendation of any member of the Group or its agents if the performance thereof is or would be illegal or unlawful; and |
|
|
|
(c) the Manager shall incur no liability to any member of the Group for doing or failing to do any act or thing which it shall be required to do or perform or forebear from doing or performing by reason of any provision of any law or any regulation or resolution made pursuant thereto or any decision, order or judgment of any court or any lawful request, announcement or similar action of any Person or body exercising or purporting to exercise the legitimate authority of any government or of any central or local governmental institution in each case where the above entity has jurisdiction. |
SECTION 12.4. (a) During the period commencing on the Effective Date and ending one year following termination of the Management Agreement (the Manager Restricted Period ), the Manager shall be prohibited from, directly or indirectly, providing management services to, or with respect to, any Drybulk Vessels (such activities, the Manager Competitive Activities ), other than as set forth in Section 12.4(b).
|
|
|
(b) Subject to Section 4.10, the Manager may engage in Manager Competitive Activities pursuant to its involvement with the Parent and with respect to the following: (i) Drybulk Vessels that are owned or operated (which includes chartering-in activities) by the Hajioannou Entities and (ii) Drybulk Vessel Businesses that are acquired, invested in or controlled by the Hajioannou Entities, in the case of each of clauses (i) and (ii), subject to compliance with, or waivers of, the Hajioannou Restrictive Covenant Agreement and the Other Restrictive Covenant Agreements, as applicable. |
ARTICLE XIII
TERMINATION OF THIS AGREEMENT
SECTION 13.1. This Agreement shall be effective as of the Effective Date and, subject to Sections 13.2, 13.3, 13.4 and 13.5, shall continue until the date falling two years after the Effective Date (the Initial Term ). Thereafter the term of this Agreement shall be extended on a year-to-year basis up to eight times (each a Subsequent Term ) unless the Parent, at least 12 months prior to the end of the then current term, gives written notice to the Manager that it wishes to terminate this Agreement at the end of the then
21
current term. In no event will the term of this Agreement (the Term ) extend beyond the date falling 10 years after the Effective Date.
SECTION 13.2. The Parent shall be entitled to terminate this Agreement upon notice in writing to the Manager if:
|
|
|
(a) the Manager defaults in the performance of any material obligation under this Agreement, subject to a cure right of 20 Business Days following written notice by the Parent, provided that any default of the Manager to perform any of its obligations under a relevant Shipmanagement Agreement or any Supervision Agreement shall not, in itself, entitle the Parent to terminate this Agreement pursuant to this Section 13.2(a) and shall only allow the relevant member of the Group to terminate the relevant Shipmanagement Agreement or Supervision Agreement; provided, further, that if a Submanager was performing services under a Shipmanagement Agreement that was terminated due to the default of that Submanager pursuant to this Section 13.2(a), the Parent shall be entitled to direct the Manager to remove such Submanager with respect to any other Shipmanagement Agreement under which such Submanager is then performing services; |
|
|
|
(b) any moneys due and payable to the Parent or third parties by the Manager under this Agreement is not paid or accounted for within 10 Business Days following written notice by the Parent; or |
|
|
|
(c) at any time after the Initial Term upon 12 months written notice by the Parent. |
SECTION 13.3. The Manager shall be entitled to terminate this Agreement by notice in writing to the Parent if:
|
|
|
(a) any moneys payable by the Parent under this Agreement is not paid when due or if due on demand within 10 Business Days following demand by the Manager; |
|
|
|
(b) the Parent defaults in the performance of any other material obligations under this Agreement, subject to a cure right of 20 Business Days following written notice by the Manager; |
|
|
|
(c) there is a Change in Control of the Parent; or |
|
|
|
(d) the Management Fee for any Subsequent Term is determined by arbitration pursuant to the terms of Article XVII hereof and the arbitrators accept the Parents proposal, with such termination being effective at the end of that Subsequent Term. |
22
SECTION 13.4. Either party shall be entitled to terminate this Agreement immediately if:
|
|
|
(a) the other party ceases to conduct business, or all or substantially all of the equity-interests, properties or assets of either such party is sold, seized or appropriated; |
|
|
|
(b) (i) the other party files a petition under any bankruptcy law, makes an assignment for the benefit of its creditors, seeks relief under any law for the protection of debtors or adopts a plan of liquidation; (ii) a petition is filed against the other party seeking to have it declared insolvent or bankrupt and such petition is not dismissed or stayed within 40 Business Days of its filing; (iii) the other party shall admit in writing its insolvency or its inability to pay its debts as they mature; (iv) an order is made for the appointment of a liquidator, manager, receiver or trustee of the other party of all or a substantial part of its assets; (v) or if an encumbrancer takes possession of or a receiver or trustee is appointed over the whole or any part of the other partys undertaking, property or assets; or (vi) if an order is made or a resolution is passed for the other partys winding up; |
|
|
|
(c) a distress, execution, sequestration or other process is levied or enforced upon or sued out against a material amount of the other partys property which is not discharged within 20 Business Days; |
|
|
|
(d) the other party ceases or threatens to cease wholly or substantially to carry on its business otherwise than for the purpose of a reconstruction or amalgamation without insolvency previously approved by the terminating party; |
|
|
|
(e) the other party is prevented from performing its obligations in any material respect hereunder by reasons of Force Majeure for a period of two or more consecutive months; or |
|
|
|
(f) All Supervision Agreements and all Shipmanagement Agreements are terminated in accordance with the respective terms thereof. |
SECTION 13.5. Upon the effective date of termination pursuant to this Article XIII, the Manager shall promptly terminate its service hereunder, ensuring that such termination occurs in a manner that minimizes any interruption to the business of the members of the Group.
SECTION 13.6. Upon termination, the Manager shall, as promptly as possible, submit a final accounting of funds received and disbursed under this Agreement, any Supervision Agreement and/or any Shipmanagement Agreement and of any remaining Management Fees and/or any other funds due from the Parent or any other member of the Group, calculated pro rata to the date of termination (except for those amounts payable in
23
respect of the three months following the termination date under Section 9.3, which shall be payable by the Parent in accordance with that Section), and any non-disbursed funds of any member of the Group in the Managers possession or control will be paid by the Manager as directed by such member of the Group promptly upon the Managers receipt of all sums then due it under this Agreement, any Supervision Agreement and/or any Management Agreement, if any.
SECTION 13.7. Upon termination of this Agreement, the Manager shall release to the Parent the originals where possible, or otherwise certified copies, of all such accounts and all documents specifically relating to each Vessel or the provision of the Services.
SECTION 13.8. The provisions of this Article XIII shall survive any termination of this Agreement.
ARTICLE XIV
CHANGE IN CONTROL OF THE MANAGER AND RIGHT OF FIRST OFFER
SECTION 14.1. During the Manager Restricted Period, the Manager is prohibited from transferring, assigning, selling or disposing of substantially all or all of its assets or property that is necessary for the performance of its services under this Agreement, any Supervision Agreement or any Shipmanagement Agreement to any other party without the Consent of the Parent except in the event that at the same time as or within three months after such disposition takes place the Manager is set to replace the same with equivalent assets or property.
SECTION 14.2. During the Manager Restricted Period, in the event of a Proposed Change in Control of the Manager, the Parent shall have a right of first offer to purchase the Manager pursuant to the procedures set forth in Section 14.4.
SECTION 14.3. The Parent and the Manager acknowledge that all potential transfers pursuant to this Article XIV are subject to obtaining any and all written consents of governmental authorities and other non-affiliated third parties.
SECTION 14.4. Set forth below are the procedures for the Parents right of first offer to purchase the Manager under Section 14.2:
|
|
|
(a) Prior to engaging in any negotiations or otherwise offering to consummate a Proposed Change in Control of the Manager with any third party, the Manager shall provide written notice of its intent to engage in a Proposed Change in Control of the Manager (a First Offer Notice ) and shall specify in such First Offer Notice the material terms and conditions (including the consideration to be paid, which shall be in cash) on which it would be willing to consummate a Proposed Change in Control of the Manager with the Parent, including any liabilities to be assumed by the Parent. |
24
|
|
|
(b) The Parent shall notify the Manager within 30 days after receiving a First Offer Notice (the First Offer Period ) that either (i) the Parent does not wish to participate in a Proposed Change in Control of the Manager (a Negative Response ) or (ii) the Parent does wish to participate in a Proposed Change in Control of the Manager, subject to the negotiation of the terms and conditions of the Proposed Change in Control of the Manager in accordance with the provisions of this Article XIV (an Affirmative Response ). |
|
|
|
(c) In the event of an Affirmative Response, the Parent and the Manager shall negotiate in good faith during the First Offer Period the terms and conditions of an agreement for the consummation of a Proposed Change in Control of the Manager with the Parent and such terms and conditions are to be based on the terms and conditions set forth in the First Offer Notice. |
|
|
|
(d) In the event of a Negative Response or in the event the Parent and the Manager are unable to agree on the terms and conditions of an agreement for the consummation of a Proposed Change in Control of the Manager during the First Offer Period, then the Manager may consummate a Proposed Change in Control of the Manager within 120 days after the earlier of the date the Manager receives a Negative Response and the end of the First Offer Period with a third party on terms and conditions as to price that are not more favorable, and on such other terms and conditions that are not materially more favorable, to the proposed purchaser than the terms and conditions specified in the First Offer Notice. |
|
|
|
(e) If the Manager does not consummate a Proposed Change in Control of the Manager to a third party within 120 days after the earlier of the date the Manager receives a Negative Response from the Parent and the end of the First Offer Period in accordance with Section 14.4(d) then the Manager shall not thereafter consummate a Proposed Change in Control of the Manager without first offering to consummate a Proposed Change in Control of the Manager with the Parent in the manner provided above. |
ARTICLE XV
NOTICES
SECTION 15.1. All notices, consents and other communications hereunder, or necessary to exercise any rights granted hereunder, shall be in writing, sent either by prepaid registered mail or telefax, and will be validly given if delivered on a Business Day to an individual at the following address:
25
|
|
|
Safe Bulkers, Inc. |
|
32 Avenue K. Karamanli |
|
P.O. Box 70837 |
|
16605 Voula |
|
Athens, Greece |
|
|
|
Telefax: +30 210 895 6900 |
|
Attention: President |
|
|
|
Safety Management Overseas S.A. |
|
32 Avenue K. Karamanli |
|
P.O. Box 70837 |
|
16605 Voula |
|
Athens, Greece |
|
|
|
Telefax: +30 210 895 6900 |
|
Attention: Managing Director |
ARTICLE XVI
APPLICABLE LAW
SECTION 16.1. This Agreement shall be governed by, and construed in accordance with, the laws of England.
SECTION 16.2. Except for Sections 3.5 and Article XI which can be relied upon by a Submanager, no other term of this Agreement is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Agreement.
ARTICLE XVII
ARBITRATION
SECTION 17.1. All disputes arising out of this Agreement shall be arbitrated in London in the following manner. One arbitrator is to be appointed by each of the parties hereto and a third by the two so chosen. Their decision or that of any two of them shall be final and, for the purpose of enforcing any award, this Agreement may be made a rule of the court. The arbitrators shall be commercial persons, conversant with shipping matters. Such arbitration is to be conducted in accordance with the rules of the London Maritime Arbitration Association terms current at the time when the arbitration proceedings are commenced and in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof.
SECTION 17.2. In the event that the a party hereto shall state a dispute and designate an arbitrator in writing, the other party shall have 20 Business Days to designate
26
its own arbitrator. If such other party fails to designate its own arbitrator within such period, the arbitrator appointed by the first party can render an award hereunder.
SECTION 17.3. Until such time as the arbitrators finally close the hearings, either party shall have the right by written notice served on the arbitrators and on the other party to specify further disputes or differences under this Agreement for hearing and determination.
SECTION 17.4. The arbitrators may grant any relief, and render an award, which they or a majority of them deem just and equitable and within the scope of this Agreement, including but not limited to the posting of security. Awards pursuant to this Article XVII may include costs, including a reasonable allowance for attorneys fees, and judgments may be entered upon any award made herein in any court having jurisdiction.
SECTION 17.5. In the case of (i) any failure of the parties to agree on the Management Fee for any Subsequent Term within 30 days prior to the commencement of that Subsequent Term or (ii) any failure of the parties to agree upon the resolution of any Questioned Items in a Draft Budget prior to the 20th of November of a calendar year, the terms of this Section 17.5 shall be applicable. Notwithstanding any contrary provisions of this Article XVII (but otherwise subject to such provisions), the following Baseball Arbitration provisions shall apply to the matters referred to in clauses (i) and (ii) above:
|
|
|
(a) Each party shall designate one arbitrator within 5 business days following the relevant date specified in clause (i) or (ii) above; and the two arbitrators so designated shall designate a third within 10 Business Days thereafter; provided, however, that the parties may agree to a single arbitrator. If either party fails to designate an arbitrator within such 5 Business Day period, the other arbitrator can render an award hereunder. |
|
|
|
(b) Each party shall propose an amount for each item in dispute that is subject to this Section 17.5, which shall be provided in writing to the arbitrators, together with any supporting documentation. Such proposed amounts may differ from the amounts proposed by the parties in their negotiations prior to triggering the implementation of this Section 17.5. The arbitrators may, but shall not be required to, accept oral testimony in addition to supporting documentation. |
|
|
|
(c) Within 20 Business Days following the selection of the arbitrators hereunder, they shall, by majority vote, accept the proposal of one party or the other for each item that is the subject of arbitration pursuant to this Section 17.5. |
|
|
|
(d) Awards under this Section 17.5 shall not include costs, but may include interest if the payment date for any amount shall have passed. The fees and expenses of the arbitrators under this Section 17.5 |
27
|
|
|
shall be borne by the losing party (and may be apportioned by the arbitrators if more than one item is the subject of an arbitration). |
|
|
|
(e) Awards under this Section 17.5 shall be final and binding on the parties. |
ARTICLE XVIII
MISCELLANEOUS
SECTION 18.1. This Agreement (which includes the Annex) constitutes the sole understanding and agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto. This Agreement may not be amended, waived or discharged except by an instrument in writing executed by the party against whom enforcement of such amendment, waiver or discharge is sought.
SECTION 18.2. During the term hereof, the Manager will not provide services hereunder through, or otherwise cause any member of the Group to have, an office or fixed place of business in the United States.
SECTION 18.3. This Agreement may be executed in one or more written counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF the undersigned have executed this Agreement as of the date first above written.
|
|
|
|
SAFE BULKERS, INC. |
|
|
|
|
|
by |
|
|
|
|
|
|
Name: |
|
|
Title: |
|
|
|
|
SAFETY MANAGEMENT OVERSEAS S.A. |
|
|
|
|
|
by |
|
|
|
|
|
|
Name: |
|
|
Title: |
[S IGNATURE P AGE TO M ANAGEMENT A GREEMENT]
SCHEDULE A
SHIPOWNING SUBSIDIARIES
SCHEDULE B
NON-SHIPOWNING SUBSIDIARIES
SCHEDULE C
COMMISSION NEWBUILDS
SCHEDULE D
ITOCHU NEWBUILDS
APPENDIX I
FORM OF HAJIOANNOU RESTRICTIVE COVENANT AGREEMENT
[TO BE ATTACHED]
APPENDIX II
FORM OF OTHER RESTRICTIVE COVENANT AGREEMENT
[TO BE ATTACHED]
APPENDIX III
FORM OF SHIPMANAGEMENT AGREEMENT
[TO BE ATTACHED]
A-A-1
APPENDIX IV
FORM OF SUPERVISION AGREEMENT
THIS AGREEMENT is made the _____ day of , 20[ ] BETWEEN:
|
|
(1) |
[name of relevant member of the Group], a company incorporated under the laws of [], whose registered office is [ADDRESS] (the Owner ); and |
|
|
(2) |
SAFETY MANAGEMENT OVERSEAS S.A., a company incorporated under the laws of Panama, whose registered office is at [ADDRESS] and whose branch office is at 32 Avenue Karamanli, P.O. Box 70837, 16605 Voula, Athens, Greece (the Construction Supervisor ). |
WHEREAS:
By a shipbuilding contract dated (the Shipbuilding Contract ) and made between [] (the Builder ) and the Owner, the Builder agreed to construct, to the order of the Owner, and sell to the Owner, a [] bulk carrier, known during construction as Hull No.[] (the Vessel );
IT IS NOW AGREED as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Except as otherwise defined herein, all terms defined in the Shipbuilding Contract shall have the same respective meanings when used herein.
SECTION 1.2. In this Agreement, unless the context otherwise requires, the following expressions shall have the following meanings:
Business Day means:
|
|
|
(i) in relation to a payment which is to be made hereunder or under any other document, a day, other than a Saturday or Sunday or a public holiday, on which major retail banks in New York, and (in respect of any payments which are to be made to the Builder) [], are open for non-automated customer services; and |
|
|
|
(ii) in any other case, a day, other than a Saturday or Sunday or a public holiday, on which major retail banks in Athens, Greece are open for non-automated customer services. |
A-II-1
|
|
|
Group Management Agreement means the agreement dated [ ] 2008 made between the Parent and the Construction Supervisor. |
Owners Supplies means all of the items to be furnished to the Vessel by the Owner in accordance with Article [] of the Shipbuilding Contract.
Parent means Safe Bulkers Inc. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 and includes its successors in title.
Spares means the items to be designated as spares by the parties hereto at the time of the delivery of the Vessel.
Supervision Period means the period from the execution of this Agreement to and including the earlier of (i) the date of delivery of the Vessel pursuant to the Shipbuilding Contract and (ii) the date this Agreement is terminated.
ARTICLE II
APPOINTMENT
SECTION 2.1. The Owner hereby appoints the Construction Supervisor, and the Construction Supervisor hereby agrees to act as the Owners supervisor towards the Builder and as the Owners Representative under the Shipbuilding Contract for the duration of the Supervision Period and to perform the duties and rights which rest with the Owner regarding the construction and delivery of the Vessel in accordance with all of the provisions of the Shipbuilding Contract. The Owner shall be responsible for, inter alia , determining the general policy of supervision of construction of the Vessel and the scope of activities of the Construction Supervisor and, in the performance of its duties under this Agreement, the Construction Supervisor shall at all times act strictly in accordance with any instructions or directions given to it by the Owner regarding such general policy or, in the absence of such instructions or directions, in accordance with the standards of a prudent supervisor providing services of the type to be provided under this Agreement, having due regard to the Owners interest. Any instructions so given shall be consistent with the nature and scope of the supervision services required to be performed by the Construction Supervisor under this Agreement and shall not require the Construction Supervisor to do or omit to do anything which may be contrary to any applicable law of any jurisdiction or which is inconsistent or contrary to any of the rights and duties of the Owner under the Shipbuilding Contract. Upon appointment the Owner shall furnish the Construction Supervisor with a full and complete copy of the Shipbuilding Contract (which for the avoidance of doubt shall include the Specifications and the Plans).
SECTION 2.2. Specific Powers and Duties of the Construction Supervisor. Without prejudice to the generality of the appointment made under Section 2.1, and (where applicable) by way of addition to the rights, powers and duties so conferred, the Construction Supervisor shall, subject to this Section 2.2 and to Articles III
A-II-2
and IV, have and be entrusted with the following rights, powers and duties in relation to the Shipbuilding Contract and the Vessel:
|
|
|
(a) to review, comment on, agree and approve the lists of plans and the drawings referred to; to attend the testing of the Vessels machinery, outfitting and equipment and to request any tests or inspections which the Construction Supervisor may consider appropriate or desirable and to review and comment on the results of all tests and inspections to the extent this is possible under the terms of the Shipbuilding Contract; to carry out such inspections and give such advice or suggestions to the Builder as the Construction Supervisor may consider appropriate and as the terms of the Shipbuilding Contract allow him to do; and to give notice to the Builder in the event that the Construction Supervisor discovers any construction, material or workmanship which the Construction Supervisor believes does not or will not conform to the requirements of the Shipbuilding Contract and the specifications again provided the terms of the Shipbuilding Contract allows for such notice to be given; |
|
|
|
(b) to appoint a representative of the Construction Supervisor for the purposes specified in Article [] of the Shipbuilding Contract; |
|
|
|
(c) if any alteration or addition to the Shipbuilding Contract becomes obligatory or desirable, to consult with the Builder and make recommendations to the Owner as to whether or not acceptance should be given to any proposal notified to the Owner by the Builder; |
|
|
|
(d) to request and agree to any minor alterations, additions or modifications to the Vessel or the specifications and any substitute materials pursuant to Article [] which the Construction Supervisor may consider appropriate or desirable, provided that if the cost of such variations or substitute materials would have the effect of altering the Contract Price (as defined in the Shipbuilding Contract) by more than [five per cent (5%)] from the Contract Price on the date hereof or the amount of any of the installments of the Contract Price due under the Shipbuilding Contract prior to the delivery of the Vessel, the Construction Supervisor shall notify the same to the Owner in writing and obtain the Owners instructions before taking any action in relation thereto; to receive from and transmit to the Builder information relating to the requirements of the classification society and to give instructions and agree with the Builder regarding alterations, additions or changes in connection with such requirements; and to approve the substitution of materials as requested by the Builder; |
|
|
|
(e) to attend and witness the trials of the Vessel to the extent this is permitted under the terms of the Shipbuilding Contract; |
|
|
|
(f) to determine whether the Vessel has been designed, constructed, equipped and completed in accordance with, and complies with, the Shipbuilding Contract and the Specifications and Plans (each as defined in the Shipbuilding Contract); to give the Builder a notice of acceptance or (as the case may be) |
A-II-3
|
|
|
rejection of the Vessel, to require or request any further test and inspection of the Vessel to the extent this is possible under the terms of the Shipbuilding Contract, and to give and receive any further or other notice relative to such matters and generally to advise the Owner in respect of all such matters; |
|
|
|
(g) to sign on behalf of the Owner any protocols as to sea trials, consumable stores, delivery and acceptance or otherwise, having first ascertained with the Owner the appropriateness of so doing; |
|
|
|
(h) to accept on behalf of the Owner the documents specified in Article [], Paragraph [] of the Shipbuilding Contract to be delivered by the Builder at delivery of the Vessel under the Shipbuilding Contract and to confirm receipt thereof to the Owner; |
|
|
|
(i) to give and receive on behalf of the Owner any notice contemplated by the Shipbuilding Contract, provided that the Construction Supervisor shall not have authority to give on behalf of the Owner any notice which the Owner may be entitled to give to cancel, repudiate or rescind the Shipbuilding Contract without the prior written consent of the Owner; and |
|
|
|
(j) to purchase, after being placed in funds by the Owner, all Owners Supplies as agent of the Owner and supply and deliver the same together with all necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates to the Builder as provided in the Shipbuilding Contract, and provide to the Owner a list of all such Owners Supplies as soon as possible. |
SECTION 2.3. The Construction Supervisor shall discharge its responsibilities under this Clause 2 as the Owners agent.
SECTION 2.4. In the event that the Construction Supervisor uses its own funds to purchase Owners Supplies, the cost of supplying and delivering Owners Supplies pursuant the relevant terms of the Shipbuilding Contract shall be reimbursed by the Owner to the Construction Supervisor on the date the Construction Supervisor submits to the Owner supporting invoices in respect of such cost.
ARTICLE III
CONSTRUCTION SUPERVISORS DUTIES
REGARDING CONSTRUCTION
SECTION 3.1. The Construction Supervisor undertakes with the Owner with respect to the Shipbuilding Contract:
|
|
|
(a) to notify the Owner in writing promptly on becoming aware of any likely change to any of the dates on which any installment under the Shipbuilding Contract is expected to be due; |
A-II-4
|
|
|
(b) to (i) notify the Owner in writing of the expected date on which the launching or, as the case may be, sea trials of the Vessel is or are to take place and (ii) promptly on the same day as the launching or, as the case may be, sea trials of the Vessel takes or take place to confirm that the launching or, as the case may be, sea trials of the Vessel has or have taken place and, where relevant, that the amount specified in such confirmation is due and payable; |
|
|
|
(c) to (i) advise the Owner in writing, four (4) Business Days prior to the date on which the delivery installment under the Shipbuilding Contract is anticipated to become due, of the times and amounts of payments to be made to the Builder under the Shipbuilding Contract and any amount due to the Construction Supervisor for Owners Supplies not already settled and (ii) promptly confirm the same on the day on which such installment becomes due under the terms of the Shipbuilding Contract; |
|
|
|
(d) not to accept the Vessel or delivery of the Vessel on the Owners behalf without the Owners prior written approval and unless the Construction Supervisor shall have previously certified to the Owner in writing, in the form of the certificate set out in Schedule 1 to this Agreement, that: |
|
|
|
(i) the Vessel has been duly completed and is ready for delivery to and acceptance by the Owner in or substantially in accordance with the Shipbuilding Contract and the Specifications and Plans; |
|
|
|
(ii) there is, to the best of the Construction Supervisors knowledge and belief having made due enquiry with the Builder, no lien or encumbrance on the Vessel other than the lien in favor of the Builder in respect of the delivery installment of the Contract Price due in accordance with the relevant terms of the Shipbuilding Contract; |
|
|
|
(iii) the Vessel is recommended for classification by the relevant classification society referred to in the Shipbuilding Contract (and the Construction Supervisor shall attach to its certificate the provisional certificate of such classification society recommending such classification of the Vessel or a duplicate or photocopy of such provisional certificate or otherwise provide evidence of such classification to the Owner); |
|
|
|
(e) on receipt thereof from the Builder promptly to deliver the documents specified in Article [], Paragraph [] of the Shipbuilding Contract to the Owner or as the Owner may direct; and |
|
|
|
(f) solely with the prior written approval of the Owner, to request from or agree with the Builder any material alterations, additions or modifications to the Vessel. |
A-II-5
ARTICLE IV
CONSTRUCTION SUPERVISORS GENERAL OBLIGATIONS
SECTION 4.1. The Construction Supervisor undertakes to the Owner, with respect to the exercise and performance of its rights, powers and duties as the Owners representative under this Agreement, as follows:
|
|
|
(a) it will ensure the due and punctual observance and performance of all conditions, duties and obligations imposed on the Owner by the Shipbuilding Contract (other than to pay the Contract Price) and will not without the prior written consent of the Owner: |
|
|
|
(i) exercise any rights of the Owner to cancel, repudiate or rescind the Shipbuilding Contract; |
|
|
|
(ii) waive, modify or suspend any provision of the Shipbuilding Contract if as a result of such waiver, modification or suspension the Owner will or may suffer any adverse consequences; and |
|
|
|
(b) it will, at its own expense, keep all necessary and proper books, accounts, records and correspondence files relating to its duties and activities under this Agreement and shall send quarterly reports to the Owner concerning the progress of the design and construction of the Vessel and keep the Owner promptly informed of any deviations from the building program. |
ARTICLE V
LIABILITY AND INDEMNITY
SECTION 5.1. Save for the obligation of the Owner to pay any moneys due to the Construction Supervisor hereunder, neither the Owner nor the Construction Supervisor shall be under any liability to the other for any failure to perform any of their obligations hereunder by reason of Force Majeure. Force Majeure shall mean any cause whatsoever of any nature or kind beyond the reasonable control of the Owner or the Construction Supervisor, including, without limitation, acts of God, acts of civil or military authorities, acts of war or public enemy, acts of any court, regulatory agency or administrative body having jurisdiction, insurrections, riots, strikes or other labor disturbances, embargoes or other causes of a similar nature.
SECTION 5.2. The Construction Supervisor, including its officers, directors, employees, shareholders, agents, and any sub-contractors (the Construction Supervisor Related Parties ), shall be under no liability whatsoever to the Owner or to any third party (including the Builder) for any loss, damage, delay or expense of whatsoever nature, whether direct or indirect (including but not limited to loss of profit arising out of or in connection with the delayed or non-conforming delivery of the Vessel), and howsoever arising in the course of the performance of this Agreement,
A-II-6
unless and to the extent that the same is proved to have resulted solely from the gross negligence or willful misconduct of the Construction Supervisor, its officers, employees, agents or any of its sub-contractors.
SECTION 5.3. The Owner shall indemnify and hold harmless the Construction Supervisor Related Parties against all actions, proceedings, claims, demands or liabilities whatsoever or howsoever arising which may be brought against them or incurred or suffered by them arising out of or in connection with the performance of this Agreement and against and in respect of any loss, damage, delay or expense of whatsoever nature (including legal costs and expenses on a full indemnity basis), whether direct or indirect, incurred or suffered by any Construction Supervisor Related Party in the performance of this Agreement, unless incurred or suffered due to the gross negligence or willful misconduct of any Construction Supervisor Related Party.
SECTION 5.4. It is hereby expressly agreed that no employee or agent of the Construction Supervisor (including any sub-contractor from time to time employed by the Construction Supervisor) shall in any circumstances whatsoever be under any liability whatsoever to the Owner or any third party for any loss, damage or delay of whatsoever kind arising or resulting directly or indirectly from any act, neglect or default on his part while acting in the course of or in connection with his employment and, without prejudice to the generality of the foregoing provisions in this Article V, every exemption, limitation, condition and liberty herein contained and every right, exemption from liability, defense and immunity of whatsoever nature applicable to the Construction Supervisor or to which the Construction Supervisor is entitled hereunder shall also be available and shall extend to protect every such employee or agent of the Construction Supervisor acting as aforesaid, and for the purpose of all the foregoing provisions of this Article V, the Construction Supervisor is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be their servants or agents from time to time (including sub-contractors as aforesaid) and all such persons shall to this extent be or be deemed to be parties to this Agreement.
SECTION 5.5. The provisions of this Article V shall survive any termination of this Agreement.
ARTICLE VI
FEES
SECTION 6.1. In consideration of the performance of the duties assigned to the Construction Supervisor in this Agreement, the Owner shall pay to the Construction Supervisor the sum of US$375,000 for its total supervision costs in connection with the supervision of the construction of the Vessel, plus any expenses incurred under the Shipbuilding Contract against presentation of supporting invoices from the Construction Supervisor which the Construction Supervisor shall supply to the Owner at the same time as payment is requested. The fee payable hereunder to the Construction Supervisor shall include all costs which are incurred by the Construction
A-II-7
Supervisor in connection with the ordinary exercise and performance by the Construction Supervisor of the rights, powers and duties entrusted to it pursuant to this Agreement. The supervision fee will be paid in two installments as follows:
|
|
(a) |
US$187,500 on execution of this Agreement; and |
|
|
(b) |
US$187,500 upon the Construction Supervisor advising the Owner of the completion of the sea trial run of the Vessel. |
For the avoidance of doubt, the Construction Supervisor can demand payment of the fee and other amounts payable hereunder from the Parent pursuant to the relevant provisions of the Group Management Agreement.
ARTICLE VII
COMMENCEMENT - TERMINATION
SECTION 7.1. This Agreement shall come into effect on the date hereof and shall continue until the delivery of the Vessel in accordance with the Shipbuilding Contract unless terminated earlier pursuant to the terms of Section 7.2, Section 7.3, Section 7.4 or Section 7.5 hereof.
SECTION 7.2. The Owner shall be entitled to terminate this Agreement by notice in writing to the Construction Supervisor if the Construction Supervisor defaults in the performance of any material obligation under this Agreement, subject to a cure right of 20 Business Days following written notice by the Owner.
SECTION 7.3. This Agreement shall terminate automatically if:
|
|
(a) |
the Shipbuilding Contract is cancelled, rescinded or terminated; or |
|
|
(b) |
the Group Management Agreement is terminated. |
SECTION 7.4. The Construction Supervisor shall be entitled to terminate this Agreement by notice in writing to the Owner if:
|
|
|
|
(a) any moneys payable by the Owner under this Agreement is not paid when due or if due on demand within 10 Business Days following demand by the Construction Supervisor; or |
|
|
|
|
|
(b) the Owner defaults in the performance of any other material obligations under this Agreement, subject to a cure right of 20 Business Days following written notice by the Construction Supervisor; or |
SECTION 7.5. Either party shall be entitled to terminate this Agreement immediately if:
A-II-8
|
|
|
(a) the other party ceases to conduct business, or all or substantially all of the equity-interests, properties or assets of either such party is sold, seized or appropriated; or |
|
|
|
(b) (i) the other party files a petition under any bankruptcy law, makes an assignment for the benefit of its creditors, seeks relief under any law for the protection of debtors or adopts a plan of liquidation; (ii) a petition is filed against the other party seeking to have it declared insolvent or bankrupt and such petition is not dismissed or stayed within 40 Business Days of its filing; (iii) the other party shall admit in writing its insolvency or its inability to pay its debts as they mature; (iv) an order is made for the appointment of a liquidator, manager, receiver or trustee of the other party of all or a substantial part of its assets; (v) or if an encumbrancer takes possession of or a receiver or trustee is appointed over the whole or any part of the other partys undertaking, property or assets; or (vi) if an order is made or a resolution is passed for the other partys winding up; or |
|
|
|
(c) a distress, execution, sequestration or other process is levied or enforced upon or sued out against the other partys property which is not discharged within 20 Business Days; or |
|
|
|
(d) the other party ceases or threatens to cease wholly or substantially to carry on its business otherwise than for the purpose of a reconstruction or amalgamation without insolvency previously approved by the terminating party; or |
|
|
|
(e) the other party is prevented from performing its obligations hereunder by reasons of Force Majeure for a period of two or more consecutive months. |
SECTION 7.6. In the event of termination due to the Construction Supervisors default, then it shall not be entitled to receive any payment in respect of the fees and other amounts described in Article VI becoming due and payable after the date of such termination.
ARTICLE VIII
EMPLOYEES
SECTION 8.1. None of the employees and/or sub-contractors of the Construction Supervisor shall constitute, for the purposes of this Agreement, sub-agents of the Owner. The Construction Supervisor, in its capacity as employer and contractor (and not in its capacity as agent for the Owner), shall (a) be responsible for the salaries, expenses and costs in respect of each of its employees and sub-contractors (not in its capacity as agent for the Owner) and (b) save for the provisions of Article V hereof, indemnify its employees and sub-contractors for any liabilities and losses incurred by such employees and sub-contractors.
A-II-9
ARTICLE IX
GOVERNING LAW - ARBITRATION
SECTION 9.1. This Agreement shall be governed by and be construed in accordance with the laws of England.
SECTION 9.2. All disputes arising out of this Agreement shall be arbitrated in London in the following manner. One arbitrator is to be appointed by each of the parties hereto and a third by the two so chosen. Their decision or that of any two of them shall be final and, for the purpose of enforcing any award, this Agreement may be made a rule of the court. The arbitrators shall be commercial persons, conversant with shipping matters. Such arbitration is to be conducted in accordance with the rules of the London Maritime Arbitration Association terms current at the time when the arbitration proceedings are commenced and in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof.
SECTION 9.3. In the event that the a party hereto shall state a dispute and designate an arbitrator in writing, the other party shall have 20 Business Days to designate its own arbitrator. If such other party fails to designate its own arbitrator within such period, the arbitrator appointed by the first party can render an award hereunder.
SECTION 9.4. Until such time as the arbitrators finally close the hearings, either party shall have the right by written notice served on the arbitrators and on the other party to specify further disputes or differences under this Agreement for hearing and determination.
SECTION 9.5. The arbitrators may grant any relief, and render an award, which they or a majority of them deem just and equitable and within the scope of this Agreement, including but not limited to the posting of security. Awards pursuant to this Article IX may include costs, including a reasonable allowance for attorneys fees, and judgments may be entered upon any award made herein in any court having jurisdiction.
ARTICLE X
COUNTERPARTS
SECTION 10.1. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument.
ARTICLE XI
NOTICES
SECTION 11.1. Every notice or other communication under this Agreement shall:
A-II-10
|
|
|
(a) be in writing delivered personally or by first-class prepaid letter (airmail if available) or facsimile transmission or other means of telecommunication (other than telex) in permanent written form; |
|
|
|
(b) be deemed to have been received, in the case of a letter, when delivered personally or three (3) days after it has been put into the post and, in the case of a facsimile transmission or other means of telecommunication (other than telex) in permanent written form, at the time of dispatch (provided that if the date of dispatch is a Saturday or Sunday or a public holiday in the country of the addressee or if the time of dispatch is after the close of business in the country of the addressee it shall be deemed to have been received at the opening of business on the next day which is not a Saturday or Sunday or public holiday); and |
|
|
|
(c) be sent: |
|
|
|
|
(i) |
to the Construction Supervisor at: |
|
|
|
|
|
Safety
Management Overseas S.A.
|
|
|
|
|
(ii) |
to the Owner at: |
|
|
|
|
|
C/o Safe
Bulkers, Inc.
|
or to such other address and/or numbers for a party as is notified by such party to the other party under this Agreement.
SECTION 11.2. Each communication and document made or delivered by one party to another pursuant to this Agreement shall be in the English language.
SECTION 11.3. This Agreement shall not create benefits on behalf of any other person not a party to this Agreement, and this Agreement shall be effective only as between the parties hereto, their successors and permitted assigns.
A-II-11
IN WITNESS of which this Agreement has been duly executed the day and year first before written.
For the Owner
For the Construction Supervisor
A-II-12
SCHEDULE 1
FORM OF CONSTRUCTION CERTIFICATE
[On the letterhead of the Construction Supervisor]
[Vessel Owner]
(the
Owner
)
[Address]
Facsimile: [ ]
Attention: [ ]
Date: _________________
Dear Sirs,
[Name of Builder] (the Builder ), [Name of Vessel] (the Vessel )
We refer to the construction supervision agreement dated [ ] between the Owner and us (the Supervision Agreement ).
Words and expressions defined in the Supervision Agreement (whether expressly or by incorporation by reference to another document) shall have the same meaning where used in this certificate.
We hereby certify, pursuant to Section 3.1(d) of the Supervision Agreement, as follows:
|
|
(i) |
the Vessel has been duly completed and is ready for delivery to and acceptance by the Owner in or substantially in accordance with the Shipbuilding Contract and the Specifications and Plans; and |
|
|
(ii) |
the Vessel is recommended for classification by [Name of the classification society] (the Classification Society ). |
S-1-1
With respect to paragraph (ii) above, please find attached to this certificate the provisional certificate of the Classification Society recommending such classification of the Vessel / a duplicate or photocopy of the provisional certificate of the Classification Society recommending such classification of the Vessel / the following evidence of the Classification Societys recommendation of such classification of the Vessel [ ].
|
|
|
Yours faithfully, |
|
|
|
|
|
for and on behalf of |
|
SAFETY MANAGEMENT OVERSEAS S.A. |
S-1-2
EXHIBIT 10.2
SAFE BULKERS, INC.,
POLYS HAJIOANNOU,
VORINI HOLDINGS INC.
SAFEFIXING CORP
- and -
MACHAIRIOTISSA HOLDINGS INC.
THIS RESTRICTIVE COVENANT AGREEMENT
(this
Agreement
) is made on [],
2008,
BY AND BETWEEN:
(1) SAFE BULKERS, INC., a Marshall Islands corporation (the Company );
(2) POLYS HAJIOANNOU, in his individual capacity ( P. Hajioannou );
(3) VORINI HOLDINGS INC., a Marshall Islands corporation ( Vorini Holdings );
(4) SAFEFIXING CORP, a Liberian corporation ( SafeFixing ); and
(5) MACHAIRIOTISSA HOLDINGS INC., a Marshall Islands corporation ( Machairiotissa Holdings and, together with P. Hajioannou, Vorini Holdings and, together with any entity controlled by or under common control with Machairiotissa Holdings, P. Hajioannou and/or Vorini Holdings, the Hajioannou Entities ).
WHEREAS:
(A) Pursuant to the Management Agreement by and between the Company and Safety Management Overseas S.A., a Panamanian corporation (the Manager ), dated [], 2008 (the Management Agreement ), the Manager has agreed to provide certain management services to the Company on an exclusive basis, restrict certain competitive activities and grant a right of first offer to the Company to purchase its assets and properties upon the occurrence of certain events, all as described therein; and
(B) the Company wishes to (i) limit the activities of each of the Hajioannou Entities, on the terms and conditions set out in this Agreement to prohibit certain activities that may compete with the business of the Company, (ii) be granted a right of first offer to purchase the Hajioannou Entities relevant interest in the Manager in the event of a potential change of control of the Manager and (iii) be granted a right of first offer to purchase the Hajioannou Entities relevant interest in SafeFixing, in the event of a potential change of control of SafeFixing.
NOW, THEREFORE, in consideration of the terms and conditions set forth below and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties hereto agree as follows:
2
ARTICLE I
INTERPRETATION
SECTION 1.1. In this Agreement, unless the context otherwise requires:
(a) Affirmative Response shall have the meaning set forth in Section 4.3(b) .
(b) Agreement shall have the meaning set forth in the preamble.
(c) Break Up Cost means the aggregate amount of any and all costs including any taxes, registration fees, administrative expenses, severance costs, and other similar costs and expenses that would be required to transfer Drybulk Vessels or any other portion of a Non-Drybulk Acquisition that owns or operates Drybulk Vessels to the Company separately from the other assets of the Non-Drybulk Acquisition.
(d) Board of Directors means the board of directors of the Company as the same may be constituted from time to time.
(e) Business Day means a day (excluding Saturdays and Sundays) on which banks are open for business in Athens, Greece; Cyprus; and New York, New York.
(f) Company shall have the meaning set forth in the preamble.
(g) Company Group means, at any time, the Company and its subsidiaries at such time and member of the Company Group shall be construed accordingly.
(h) Competitive Activities shall have the meaning set forth in Section 3.1.
(i) Drybulk Vessel means any ocean-going vessel (including any Newbuild) that is intended to be used primarily to transport non-liquid cargoes of commodities shipped in an unpackaged state.
(j) Drybulk Vessel Business means any business involved in the ownership or operation of Drybulk Vessels.
(k) Effective Date means the Effective Date (as defined in the Management Agreement).
(l) First Offer Notice shall have the meaning set forth in Section 4.3(a) .
(m) First Offer Period means (i) 30 days in the case of a Permitted Acquisition First Offer Right, (ii) 30 days in the case of a Manager First Offer
3
Right and (iii) 15 days in the case of a SafeFixing First Offer Right.
(n) Hajioannou Entities shall have the meaning set forth in the preamble.
(o) Independent Directors means those members of the Board of Directors that qualify as independent directors within the meaning of Rule 10A-3 promulgated under the U.S. Securities Exchange Act of 1934, as amended, and the listing criteria of the New York Stock Exchange.
(p) Machairiottisa Holdings shall have the meaning set forth in the preamble.
(q) Management Agreement shall have the meaning set forth in the recitals.
(r) Manager shall have the meaning set forth in the recitals.
(s) Manager First Offer Right shall have the meaning set forth in Section 4.1.
(t) Negative Response shall have the meaning set forth in Section 4.3(b) .
(u) Newbuild means a new vessel to be or which has just been constructed, or is under construction, which a member of the Company Group has agreed to acquire pursuant to a shipbuilding contract, memorandum of agreement or otherwise.
(v) Non-Drybulk Acquisition means an acquisition or investment that includes (i) both Drybulk Vessels and vessels other than Drybulk Vessels and/or (ii) any business that owns or operates Drybulk Vessels and vessels other than Drybulk Vessels.
(w) P. Hajioannou shall have the meaning set forth in the preamble.
(x) Permitted Acquisition means an acquisition by any of the Hajioannou Entities of a Drybulk Vessel or an acquisition of or investment in a Drybulk Vessel Business that (i) has been first offered to the Company and refused by the majority of the Independent Directors and (ii) has been acquired or invested in by the relevant Hajioannou Entity on terms and conditions as to price that are not more favorable, and on such other terms and conditions that are not materially more favorable, to such Hajioannou Entity than those offered to the Company.
(y) Permitted Acquisition First Offer Right shall have the meaning set forth in Section 3.2(a).
4
(z) Proposed Change in Control of the Manager means (i) the approval by the board of directors of the Manager or the shareholders of the Manager of a proposed sale of all or substantially all of the assets or property of the Manager necessary for the performance of its services under the Management Agreement, (ii) the approval by the shareholders of the Manager of a proposed sale of the Managers shares that would result in one or more of the Hajioannou Entities owning less than 80% of the voting power of the outstanding voting securities of the Manager or (iii) the approval by the shareholders of the Manager of a proposed merger, consolidation or similar transaction, as a result of which one or more of the Hajioannou Entities would beneficially own less than 80% of the voting power of the outstanding voting securities of the resulting entity following such transaction.
(aa) Proposed Change in Control of SafeFixing shall mean (i) the approval by the board of directors of SafeFixing or the shareholders of SafeFixing of a proposed sale of all or substantially all of the assets or property of SafeFixing, (ii) the approval by the shareholders of SafeFixing of a proposed sale of SafeFixings shares that would result in one or more of the Hajioannou Entities and Nicolaos Hadjioannou, collectively, owning less than 50.1% of the voting power of the outstanding voting securities of SafeFixing or (iii) the approval by the shareholders of SafeFixing of a proposed merger, consolidation or similar transaction, as a result of which one or more of the Hajioannou Entities and Nicolaos Hadjioannou, collectively, would beneficially own less than 50.1% of the voting power of the outstanding voting securities of the resulting entity following such transaction. (bb) Restricted Period shall have the meaning set forth in Section 3.1.
(cc) SafeFixing shall have the meaning set forth in the recitals.
(dd) SafeFixing First Offer Right shall have the meaning set forth in Section 4.2.
(ee) SafeFixing Vessels shall have the meaning set forth in Section 3.2(c) .
(ff) Specified Vessels shall have the meaning set forth in Section 3.2(c) .
(gg) Sale Transaction shall have the meaning set forth in Section 4.3.
(hh) Vorini Holdings shall have the meaning set forth in the preamble.
SECTION 1.2. The headings of this Agreement are for ease of reference and do not limit or otherwise affect the meaning hereof.
SECTION 1.3. All the terms of this Agreement, whether or not so expressed, shall be binding upon the parties hereto and their respective successors and assigns.
5
SECTION 1.4. Unless the context otherwise requires, words in the singular include the plural and vice versa.
ARTICLE II
ACKNOWLEDGEMENT AND REPRESENTATION
SECTION 2.1. Each of the Hajioannou Entities acknowledges he or it has received and reviewed the Management Agreement.
SECTION 2.2. Each of P. Hajioannou and Machairiotissa Holdings hereby represents and warrants that as of the date of this Agreement, Machairiotissa Holdings (a) owns at least 80% of the capital stock of the Manager and (b) holds at least 80% of the voting power of the outstanding capital stock of the Manager considered for this purpose as a single class.
SECTION 2.3. Each of the Hajioannou Entities hereby represents and warrants that as of the date of this Agreement, the Hajioannou Entities and Nicolaos Hadjioannou, collectively, (a) own at least 50.1% of the capital stock of SafeFixing and (b) hold at least 50.1% of the voting power of the outstanding capital stock of SafeFixing considered for this purpose as a single class.
SECTION 2.4. Each of the Hajioannou Entities acknowledges and agrees that, pursuant to the terms of the Management Agreement, during the term of the Management Agreement, if a Drybulk Vessel owned by the Company and a Drybulk Vessel owned or operated, directly or indirectly, by any of the Hajioannou Entities (other than through the Company), including through Safefixing, are both available and meet the criteria for a charter being fixed by the Manager, the Companys Drybulk Vessel shall receive such charter.
ARTICLE III
NON-COMPETITION
SECTION 3.1. During the period commencing on the Effective Date and ending one year following termination of the Management Agreement (such period the Restricted Period ), each of the Hajioannou Entities shall not, subject to Section 3.2 hereof, directly or indirectly, engage in (a) the ownership or operation of any Drybulk Vessel or (b) the acquisition of or investment in any Drybulk Vessel Business, other than pursuant to (i) their involvement with the Company and its subsidiaries and (ii) their involvement with the Manager, in compliance with the terms of the Management Agreement, as the same may be waived or amended from time to time (together, the Competitive Activities ).
SECTION 3.2. Notwithstanding the foregoing, the Hajioannou Entities may engage in Competitive Activities (including through SafeFixing) in the following circumstances:
6
(a) with respect to any Permitted Acquisition; provided that , (i) in the event of any subsequent proposed sale or transfer of legal or beneficial ownership (in whole or in part) of the Permitted Acquisition by any of the Hajioannou Entities (other than to another Hajioannou Entity), the relevant Hajioannou Entity or Entities shall grant to the Company a right of first offer on such proposed sale or transfer of ownership (the Permitted Acquisition First Offer Right ), in accordance with the procedures set forth in Section 4.3 and (ii) any commercial management of Drybulk Vessels that are controlled by the Hajioannou Entities (including through SafeFixing) in connection with the Permitted Acquisition is performed by the Manager;
(b) with respect to any Drybulk Vessels or Drybulk Vessel Business included in a Non-Drybulk Acquisition; provided that (i) less than 50% of the fair market value of the Non-Drybulk Acquisition is attributable to the Drybulk Vessels and any related portion of such business that is solely dedicated to the ownership and operation of such Drybulk Vessels, (ii) the relevant Hajioannou Entity or Entities promptly offer to sell the Drybulk Vessels and such related portion of the business to the Company for their fair market value plus any Break Up Costs and the majority of the Independent Directors refuse such offer and (iii) any commercial management of Drybulk Vessels that are controlled by the Hajioannou Entities in connection with such Non-Drybulk Acquisition is performed by the Manager. For purposes of this Section 3.2(b), fair market values shall be determined in good faith by the Board of Directors;
(c) solely through SafeFixing, where such engagement consists of chartering in Drybulk Vessels from third-party owners for subsequent chartering out to customers (such chartered-in Drybulk Vessels, the SafeFixing Vessels ); provided that (i) with respect to the SafeFixing Vessels that are chartered in by SafeFixing as of the Effective Date (the Specified Vessels ), in the event any Specified Vessel is not subject to an existing charter-out arrangement or the existing charter-out arrangement with respect to such Specified Vessel is terminated or otherwise expires, the Company shall have the option (exercisable within 10 Business Days of written notice by SafeFixing of such termination or expiry) to charter in such Specified Vessel from SafeFixing on the same terms and conditions as apply to SafeFixing under the charter-in arrangement with respect to such Specified Vessel, (ii) with respect to SafeFixing Vessels other than Specified Vessels, the Company shall have the option (exercisable within 10 Business Days following written notice by SafeFixing of entry into the charter-in arrangement between SafeFixing and the third party owner) to charter in such SafeFixing Vessel from SafeFixing on the same terms and conditions as apply to SafeFixing under such charter-in arrangement and (iii) any commercial management of SafeFixing Vessels is performed by the Manager. For purposes of this Section 3.2(c), a Specified Vessel will no longer be deemed a Specified Vessel following the expiration or other termination of the charter-in agreement between SafeFixing and the third party owner of such vessel, as in effect as of the Effective Date; and
(d) passive ownership of up to 9.99% of the outstanding voting securities of any publicly traded company that is a Drybulk Vessel Business in whole or in part.
7
SECTION 3.3. For the avoidance of doubt, nothing in this Agreement shall be construed to restrict the ability of any Hajioannou Entity or SafeFixing to acquire, invest in, operate, manage or charter any vessel other than Drybulk Vessels or any shipping-related business other than a Drybulk Vessel Business.
ARTICLE IV
CONTROL OF MANAGER; CONTROL OF SAFEFIXING; RIGHT OF FIRST OFFER
SECTION 4.1. During the Restricted Period, in the event of a Proposed Change in Control of the Manager, the Company shall have a 30-day right of first offer to purchase the relevant Hajioannou Entities direct or indirect interests in the Manager involved in the Proposed Change in Control of the Manager ( Manager First Offer Right ). Set forth in Section 4.3 are the procedures applicable to the Manager First Offer Right.
SECTION 4.2. During the Restricted Period, in the event of a Proposed Change in Control of SafeFixing, the Company shall have a 15 day right of first offer to purchase the relevant Hajioannou Entities or Nicolaos Hadjioannous direct or indirect interests in SafeFixing involved in the Proposed Change in Control of SafeFixing (the SafeFixing First Offer Right ). Set forth in Section 4.3 are the procedures applicable to the SafeFixing First Offer Right.
SECTION 4.3. Set forth below are the procedures applicable to the Permitted Acquisition First Offer Right, the Manager First Offer Right and the SafeFixing First Offer Right. For purposes of this Section 4.3, the term Sale Transaction shall mean (i) the sale or transfer of ownership of the Permitted Acquisition by the relevant Hajioannou Entities, as described in Section 3.2(a), in the case of a Permitted Acquisition First Offer Right, (ii) a Proposed Change in Control of the Manager, as described in Section 4.1, in the case of a Manager First Offer Right and (iii) a Proposed Change in Control of SafeFixing, as described in Section 4.2, in the case of a SafeFixing First Offer Right.
(a) Prior to engaging in any negotiations or otherwise offering to consummate a Sale Transaction with any third party, the relevant Hajioannou Entity or Entities shall provide written notice of their intent to engage in a Sale Transaction (a First Offer Notice ) and shall specify in such First Offer Notice the material terms and conditions (including the consideration to be paid, which shall be in cash) on which they would be willing to consummate a Sale Transaction with the Company, including any liabilities to be assumed by the Company.
(b) The Company shall notify the relevant Hajioannou Entity or Entities within the First Offer Period that either (i) the Company does not wish to participate in a Sale Transaction (a Negative Response ) or (ii) the Company does wish to participate in a Sale Transaction, subject to the negotiation of the terms and conditions of the Sale Transaction in accordance with the provisions of this Section 4.3 (an Affirmative Response ).
8
(c) In the event of an Affirmative Response, the Company and the relevant Hajioannou Entity or Entities shall negotiate in good faith during the First Offer Period the terms and conditions of an agreement for the consummation of a Sale Transaction with the Company and such terms and conditions are to be based on the terms and conditions set forth in the First Offer Notice.
(d) In the event of a Negative Response or in the event the Company and the relevant Hajioannou Entity or Entities are unable to agree on the terms and conditions of an agreement for the consummation of a Sale Transaction during the First Offer Period, then the relevant Hajioannou Entity or Entities may consummate a Sale Transaction within 120 days after the earlier of the date the relevant Hajioannou Entity or Entities receive a Negative Response and the end of the First Offer Period with a third party on terms and conditions as to price that are not more favorable, and on such other terms and conditions that are not materially more favorable, to the proposed purchaser than the terms and conditions specified in the First Offer Notice.
(e) If a Sale Transaction is not consummated with a third party within 120 days after the earlier of the date of the Negative Response and the end of the First Offer Period in accordance with clause (d) then the relevant Hajioannou Entity or Entities shall not thereafter engage in a Sale Transaction without first offering the Company a Permitted Acquisition First Offer Right, Manager First Offer Right or SafeFixing First Offer Right, as applicable, in the manner provided above.
SECTION 4.4. The Hajioannou Entities and the Company acknowledge that all potential transfers pursuant to Section 3.2(a) and this Article IV are subject to obtaining any and all written consents of governmental authorities and offer non-affiliated third parties.
ARTICLE V
NOTICES
SECTION 5.1. All notices, consents and other communications hereunder, or necessary to exercise any rights granted hereunder, shall be in writing, sent either by prepaid registered mail or telefax, and will be validly given if delivered on a Business Day to a party at its respective address set forth below:
Safe Bulkers, Inc.
c/o Safety Management Overseas S.A.
32 Avenue K. Karamanli
P.O. Box 70837
16605 Voula
Athens, Greece
Attention: Chief Executive Officer
Telefax:
9
Polys Hajioannou
[ADDRESS]
Attention: Polys Hajioannou]
Vorini Holdings Inc.
[ADDRESS]
Attention: [CONTACT]
Machairiotissa Holdings Inc.
[ADDRESS]
Attention: [CONTACT]
ARTICLE VI
APPLICABLE LAW AND JURISDICTION
SECTION 6.1. This Agreement shall be governed by, and construed in accordance with, the laws of England.
ARTICLE VII
ARBITRATION
SECTION 7.1. All disputes arising out of this Agreement shall be arbitrated in London in the following manner. One arbitrator is to be appointed by the Company, a second by the Hajioannou Entities (acting together) relevant to such arbitration and a third by the two so chosen. Their decision or that of any two of the arbitrators shall be final and, for the purpose of enforcing any award, this Agreement may be made a rule of the court. The arbitrators shall be commercial persons, conversant with shipping matters. Such arbitration is to be conducted in accordance with the Arbitration Act of 1996 or any statutory modification or re-enactment thereof.
SECTION 7.2. In the event that the Company or any of the Hajioannou Entities shall state a dispute and designate an arbitrator, in writing, the other party shall have twenty (20) Business Days to designate its own arbitrator. Upon failure to do so, the arbitrator appointed by the other party can conduct the arbitration and render an award hereunder.
SECTION 7.3. Until such time as the arbitrators finally close the hearings, either of the Company or the Hajioannou Entities relevant to such arbitration shall have the right by written notice served on the arbitrators and on the other party to specify further disputes or differences under this Agreement for hearing and determination.
SECTION 7.4. The arbitrators may grant any relief, and render an award, which they or a majority of them deem just and equitable and within the scope of the Agreement of the parties, including but not limited to the posting of security. Awards
10
pursuant to this Article VII may include costs, including a reasonable allowance for attorneys fees, and judgments may be entered upon any award made herein in any court having jurisdiction.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. This Agreement constitutes the sole understanding and agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto, with the exception of the Management Agreement. This Agreement may not be amended, waived or discharged except by an instrument in writing executed by the party against whom enforcement of such amendment, waiver or discharge is sought.
SECTION 8.2. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement is adjudicated to be invalid or unenforceable, such provision will be deemed amended to delete therefrom the portion thus adjudicated as invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudications is made.
SECTION 8.3. This Agreement may be executed in one or more written counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.
[Remainder of page intentionally left blank.]
11
IN WITNESS whereof the undersigned have executed this Agreement as of the date first above written.
SAFE BULKERS, INC. | ||
By: | ||
Name: | ||
Title: | ||
POLYS HAJIOANNOU | ||
VORINI HOLDINGS INC. | ||
By: | ||
Name: | ||
Title: | ||
SAFEFIXING CORP | ||
By: | ||
Name: | ||
Title: | ||
MACHAIRIOTISSA HOLDINGS INC. | ||
By: | ||
Name: | ||
Title: |
EXHIBIT 10.3
SAFE BULKERS, INC.,
- and -
POLYS HAJIOANNOU
THIS RESTRICTIVE COVENANT AGREEMENT
(this Agreement ) is made on [], 2008,
BY AND BETWEEN:
(1) SAFE BULKERS, INC., a Marshall Islands corporation (the Company ); and
(2) POLYS HAJIOANNOU, in his individual capacity (P . Hajioannou ).
WHEREAS:
(A) Pursuant to the Restrictive Covenant Agreement by and between the Company and P. Hajioannou, Vorini Holdings, Inc., a Marshall Islands Corporation ( Vorini Holdings ), SafeFixing Corp., a Liberian Corporation ( SafeFixing ) and Machairiotissa Holdings Inc., a Marshall Islands Corporation ( Machairiotissa Holdings and, together with P. Hajioannou, Vorini Holdings and, together with any entity controlled by or under common control with Machairiotissa Holdings, P. Hajioannou and/or Vorini Holdings, the Hajioannou Entities ), dated [], 2008 (the Hajioannou Entities Restrictive Covenant Agreement ), the Hajioannou Entities are: (i) prohibited from conducting certain activities that may compete with the business of the Company, (ii) granted a right of first offer to purchase the Hajioannou Entities relevant interest in Safety Management Overseas S.A., a Panamanian corporation (the Manager ) in the event of a potential change of control of the Manager and (iii) granted a right of first offer to purchase the Hajioannou Entities relevant interest in SafeFixing, in the event of a potential change of control of SafeFixing; and
(B) the Company wishes to limit the activities of P. Hajioannou in his capacity as a director or employee of the Company on the terms and conditions set out in this Agreement to prohibit certain activities that may compete with the business of the Company.
NOW, THEREFORE, in consideration of the terms and conditions set forth below and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties hereto agree as follows:
ARTICLE I
INTERPRETATION
SECTION 1.1. In this Agreement, unless the context otherwise requires:
(a) Affirmative Response shall have the meaning set forth in Section 3.1(b).
(b) Agreement shall have the meaning set forth in the preamble.
2
(c) Break Up Cost means the aggregate amount of any and all costs including any taxes, registration fees, administrative expenses, severance costs, and other similar costs and expenses that would be required to transfer Drybulk Vessels or any other portion of a Non-Drybulk Acquisition that owns or operates Drybulk Vessels to the Company separately from the other assets of the Non-Drybulk Acquisition.
(d) Board of Directors means the board of directors of the Company as the same may be constituted from time to time.
(e) Business Day means a day (excluding Saturdays and Sundays) on which banks are open for business in Athens, Greece; Cyprus; and New York, New York.
(f) Company shall have the meaning set forth in the preamble.
(g) Company Group means, at any time, the Company and its subsidiaries at such time and member of the Company Group shall be construed accordingly.
(h) Competitive Activities shall have the meaning set forth in Section 2.1.
(i) Drybulk Vessel means any ocean-going vessel (including any Newbuild) that is intended to be used primarily to transport non-liquid cargoes of commodities shipped in an unpackaged state.
(j) Drybulk Vessel Business means any business involved in the ownership or operation of Drybulk Vessels.
(k) Effective Date means the date upon which the initial public offering of the Company is consummated.
(l) First Offer Notice shall have the meaning set forth in Section 3.1(a) .
(m) First Offer Period means 30 days in the case of a Permitted Acquisition First Offer Right.
(n) Hajioannou Entities shall have the meaning set forth in the recitals.
(o) Hajioannou Entities Restrictive Covenant Agreement shall have the meaning set forth in the recitals.
(p) Independent Directors means those members of the Board of Directors that qualify as independent directors within the meaning of Rule 10A-3 promulgated under the U.S. Securities Exchange Act of 1934, as amended, and the listing criteria of the New York Stock Exchange.
(q) Machairiotissa Holdings shall have the meaning set forth in the recitals.
3
(r) Manager shall have the meaning set forth in the recitals.
(s) Negative Response shall have the meaning set forth in Section 3.1(b) .
(t) Newbuild means a new vessel to be or which has just been constructed, or is under construction, which a member of the Company Group has agreed to acquire pursuant to a shipbuilding contract, memorandum of agreement or otherwise.
(u) Non-Drybulk Acquisition means an acquisition or investment that includes (i) both Drybulk Vessels and vessels other than Drybulk Vessels and/or (ii) any business that owns or operates Drybulk Vessels and vessels other than Drybulk Vessels.
(v) P. Hajioannou shall have the meaning set forth in the preamble.
(w) Permitted Acquisition means an acquisition by P. Hajioannou of a Drybulk Vessel or an acquisition of or investment in a Drybulk Vessel Business that (i) has been first offered to the Company and refused by the majority of the Independent Directors and (ii) has been acquired or invested in by P. Hajioannou on terms and conditions as to price that are not more favorable, and on such other terms and conditions that are not materially more favorable, to P. Hajioannou than those offered to the Company.
(x) Permitted Acquisition First Offer Right shall have the meaning set forth in Section 2.2(a) .
(y) Restricted Period shall mean the period commencing on the Effective Date and ending one year following the later of (i) the termination of P. Hajioannous service with the Company as a director and (ii) the termination of P. Hajioannous service with the Company as an employee.
(z) SafeFixing shall have the meaning set forth in the recitals.
(aa) SafeFixing Vessels shall have the meaning set forth in Section 2.2(c) .
(bb) Specified Vessels shall have the meaning set forth in Section 2.2(c) .
(cc) Sale Transaction shall have the meaning set forth in Section 3.1.
(dd) Vorini Holdings shall have the meaning set forth in the recitals.
SECTION 1.2. The headings of this Agreement are for ease of reference and do not limit or otherwise affect the meaning hereof.
4
SECTION 1.3. All the terms of this Agreement, whether or not so expressed, shall be binding upon the parties hereto and their respective successors and assigns.
SECTION 1.4. Unless the context otherwise requires, words in the singular include the plural and vice versa.
ARTICLE II
NON-COMPETITION
SECTION 2.1. During the Restricted Period, P. Hajioannou shall not, subject to Section 2.2 hereof, directly or indirectly, engage in (a) the ownership or operation of any Drybulk Vessel or (b) the acquisition of or investment in any Drybulk Vessel Business, other than pursuant to his involvement with any member of the Company Group (the Competitive Activities ).
SECTION 2.2. Notwithstanding the foregoing, P. Hajioannou may engage in Competitive Activities (including through SafeFixing) in the following circumstances:
(a) with respect to any Permitted Acquisition; provided that , (i) in the event of any subsequent proposed sale or transfer of legal or beneficial ownership (in whole or in part) of the Permitted Acquisition by P. Hajioannou (other than to another Hajioannou Entity or Nicolaos Hadjioannou), P. Hajioannou shall grant to the Company a right of first offer on such proposed sale or transfer of ownership (the Permitted Acquisition First Offer Right ), in accordance with the procedures set forth in Section 3.1 and (ii) any commercial management of Drybulk Vessels that are controlled by P. Hajioannou (including through SafeFixing) in connection with the Permitted Acquisition is performed by the Manager;
(b) with respect to any Drybulk Vessels or Drybulk Vessel Business included in a Non-Drybulk Acquisition; provided that (i) less than 50% of the fair market value of the Non-Drybulk Acquisition is attributable to the Drybulk Vessels and any related portion of such business that is solely dedicated to the ownership and operation of such Drybulk Vessels, (ii) P. Hajioannou promptly offers to sell the Drybulk Vessels and such related portion of the business to the Company for their fair market value plus any Break Up Costs and the majority of the Independent Directors refuse such offer and (iii) any commercial management of Drybulk Vessels that are controlled by P. Hajioannou in connection with such Non-Drybulk Acquisition is performed by the Manager. For purposes of this Section 2.2(b), fair market values shall be determined in good faith by the Board of Directors;
(c) solely through SafeFixing, where such engagement consists of chartering in Drybulk Vessels from third-party owners for subsequent chartering out to customers (such chartered-in Drybulk Vessels, the SafeFixing Vessels ); provided that (i) with respect to the SafeFixing Vessels that are chartered in by SafeFixing as of the
5
Effective Date (the Specified Vessels ), in the event any Specified Vessel is not subject to an existing charter-out arrangement or the existing charter-out arrangement with respect to such Specified Vessel is terminated or otherwise expires, the Company shall have the option (exercisable within 10 Business Days of written notice by SafeFixing of such termination or expiry) to charter in such Specified Vessel from SafeFixing on the same terms and conditions as apply to SafeFixing under the charter-in arrangement with respect to such Specified Vessel, (ii) with respect to SafeFixing Vessels other than Specified Vessels, the Company shall have the option (exercisable within 10 Business Days following written notice by SafeFixing of entry into the charter-in arrangement between SafeFixing and the third party owner) to charter in such SafeFixing Vessel from SafeFixing on the same terms and conditions as apply to SafeFixing under such charter-in arrangement and (iii) any commercial management of SafeFixing Vessels is performed by the Manager. For purposes of this Section 2.2(c), a Specified Vessel will no longer be deemed a Specified Vessel following the expiration or other termination of the charter-in agreement between SafeFixing and the third party owner of such vessel, as in effect as of the Effective Date; and
(d) passive ownership of up to 9.99% of the outstanding voting securities of any publicly traded company that is a Drybulk Vessel Business in whole or in part.
SECTION 2.3. For the avoidance of doubt, nothing in this Agreement shall be construed to restrict the ability of P. Hajioannou or SafeFixing to acquire, invest in, operate, manage or charter any vessel other than Drybulk Vessels or any shipping-related business other than a Drybulk Vessel Business.
ARTICLE III
RIGHT OF FIRST OFFER
SECTION 3.1. Set forth below are the procedures applicable to the Permitted Acquisition First Offer Right. For purposes of this Section 3.1, the term Sale Transaction shall mean the sale or transfer of ownership of the Permitted Acquisition by P. Hajioannou, as described in Section 2.2(a), in the case of a Permitted Acquisition First Offer Right.
(a) Prior to engaging in any negotiations or otherwise offering to consummate a Sale Transaction with any third party, P. Hajioannou shall provide written notice of his intent to engage in a Sale Transaction (a First Offer Notice ) and shall specify in such First Offer Notice the material terms and conditions (including the consideration to be paid, which shall be in cash) on which he would be willing to consummate a Sale Transaction with the Company, including any liabilities to be assumed by the Company.
(b) The Company shall notify P. Hajioannou within the First Offer Period that either (i) the Company does not wish to participate in a Sale Transaction (a Negative Response ) or (ii) the Company does wish to participate in a Sale Transaction,
6
subject to the negotiation of the terms and conditions of the Sale Transaction in accordance with the provisions of this Section 3.1 (an Affirmative Response ).
(c) In the event of an Affirmative Response, the Company and P. Hajioannou shall negotiate in good faith during the First Offer Period the terms and conditions of an agreement for the consummation of a Sale Transaction with the Company and such terms and conditions are to be based on the terms and conditions set forth in the First Offer Notice.
(d) In the event of a Negative Response or in the event the Company and P. Hajioannou are unable to agree on the terms and conditions of an agreement for the consummation of a Sale Transaction during the First Offer Period, then P. Hajioannou may consummate a Sale Transaction within 120 days after the earlier of the date P. Hajioannou receives a Negative Response and the end of the First Offer Period with a third party on terms and conditions as to price that are not more favorable, and on such other terms and conditions that are not materially more favorable, to the proposed purchaser than the terms and conditions specified in the First Offer Notice.
(e) If a Sale Transaction is not consummated with a third party within 120 days after the earlier of the date of the Negative Response and the end of the First Offer Period in accordance with clause (d) then P. Hajioannou shall not thereafter engage in a Sale Transaction without first offering the Company a Permitted Acquisition First Offer Right in the manner provided above.
SECTION 3.2. P. Hajioannou and the Company acknowledge that all potential transfers pursuant to Section 2.2(a) and this Article III are subject to obtaining any and all written consents of governmental authorities and offer non-affiliated third parties.
ARTICLE IV
NOTICES
SECTION 4.1. All notices, consents and other communications hereunder, or necessary to exercise any rights granted hereunder, shall be in writing, sent either by prepaid registered mail or telefax, and will be validly given if delivered on a Business Day to a party at its respective address set forth below:
Safe Bulkers, Inc.
c/o Safety Management Overseas S.A.
32 Avenue K. Karamanli
P.O. Box 70837
16605 Voula
Athens, Greece
Attention: Chief Executive Officer
Telefax:
7
Polys Hajioannou
[ADDRESS]
Attention: Polys Hajioannou
ARTICLE V
APPLICABLE LAW AND JURISDICTION
SECTION 5.1. This Agreement shall be governed by, and construed in accordance with, the laws of England.
ARTICLE VI
ARBITRATION
SECTION 6.1. All disputes arising out of this Agreement shall be arbitrated in London in the following manner. One arbitrator is to be appointed by the Company, a second by P. Hajioannou relevant to such arbitration and a third by the two so chosen. Their decision or that of any two of the arbitrators shall be final and, for the purpose of enforcing any award, this Agreement may be made a rule of the court. The arbitrators shall be commercial persons, conversant with shipping matters. Such arbitration is to be conducted in accordance with the Arbitration Act of 1996 or any statutory modification or re-enactment thereof.
SECTION 6.2. In the event that the Company or P. Hajioannou shall state a dispute and designate an arbitrator, in writing, the other party shall have twenty (20) Business Days to designate its own arbitrator. Upon failure to do so, the arbitrator appointed by the other party can conduct the arbitration and render an award hereunder.
SECTION 6.3. Until such time as the arbitrators finally close the hearings, either of the Company or P. Hajioannou shall have the right by written notice served on the arbitrators and on the other party to specify further disputes or differences under this Agreement for hearing and determination.
SECTION 6.4. The arbitrators may grant any relief, and render an award, which they or a majority of them deem just and equitable and within the scope of the Agreement of the parties, including but not limited to the posting of security. Awards pursuant to this Article VI may include costs, including a reasonable allowance for attorneys fees, and judgments may be entered upon any award made herein in any court having jurisdiction.
8
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. This Agreement constitutes the sole understanding and agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto, with the exception of the Hajioannou Entities Restrictive Covenant Agreement. This Agreement may not be amended, waived or discharged except by an instrument in writing executed by the party against whom enforcement of such amendment, waiver or discharge is sought.
SECTION 7.2. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement is adjudicated to be invalid or unenforceable, such provision will be deemed amended to delete therefrom the portion thus adjudicated as invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudications is made.
SECTION 7.3. This Agreement may be executed in one or more written counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.
[Remainder of page intentionally left blank.]
9
IN WITNESS whereof the undersigned have executed this Agreement as of the date first above written.
SAFE BULKERS, INC.
By:
_______________________
Name:
Title:
POLYS HAJIOANNOU
[S IGNATURE P AGE TO THE P OLYS H AJIOANNOU R ESTRICTIVE C OVENANT A GREEMENT ]
EXHIBIT 10.4
SAFE BULKERS, INC.,
- and -
NICOLAOS HADJIOANNOU
RESTRICTIVE COVENANT AGREEMENT
THIS RESTRICTIVE COVENANT AGREEMENT
(this
Agreement
) is made on [], 2008,
BY AND BETWEEN:
(1) SAFE BULKERS, INC., a Marshall Islands corporation (the Company ); and
(2) NICOLAOS HADJIOANNOU, in his individual capacity ( N. Hadjioannou ).
WHEREAS:
(A) Pursuant to the Restrictive Covenant Agreement by and between the Company and Polys Hajioannou (P. Hajioannou), Vorini Holdings, Inc., a Marshall Islands Corporation ( Vorini Holdings ), SafeFixing Corp., a Liberian Corporation ( SafeFixing ) and Machairiotissa Holdings Inc., a Marshall Islands Corporation ( Machairiotissa Holdings and, together with P. Hajioannou, Vorini Holdings and, together with any entity controlled by or under common control with Machairiotissa Holdings, P. Hajioannou and/or Vorini Holdings, the Hajioannou Entities ), dated [], 2008 (the Hajioannou Entities Restrictive Covenant Agreement ), the Hajioannou Entities are: (i) prohibited from conducting certain activities that may compete with the business of the Company, (ii) granted a right of first offer to purchase the Hajioannou Entities relevant interest in Safety Management Overseas S.A., a Panamanian corporation (the Manager ) in the event of a potential change of control of the Manager and (iii) granted a right of first offer to purchase the Hajioannou Entities relevant interest in SafeFixing, in the event of a potential change of control of SafeFixing; and
(B) the Company wishes to (i) limit the activities of N. Hadjioannou in his capacity as a director or employee of the Company on the terms and conditions set out in this Agreement to prohibit certain activities that may compete with the business of the Company and (ii) be granted a right of first offer to purchase N. Hadjioannous interest in SafeFixing, in the event of a potential change of control of SafeFixing.
NOW, THEREFORE, in consideration of the terms and conditions set forth below and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties hereto agree as follows:
ARTICLE I
INTERPRETATION
SECTION 1.1. In this Agreement, unless the context otherwise requires:
(a) Affirmative Response shall have the meaning set forth in Section 4.2(b) .
2
(b) Agreement shall have the meaning set forth in the preamble.
(c) Break Up Cost means the aggregate amount of any and all costs including any taxes, registration fees, administrative expenses, severance costs, and other similar costs and expenses that would be required to transfer Drybulk Vessels or any other portion of a Non-Drybulk Acquisition that owns or operates Drybulk Vessels to the Company separately from the other assets of the Non-Drybulk Acquisition.
(d) Board of Directors means the board of directors of the Company as the same may be constituted from time to time.
(e) Business Day means a day (excluding Saturdays and Sundays) on which banks are open for business in Athens, Greece; Cyprus; and New York, New York.
(f) Company shall have the meaning set forth in the preamble.
(g) Company Group means, at any time, the Company and its subsidiaries at such time and member of the Company Group shall be construed accordingly.
(h) Competitive Activities shall have the meaning set forth in Section 3.1.
(i) Drybulk Vessel means any ocean-going vessel (including any Newbuild) that is intended to be used primarily to transport non-liquid cargoes of commodities shipped in an unpackaged state.
(j) Drybulk Vessel Business means any business involved in the ownership or operation of Drybulk Vessels.
(k) Effective Date means the date upon which the initial public offering of the Company is consummated.
(l) First Offer Notice shall have the meaning set forth in Section 4.2(a) .
(m) First Offer Period means (i) 30 days in the case of a Permitted Acquisition First Offer Right and (ii) 15 days in the case of a SafeFixing First Offer Right.
(n) Hajioannou Entities shall have the meaning set forth in the recitals.
(o) Independent Directors means those members of the Board of Directors that qualify as independent directors within the meaning of Rule 10A-3 promulgated under the U.S. Securities Exchange Act of 1934, as amended, and the listing criteria of the New York Stock Exchange.
(p) Machairiotissa Holdings shall have the meaning set forth in the recitals.
3
(q) Manager shall have the meaning set forth in the recitals.
(r) N. Hadjioannou shall have the meaning set forth in the preamble.
(s) Negative Response shall have the meaning set forth in Section 4.2(b) .
(t) Newbuild means a new vessel to be or which has just been constructed, or is under construction, which a member of the Company Group has agreed to acquire pursuant to a shipbuilding contract, memorandum of agreement or otherwise.
(u) Non-Drybulk Acquisition means an acquisition or investment that includes (i) both Drybulk Vessels and vessels other than Drybulk Vessels and/or (ii) any business that owns or operates Drybulk Vessels and vessels other than Drybulk Vessels.
(v) P. Hajioannou shall have the meaning set forth in the recitals.
(w) Permitted Acquisition means an acquisition by N. Hadjioannou of a Drybulk Vessel or an acquisition of or investment in a Drybulk Vessel Business that (i) has been first offered to the Company and refused by the majority of the Independent Directors and (ii) has been acquired or invested in by N. Hadjioannou on terms and conditions as to price that are not more favorable, and on such other terms and conditions that are not materially more favorable, to N. Hadjioannou than those offered to the Company.
(x) Permitted Acquisition First Offer Right shall have the meaning set forth in Section 3.2(a) .
(y) Proposed Change in Control of SafeFixing shall mean (i) the approval by the board of directors of SafeFixing or the shareholders of SafeFixing of a proposed sale of all or substantially all of the assets or property of SafeFixing, (ii) the approval by the shareholders of SafeFixing of a proposed sale of SafeFixings shares that would result in one or more of the Hajioannou Entities and N. Hadjioannou, collectively, owning less than 50.1% of the voting power of the outstanding voting securities of SafeFixing or (iii) the approval by the shareholders of SafeFixing of a proposed merger, consolidation or similar transaction, as a result of which one or more of the Hajioannou Entities and N. Hadjioannou, collectively, would beneficially own less than 50.1% of the voting power of the outstanding voting securities of the resulting entity following such transaction.
(z) Restricted Period shall mean the period commencing on the Effective Date and ending one year following the later of (i) the termination of N. Hadjioannous service with the Company as a director and (ii) the termination of N. Hadjioannous service with the Company as an employee.
(aa) SafeFixing shall have the meaning set forth in the recitals.
4
(bb) SafeFixing First Offer Right shall have the meaning set forth in Section 4.1.
(cc) SafeFixing Vessels shall have the meaning set forth in Section 3.2(c) .
(dd) Specified Vessels shall have the meaning set forth in Section 3.2(c) .
(ee) Sale Transaction shall have the meaning set forth in Section 4.2.
(ff) Vorini Holdings shall have the meaning set forth in the recitals.
SECTION 1.2. The headings of this Agreement are for ease of reference and do not limit or otherwise affect the meaning hereof.
SECTION 1.3. All the terms of this Agreement, whether or not so expressed, shall be binding upon the parties hereto and their respective successors and assigns.
SECTION 1.4. Unless the context otherwise requires, words in the singular include the plural and vice versa.
ARTICLE II
REPRESENTATION
SECTION 2.1. N. Hadjioannou hereby represents and warrants that as of the date of this Agreement, the Hajioannou Entities and N. Hadjioannou, collectively, (a) own at least 50.1% of the capital stock of SafeFixing and (b) hold at least 50.1% of the voting power of the outstanding capital stock of SafeFixing considered for this purpose as a single class.
ARTICLE III
NON-COMPETITION
SECTION 3.1. During the Restricted Period, N. Hadjioannou shall not, subject to Section 3.2 hereof, directly or indirectly, engage in (a) the ownership or operation of any Drybulk Vessel or (b) the acquisition of or investment in any Drybulk Vessel Business, other than pursuant to his involvement with any member of the Company Group (the Competitive Activities ).
SECTION 3.2. Notwithstanding the foregoing, N. Hadjioannou may engage in Competitive Activities (including through SafeFixing) in the following circumstances:
5
(a) with respect to any Permitted Acquisition; provided that , (i) in the event of any subsequent proposed sale or transfer of legal or beneficial ownership (in whole or in part) of the Permitted Acquisition by N. Hadjioannou (other than to a Hajioannou Entity), N. Hadjioannou shall grant to the Company a right of first offer on such proposed sale or transfer of ownership (the Permitted Acquisition First Offer Right ), in accordance with the procedures set forth in Section 4.2 and (ii) any commercial management of Drybulk Vessels that are controlled by N. Hadjioannou (including through SafeFixing) in connection with the Permitted Acquisition is performed by the Manager;
(b) with respect to any Drybulk Vessels or Drybulk Vessel Business included in a Non-Drybulk Acquisition; provided that (i) less than 50% of the fair market value of the Non-Drybulk Acquisition is attributable to the Drybulk Vessels and any related portion of such business that is solely dedicated to the ownership and operation of such Drybulk Vessels, (ii) N. Hadjioannou promptly offers to sell the Drybulk Vessels and such related portion of the business to the Company for their fair market value plus any Break Up Costs and the majority of the Independent Directors refuse such offer and (iii) any commercial management of Drybulk Vessels that are controlled by N. Hadjioannou in connection with such Non-Drybulk Acquisition is performed by the Manager. For purposes of this Section 3.2(b), fair market values shall be determined in good faith by the Board of Directors;
(c) solely through SafeFixing, where such engagement consists of chartering in Drybulk Vessels from third-party owners for subsequent chartering out to customers (such chartered-in Drybulk Vessels, the SafeFixing Vessels ); provided that (i) with respect to the SafeFixing Vessels that are chartered in by SafeFixing as of the Effective Date (the Specified Vessels ), in the event any Specified Vessel is not subject to an existing charter-out arrangement or the existing charter-out arrangement with respect to such Specified Vessel is terminated or otherwise expires, the Company shall have the option (exercisable within 10 Business Days of written notice by SafeFixing of such termination or expiry) to charter in such Specified Vessel from SafeFixing on the same terms and conditions as apply to SafeFixing under the charter-in arrangement with respect to such Specified Vessel, (ii) with respect to SafeFixing Vessels other than Specified Vessels, the Company shall have the option (exercisable within 10 Business Days following written notice by SafeFixing of entry into the charter-in arrangement between SafeFixing and the third party owner) to charter in such SafeFixing Vessel from SafeFixing on the same terms and conditions as apply to SafeFixing under such charter-in arrangement and (iii) any commercial management of SafeFixing Vessels is performed by the Manager. For purposes of this Section 3.2(c), a Specified Vessel will no longer be deemed a Specified Vessel following the expiration or other termination of the charter-in agreement between SafeFixing and the third party owner of such vessel, as in effect as of the Effective Date; and
(d) passive ownership of up to 9.99% of the outstanding voting securities of any publicly traded company that is a Drybulk Vessel Business in whole or in part.
6
SECTION 3.3. For the avoidance of doubt, nothing in this Agreement shall be construed to restrict the ability of N. Hadjioannou or SafeFixing to acquire, invest in, operate, manage or charter any vessel other than Drybulk Vessels or any shipping-related business other than a Drybulk Vessel Business.
ARTICLE IV
CONTROL OF SAFEFIXING; RIGHT OF FIRST OFFER
SECTION 4.1. During the Restricted Period, in the event of a Proposed Change in Control of SafeFixing, the Company shall have a 15 day right of first offer to purchase N. Hadjioannous direct or indirect interests in SafeFixing involved in the Proposed Change in Control of SafeFixing (the SafeFixing First Offer Right ). Set forth in Section 4.2 are the procedures applicable to the SafeFixing First Offer Right.
SECTION 4.2. Set forth below are the procedures applicable to the Permitted Acquisition First Offer Right and the SafeFixing First Offer Right. For purposes of this Section 4.2, the term Sale Transaction shall mean (i) the sale or transfer of ownership of the Permitted Acquisition by N. Hadjioannou, as described in Section 3.2(a), in the case of a Permitted Acquisition First Offer Right and (ii) a Proposed Change in Control of SafeFixing, as described in Section 4.1, in the case of a SafeFixing First Offer Right.
(a) Prior to engaging in any negotiations or otherwise offering to consummate a Sale Transaction with any third party, N. Hadjioannou shall provide written notice of his intent to engage in a Sale Transaction (a First Offer Notice ) and shall specify in such First Offer Notice the material terms and conditions (including the consideration to be paid, which shall be in cash) on which he would be willing to consummate a Sale Transaction with the Company, including any liabilities to be assumed by the Company.
(b) The Company shall notify N. Hadjioannou within the First Offer Period that either (i) the Company does not wish to participate in a Sale Transaction (a Negative Response ) or (ii) the Company does wish to participate in a Sale Transaction, subject to the negotiation of the terms and conditions of the Sale Transaction in accordance with the provisions of this Section 4.2 (an Affirmative Response ).
(c) In the event of an Affirmative Response, the Company and N. Hadjioannou shall negotiate in good faith during the First Offer Period the terms and conditions of an agreement for the consummation of a Sale Transaction with the Company and such terms and conditions are to be based on the terms and conditions set forth in the First Offer Notice.
(d) In the event of a Negative Response or in the event the Company and N. Hadjioannou are unable to agree on the terms and conditions of an agreement for the consummation of a Sale Transaction during the First Offer Period, then N. Hadjioannou may consummate a Sale Transaction within 120 days after the earlier of the date N.
7
Hadjioannou receives a Negative Response and the end of the First Offer Period with a third party on terms and conditions as to price that are not more favorable, and on such other terms and conditions that are not materially more favorable, to the proposed purchaser than the terms and conditions specified in the First Offer Notice.
(e) If a Sale Transaction is not consummated with a third party within 120 days after the earlier of the date of the Negative Response and the end of the First Offer Period in accordance with clause (d) then N. Hadjioannou shall not thereafter engage in a Sale Transaction without first offering the Company a Permitted Acquisition First Offer Right or SafeFixing First Offer Right, as applicable, in the manner provided above.
SECTION 4.3. N. Hadjioannou and the Company acknowledge that all potential transfers pursuant to Section 3.2(a) and this Article IV are subject to obtaining any and all written consents of governmental authorities and offer non-affiliated third parties.
ARTICLE V
NOTICES
SECTION 5.1. All notices, consents and other communications hereunder, or necessary to exercise any rights granted hereunder, shall be in writing, sent either by prepaid registered mail or telefax, and will be validly given if delivered on a Business Day to a party at its respective address set forth below:
Safe Bulkers, Inc.
c/o Safety Management Overseas S.A.
32 Avenue K. Karamanli
P.O. Box 70837
16605 Voula
Athens, Greece
Attention: Chief Executive Officer
Telefax:
Nicolaos Hadjioannou
[ADDRESS]
Attention: Nicolaos Hadjioannou
ARTICLE VI
APPLICABLE LAW AND JURISDICTION
SECTION 6.1. This Agreement shall be governed by, and construed in accordance with, the laws of England.
8
ARTICLE VII
ARBITRATION
SECTION 7.1. All disputes arising out of this Agreement shall be arbitrated in London in the following manner. One arbitrator is to be appointed by the Company, a second by N. Hadjioannou relevant to such arbitration and a third by the two so chosen. Their decision or that of any two of the arbitrators shall be final and, for the purpose of enforcing any award, this Agreement may be made a rule of the court. The arbitrators shall be commercial persons, conversant with shipping matters. Such arbitration is to be conducted in accordance with the Arbitration Act of 1996 or any statutory modification or re-enactment thereof.
SECTION 7.2. In the event that the Company or N. Hadjioannou shall state a dispute and designate an arbitrator, in writing, the other party shall have twenty (20) Business Days to designate its own arbitrator. Upon failure to do so, the arbitrator appointed by the other party can conduct the arbitration and render an award hereunder.
SECTION 7.3. Until such time as the arbitrators finally close the hearings, either of the Company or N. Hadjioannou shall have the right by written notice served on the arbitrators and on the other party to specify further disputes or differences under this Agreement for hearing and determination.
SECTION 7.4. The arbitrators may grant any relief, and render an award, which they or a majority of them deem just and equitable and within the scope of the Agreement of the parties, including but not limited to the posting of security. Awards pursuant to this Article VII may include costs, including a reasonable allowance for attorneys fees, and judgments may be entered upon any award made herein in any court having jurisdiction.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. This Agreement constitutes the sole understanding and agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto. This Agreement may not be amended, waived or discharged except by an instrument in writing executed by the party against whom enforcement of such amendment, waiver or discharge is sought.
SECTION 8.2. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement is adjudicated to be invalid or unenforceable, such provision will be deemed amended to delete therefrom the portion thus adjudicated as invalid or unenforceable, such deletion to apply only with respect to
9
the operation of such provision in the particular jurisdiction in which such adjudications is made.
SECTION 8.3. This Agreement may be executed in one or more written counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.
[Remainder of page intentionally left blank.]
10
IN WITNESS whereof the undersigned have executed this Agreement as of the date first above written.
SAFE BULKERS, INC.
By: | |
Name: | |
Title: | |
NICOLAOS HADJIOANNOU | |
EXHIBIT 10.5
STOCKHOLDERS RIGHTS AGREEMENT
This Stockholders Rights Agreement (this Rights Agreement ) is made and entered into as of May 14, 2008, by and between Safe Bulkers, Inc., a Marshall Islands corporation (the Company ), and American Stock Transfer & Trust Company, as Rights Agent (the Rights Agent ).
WHEREAS, the Board of Directors of the Company (the Board ) has (a) authorized and declared a grant of one right (the Right ) for each share of the Companys common stock, par value U.S. $.001 per share (the Common Stock ), held of record as of the Close of Business (as hereinafter defined) on the date specified by the Board as the Record Date (the Record Date ) and (b) has further authorized the issuance of one Right in respect of each share of Common Stock that shall become outstanding (i) at any time between the Record Date and the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date (as such terms are hereinafter defined) or (ii) upon the exercise or conversion, prior to the earlier of the Redemption Date or the Final Expiration Date, of any option or other security exercisable for or convertible into shares of Common Stock, which option or other such security is outstanding on the Distribution Date; and
WHEREAS, each Right represents the right of the holder thereof to purchase one one-thousandth of a share of Series A Participating Preferred Stock (as such number may hereafter be adjusted pursuant to the provisions hereof), upon the terms and subject to the conditions set forth herein, having the rights, preferences and privileges set forth in the Statement of Designation of Series A Participating Preferred Stock, attached hereto as Exhibit A.
NOW THEREFORE, in consideration of the premises and the mutual agreements set forth herein, the parties hereby agrees as follows:
Section 1. Certain Definitions .
Acquiring Person shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company, or any entity holding shares of Common Stock for or pursuant to the terms of any such plan or (iv) an Exempted Person. Notwithstanding the foregoing, no Person shall be deemed to be an Acquiring Person as the result of an acquisition of shares of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the shares of Common Stock of the Company then outstanding; provided , however , that a Person who (i) becomes the Beneficial Owner of 15% or more of the shares of Common Stock of the Company then outstanding by reason of share purchases by the Company and (ii) then after such share purchases by the Company, becomes the Beneficial Owner of any additional shares of Common Stock of the Company (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding shares of Common Stock in shares of Common Stock or pursuant to a split or subdivision of the outstanding shares of Common Stock) representing one percent or more of the Common Stock then outstanding, such Person shall be deemed to be an Acquiring
Person unless upon becoming the Beneficial Owner of such additional shares of Common Stock of the Company such Person does not beneficially own 15% or more of the shares of Common Stock of the Company then outstanding. Notwithstanding the foregoing, (i) if the Companys Board of Directors determines in good faith that a Person who would otherwise be an Acquiring Person, as defined herein, has become such inadvertently (including, without limitation, because (A) such Person was unaware that it beneficially owned a percentage of the shares of Common Stock that would otherwise cause such Person to be an Acquiring Person, as defined herein, or (B) such Person was aware of the extent of the shares of Common Stock it beneficially owned but had no actual knowledge of the consequences of such beneficial ownership under this Agreement) and without any intention of changing or influencing control of the Company, and if such Person divested or divests as promptly as practicable a sufficient number of shares of Common Stock so that such Person would no longer be an Acquiring Person, as defined herein, then such Person shall not be deemed to be or to have become an Acquiring Person for any purposes of this Agreement; and (ii) if, as of the date hereof, any Person is the Beneficial Owner of 15% or more of the shares of Common Stock outstanding, such Person shall not be or become an Acquiring Person, as defined herein, unless and until such time as such Person shall become the Beneficial Owner of additional shares of Common Stock (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding shares of Common Stock in shares of Common Stock or pursuant to a split or subdivision of the outstanding shares of Common Stock), unless, upon becoming the Beneficial Owner of such additional shares of Common Stock, such Person is not then the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding.
Adjustment Fraction shall have the meaning set forth in Section 11(a)(i) hereof.
Affiliate and Associate shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement.
A Person shall be deemed the Beneficial Owner of and shall be deemed to Beneficially Own any securities:
(i) which such Person or any of such Persons Affiliates or Associates beneficially owns, directly or indirectly, for purposes of Section 13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or successor law or regulation); (ii) which such Person or any of such Persons Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided , however , that a Person shall not be deemed pursuant to this subsection (ii)(A) to be the Beneficial Owner of, or to beneficially own, (1) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Persons Affiliates or Associates until such tendered securities are accepted for purchase or exchange, or (2) securities which a Person or any of such Persons Affiliates or |
2
Associates may be deemed to have the right to acquire pursuant to any merger or other acquisition agreement between the Company and such Person (or one or more of its Affiliates or Associates) if such agreement has been approved by the Board of Directors of the Company prior to there being an Acquiring Person; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided , however , that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this subsection (ii)(B) if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of such Persons Affiliates or Associates has any agreement, arrangement or understanding, whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to subsection (ii)(B) above) or disposing of any securities of the Company; provided , however , that in no case shall an officer or director of the Company be deemed (x) the Beneficial Owner of any securities beneficially owned by another officer or director of the Company solely by reason of actions undertaken by such persons in their capacity as officers or directors of the Company or (y) the Beneficial Owner of securities held of record by the trustee of any employee benefit plan of the Company or any Subsidiary of the Company for the benefit of any employee of the Company or any Subsidiary of the Company, other than the officer or director, by reason of any influence that such officer or director may have over the voting of the securities held in the plan. |
Business Day shall mean any day other than a Saturday, Sunday or a day on which banking institutions in New York are authorized or obligated by law or executive order to close.
Close of Business on any given date shall mean 5:00 P.M., New York time, on such date; provided , however , that if such date is not a Business Day it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
Common Stock shall have the meaning set forth in the preamble. Common Stock when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.
Common Stock Equivalents shall have the meaning set forth in Section 11(a)(iii) hereof.
3
Company shall have the meaning set forth in the preamble, subject to the terms of Section 13(a)(iii)(c) hereof.
Current Per Share Market Price of any security (a Security for purposes of this definition), for all computations other than those made pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily closing prices per share of such Security for the thirty (30) consecutive Trading Days immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market Price of any Security on any date shall be deemed to be the average of the daily closing prices per share of such Security for the ten (10) consecutive Trading Days immediately prior to such date; provided , however , that in the event that the Current Per Share Market Price of the Security is determined during a period following the announcement by the issuer of such Security of (i) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares or (ii) any subdivision, combination or reclassification of such Security, and prior to the expiration of the applicable thirty (30) Trading Day or ten (10) Trading Day period, after the ex dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Current Per Share Market Price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last sale price or, if such last sale price is not reported, the average of the high bid and low asked prices in the over-the-counter market, as reported by Nasdaq or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Security, the fair value of such shares on such date as determined in good faith by the Board of Directors of the Company shall be used. If the Preferred Shares are not publicly traded, the Current Per Share Market Price of the Preferred Shares shall be conclusively deemed to be the Current Per Share Market Price of the shares of Common Stock as determined pursuant to this definition, as appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof, multiplied by 1000. If the Security is not publicly held or so listed or traded, Current Per Share Market Price shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.
Current Value shall have the meaning set forth in Section 11(a)(iii) hereof.
Distribution Date shall mean the earlier of (i) the Close of Business on the tenth day after the Shares Acquisition Date (or, if the tenth day after the Shares Acquisition Date occurs before the Record Date, the Close of Business on the Record Date) or (ii) the Close of
4
Business on the tenth Business Day (or such later date as may be determined by action of the Companys Board of Directors) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan or an Exempted Person) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if, assuming the successful consummation thereof, such Person would be an Acquiring Person.
Equivalent Shares shall mean Preferred Shares and any other class or series of capital stock of the Company which is entitled to the same rights, privileges and preferences as the Preferred Shares.
Exchange Act shall mean the U.S. Securities Exchange Act of 1934, as amended.
Exchange Ratio shall have the meaning set forth in Section 24(a) hereof.
Exempted Person shall mean each member of the Hajioannou Group and any Underwriter.
Exercise Price shall have the meaning set forth in Section 4(a) hereof.
Expiration Date shall mean the earliest to occur of: (i) the Close of Business on the Final Expiration Date, (ii) the Redemption Date, or (iii) the time at which the Board of Directors orders the exchange of the Rights as provided in Section 24 hereof.
Final Expiration Date shall mean May 14, 2018.
Hajioannou Group shall mean Vorini Holdings Inc., Machairiotissa Holdings Inc., Safety Management Overseas S.A., Mr. Polys Hajioannou, Mr. Nicolaos Hadjioannou, any other trusts or entities established for the benefit of Mr. Polys Hajioannou or Mr. Nicolaos Hadjioannou or members of their respective families, any other entities wholly owned by Mr. Polys Hajioannou or Mr. Nicolaos Hadjioannou and members of their respective families, and each of their respective Affiliates and Associates.
Nasdaq shall mean the National Association of Securities Dealers, Inc. Automated Quotations System.
Person shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity.
Post-event Transferee shall have the meaning set forth in Section 7(e) hereof.
Preferred Shares shall mean shares of Series A Participating Preferred Stock, U.S. $0.01 par value, of the Company.
Pre-event Transferee shall have the meaning set forth in Section 7(e) hereof.
5
Principal Party shall have the meaning set forth in Section 13(b) hereof.
Record Date shall have the meaning set forth in the recitals at the beginning of this Rights Agreement.
Redemption Date shall have the meaning set forth in Section 23(a) hereof.
Redemption Price shall have the meaning set forth in Section 23(a) hereof.
Rights Agent shall mean American Stock Transfer & Trust Company, or its successor or replacement as provided in Sections 19 and 21 hereof.
Rights Certificate shall mean a certificate substantially in the form attached hereto as Exhibit B.
Section 11(a)(ii) Trigger Date shall have the meaning set forth in Section 11(a)(iii) hereof.
Section 13 Event shall mean any event described in clause (i), (ii) or (iii) of Section 13(a) hereof.
Securities Act shall mean the U.S. Securities Act of 1933, as amended.
Shares Acquisition Date shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such; provided that, if such Person is determined not to have become an Acquiring Person as defined herein, then no Shares Acquisition Date shall be deemed to have occurred.
Spread shall have the meaning set forth in Section 11(a)(iii) hereof.
Subsidiary of any Person shall mean any corporation or other entity of which an amount of voting securities sufficient to elect a majority of the directors or Persons having similar authority of such corporation or other entity is beneficially owned, directly or indirectly, by such Person, or any corporation or other entity otherwise controlled by such Person.
Substitution Period shall have the meaning set forth in Section 11(a)(iii) hereof.
Summary of Rights shall mean a summary of this Agreement substantially in the form attached hereto as Exhibit C.
Total Exercise Price shall have the meaning set forth in Section 4(a) hereof.
Trading Day shall mean a day on which the principal national securities exchange on which a referenced security is listed or admitted to trading is open for the transaction of business or, if a referenced security is not listed or admitted to trading on any national securities exchange, a Business Day.
6
A Triggering Event shall be deemed to have occurred upon any Person, becoming an Acquiring Person.
Underwriter shall mean any financial institution while acting as an underwriter in a public offering of the Common Stock of the Company.
Section 2. Appointment of Rights Agent . The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the shares of Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co Rights Agents as it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates .
(a) Until the Distribution Date, (i) the Rights will be evidenced (subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates for shares of Common Stock registered in the names of the holders thereof (which certificates shall also be deemed to be Rights Certificates) and not by separate Rights Certificates and (ii) the right to receive Rights Certificates will be transferable only in connection with the transfer of shares of Common Stock. Until the earlier of the Distribution Date or the Expiration Date, the surrender for transfer of certificates for shares of Common Stock shall also constitute the surrender for transfer of the Rights associated with the shares of Common Stock represented thereby. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, postage prepaid mail, to each record holder of shares of Common Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Rights Certificate evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11 hereof, then at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of the Distribution Date, the Rights will be evidenced solely by such Rights Certificates and may be transferred by the transfer of the Rights Certificates as permitted hereby, separately and apart from any transfer of shares of Common Stock, and the holders of such Rights Certificates as listed in the records of the Company or any transfer agent or registrar for the Rights shall be the record holders thereof.
(b) On the Record Date or as soon as practicable thereafter, the Company will send a copy of the Summary of Rights by first-class, postage-prepaid mail, to each record holder of shares of Common Stock as of the Close of Business on the Record Date that requests a Summary of the Rights, at the address of such holder shown on the records of the Companys transfer agent and registrar. With respect to certificates for shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with the Summary of Rights. Until the Distribution Date (or, if earlier, the Expiration Date), the surrender for transfer of any
7
certificate for shares of Common Stock outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the shares of Common Stock represented thereby.
(c) Unless the Board of Directors by resolution adopted at or before the time of the issuance of any shares of Common Stock specifies to the contrary, Rights shall be issued in respect of all shares of Common Stock that are issued after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date or, in certain circumstances provided in Section 22 hereof, after the Distribution Date. Certificates representing such shares of Common Stock shall also be deemed to be certificates for Rights, and shall bear the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A STOCKHOLDERS RIGHTS AGREEMENT BETWEEN SAFE BULKERS, INC. AND AMERICAN STOCK TRANSFER & TRUST COMPANY, AS THE RIGHTS AGENT (THE RIGHTS AGREEMENT), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF SAFE BULKERS, INC. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. SAFE BULKERS, INC. WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated with the shares of Common Stock represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the shares of Common Stock represented thereby.
(d) In the event that the Company purchases or acquires any shares of Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such shares of Common Stock shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding.
Section 4. Form of Rights Certificates .
(a) The Rights Certificates (and the forms of election to purchase shares of Common Stock and of assignment to be printed on the reverse thereof) shall be substantially in
8
the form of Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or a national market system, on which the Rights may from time to time be listed or included, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date (or in the case of Rights issued with respect to shares of Common Stock issued by the Company after the Record Date, as of the date of issuance of such shares of Common Stock) and on their face shall entitle the holders thereof to purchase such number of one-thousandths of a Preferred Share as shall be set forth therein at the price set forth therein (such exercise price per one one-thousandth of a Preferred Share being hereinafter referred to as the Exercise Price and the aggregate Exercise Price of all Preferred Shares issuable upon exercise of one Right being hereinafter referred to as the Total Exercise Price ), but the number and type of securities purchasable upon the exercise of each Right and the Exercise Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Companys Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.
Section 5. Countersignature and Registration .
(a) The Rights Certificates shall be executed on behalf of the Company by its Chief Executive Officer, its Chief Operating Officer, its Chief Financial Officer, its President or any Vice President, either manually or by facsimile signature, and by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature, and shall have
9
affixed thereto the Companys seal (if any) or a facsimile thereof. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates on behalf of the Company had not ceased to be such officer of the Company; and any Rights Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated for such purposes, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates .
(a) Subject to the provisions of Sections 7(e), 14 and 24 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Rights Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Rights Certificates, entitling the registered holder to purchase a like number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets, as the case may be) as the Rights Certificate or Rights Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Rights Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Rights Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Sections 7(e), 14 and 24 hereof, countersign and deliver to the person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Companys request, reimbursement to the Company and the Rights Agent of all reasonable
10
expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will make and deliver a new Rights Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights .
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date and prior to the Close of Business on the Expiration Date by surrender of the Rights Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the Exercise Price for each one-thousandth of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) as to which the Rights are exercised.
(b) The Exercise Price for each one-thousandth of a Preferred Share issuable pursuant to the exercise of a Right shall initially be twenty-five U.S. Dollars (U.S. $25.00), shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Exercise Price for the number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Rights Certificate in accordance with Section 9(e) hereof, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent for the Preferred Shares) a certificate or certificates for the number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have elected to deposit the total number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) as are to be purchased (in which case certificates for the Preferred Shares (or, following a Triggering Event, other securities, cash or other assets as the case may be) represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt thereof, deliver such cash to or upon the order of the registered holder
11
of such Rights Certificate. The payment of the Exercise Price (as such amount may be reduced (including to zero) pursuant to Section 11(a)(iii) hereof) and an amount equal to any applicable transfer tax required to be paid by the holder of such Rights Certificate in accordance with Section 9(e) hereof, may be made in cash or by certified bank check, cashiers check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue securities of the Company other than Preferred Shares, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Rights Certificate or to his or her duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Triggering Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such (a Post-Event Transferee ), (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Companys Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e) (a Pre-Event Transferee ) or (iv) any subsequent transferee receiving transferred Rights from a Post-Event Transferee or a Pre-Event Transferee, either directly or through one or more intermediate transferees, shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or to any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of such Acquiring Persons Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall, in addition to having complied with the requirements of Section 7(a), have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.
12
Section 8. Cancellation and Destruction of Rights Certificates . All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Shares .
(a) The Company covenants and agrees that it will use its best efforts to cause to be reserved and kept available out of its authorized and unissued Preferred Shares not reserved for another purpose (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities), the number of Preferred Shares (and, following the occurrence of the Triggering Event, Common Stock and/or other securities) that will be sufficient to permit the exercise in full of all outstanding Rights.
(b) If the Company shall hereafter list any of its Preferred Shares on a national securities exchange, then so long as the Preferred Shares (and, following the occurrence of a Triggering Event, shares of Common Stock and/or other securities) issuable and deliverable upon exercise of the Rights may be listed on such exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable (but only to the extent that it is reasonably likely that the Rights will be exercised), all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Triggering Event in which the consideration to be delivered by the Company upon exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii) hereof, or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under the Securities Act with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the date of expiration of the Rights. The Company may temporarily suspend, for a period not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement and notify the Rights Agent that the exercisability of the Rights has been temporarily suspended, as well as a public announcement and notification to the Rights Agent at such time as the suspension is no longer in effect. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or blue sky laws of the various states in connection with the exercisability of the
13
Rights. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction, unless the requisite qualification in such jurisdiction shall have been obtained, or an exemption therefrom shall be available, and until a registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares (or other securities of the Company) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such securities (subject to payment of the Exercise Price), be duly and validly authorized and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the original issuance or delivery of the Rights Certificates or of any Preferred Shares (or other securities of the Company) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares (or other securities of the Company) in a name other than that of, the registered holder of the Rights Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares (or other securities of the Company) upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Companys satisfaction that no such tax is due.
Section 10. Record Date . Each Person in whose name any certificate for a number of one-thousandths of a Preferred Share (or other securities of the Company) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of Preferred Shares (or other securities of the Company) represented thereon, and such certificate shall be dated the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Total Exercise Price with respect to which the Rights have been exercised (and any applicable transfer taxes) was made; provided , however , that if the date of such surrender and payment is a date upon which the transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a holder of Preferred Shares (or other securities of the Company) for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Exercise Price, Number of Shares or Number of Rights . The Exercise Price, the number and kind of shares or other property covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
14
(a) (i) Notwithstanding anything in this Agreement to the contrary, in the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares (by reverse stock split or otherwise) into a smaller number of Preferred Shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such event, except as otherwise provided in this Section 11 and Section 7(e) hereof: (1) the Exercise Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall be adjusted so that the Exercise Price thereafter shall equal the result obtained by dividing the Exercise Price in effect immediately prior to such time by a fraction (the Adjustment Fraction ), the numerator of which shall be the total number of Preferred Shares (or shares of capital stock issued in such reclassification of the Preferred Shares) outstanding immediately following such time and the denominator of which shall be the total number of Preferred Shares outstanding immediately prior to such time; provided , however , that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of such Right; and (2) the number of one-thousandths of a Preferred Share (or share of such other capital stock) issuable upon the exercise of each Right shall equal the number of one-thousandths of a Preferred Share (or share of such other capital stock) as was issuable upon exercise of a Right immediately prior to the occurrence of the event described in clauses (A) (D) of this Section 11(a)(i), multiplied by the Adjustment Fraction; provided , however , that, no such adjustment shall be made pursuant to this Section 11(a)(i) to the extent that there shall have simultaneously occurred an event described in clause (A), (B), (C) or (D) of Section 11(n) with a proportionate adjustment being made thereunder. Each share of Common Stock that shall become outstanding after an adjustment has been made pursuant to this Section 11(a)(i) shall have associated with it the number of Rights, exercisable at the Exercise Price and for the number of one-thousandths of a Preferred Share (or shares of such other capital stock) as one share of Common Stock has associated with it immediately following the adjustment made pursuant to this Section 11(a)(i).
(ii) Subject to Section 24 of this Agreement, in the event a Triggering Event shall have occurred, then promptly following such Triggering Event each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive for each Right, upon exercise thereof in accordance with the terms of this Agreement and payment of the Exercise Price in effect immediately prior to the occurrence of the Triggering Event, in lieu of a number of one-thousandths of a Preferred Share, such number of shares of Common Stock of the Company as shall equal the result obtained by multiplying the Exercise Price in effect immediately prior to the occurrence of the Triggering Event by the number of one-thousandths of a Preferred Share for which a Right was exercisable (or would have been exercisable if the Distribution Date had occurred) immediately prior to the first occurrence of a Triggering Event, and dividing that product by 50% of the Current Per Share Market Price for shares of Common Stock on the date of occurrence of the Triggering Event; provided , however , that the Exercise Price and the number of shares of Common Stock of the Company so receivable upon exercise of a Right shall be subject to further adjustment as appropriate in accordance with Section 11(e) hereof to reflect any events occurring in respect of the shares of Common Stock of the Company after the occurrence of the Triggering Event.
15
(iii) In lieu of issuing shares of Common Stock in accordance with Section 11(a)(ii) hereof, the Company may, if the Companys Board of Directors determines that such action is necessary or appropriate and not contrary to the interest of holders of Rights and, in the event that the number of shares of Common Stock which are authorized by the Companys Certificate of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights, or if any necessary regulatory approval for such issuance has not been obtained by the Company, the Company shall: (A) determine the excess of (1) the value of the shares of Common Stock issuable upon the exercise of a Right (the Current Value ) over (2) the Exercise Price (such excess, the Spread ) and (B) with respect to each Right, make adequate provision to substitute for such shares of Common Stock, upon exercise of the Rights, (1) cash, (2) a reduction in the Exercise Price, (3) other equity securities of the Company (including, without limitation, shares or units of shares of any series of preferred stock which the Companys Board of Directors has deemed to have the same value as Common Stock (such shares or units of shares of preferred stock are herein called Common Stock Equivalents )), except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance, (4) debt securities of the Company, except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance, (5) other assets or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Companys Board of Directors based upon the advice of a nationally recognized investment banking firm selected by the Companys Board of Directors; provided , however , if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Triggering Event and (y) the date on which the Companys right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the Section 11(a)(ii) Trigger Date ), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Exercise Price, Common Stock (to the extent available), except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance, and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If the Companys Board of Directors shall determine in good faith that it is likely that sufficient additional Common Stock could be authorized for issuance upon exercise in full of the Rights or that any necessary regulatory approval for such issuance will be obtained, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares or take action to obtain such regulatory approval (such period, as it may be extended, the Substitution Period ). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares, to take any action to obtain any required regulatory approval and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
16
value of the Common Stock shall be the Current Per Share Market Price of the Common Stock on the Section 11(a)(ii) Trigger Date and the value of any Common Stock Equivalent shall be deemed to have the same value as the Common Stock on such date.
(b) In case the Company shall, at any time after the date of this Agreement, fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling such holders (for a period expiring within forty five (45) calendar days after such record date) to subscribe for or purchase Preferred Shares or Equivalent Shares or securities convertible into Preferred Shares or Equivalent Shares at a price per share (or having a conversion price per share, if a security convertible into Preferred Shares or Equivalent Shares) less than the then Current Per Share Market Price of the Preferred Shares or Equivalent Shares on such record date, then, in each such case, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares and Equivalent Shares (if any) outstanding on such record date, plus the number of Preferred Shares or Equivalent Shares, as the case may be, which the aggregate offering price of the total number of Preferred Shares or Equivalent Shares, as the case may be, to be offered or issued (and/or the aggregate initial conversion price of the convertible securities to be offered or issued) would purchase at such current market price, and the denominator of which shall be the number of Preferred Shares and Equivalent Shares (if any) outstanding on such record date, plus the number of additional Preferred Shares or Equivalent Shares, as the case may be, to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided , however , that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Companys Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Preferred Shares and Equivalent Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights, options or warrants are not so issued, the Exercise Price shall be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall, at any time after the date of this Agreement, fix a record date for the making of a distribution to all holders of the Preferred Shares or of any class or series of Equivalent Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend, if any, or a dividend payable in Preferred Shares) or subscription rights, options or warrants (excluding those referred to in Section 11(b)), then, in each such case, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Per Share Market Price of a Preferred Share or an Equivalent Share on such record date, less the fair market value per Preferred Share or Equivalent Share (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights
17
Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a Preferred Share or Equivalent Share, as the case may be, and the denominator of which shall be such Current Per Share Market Price of a Preferred Share or Equivalent Share on such record date; provided , however , that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Exercise Price shall be adjusted to be the Exercise Price which would have been in effect if such record date had not been fixed.
(d) Notwithstanding anything to the contrary, no adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price; provided , however , that any adjustments which by reason of this Section 11(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock or other share or one hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding the first sentence of this Section 11(d), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which requires such adjustment or (ii) the Expiration Date.
(e) If as a result of an adjustment made pursuant to Section 11(a) or 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right and, if required, the Exercise Price thereof, shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and 11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall apply on like terms to any such other shares.
(f) All Rights originally issued by the Company subsequent to any adjustment made to the Exercise Price hereunder shall evidence the right to purchase, at the adjusted Exercise Price, the number of one-thousandths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as provided in Section 11(h), upon each adjustment of the Exercise Price as a result of the calculations made in Section 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of Preferred Shares (calculated to the nearest one hundred-thousandth of a share) obtained by (i) multiplying (x) the number of Preferred Shares covered by a Right immediately prior to this adjustment, by (y) the Exercise Price in effect immediately prior to such adjustment of the Exercise Price, and (ii) dividing the product so obtained by the Exercise Price in effect immediately after such adjustment of the Exercise Price.
(h) The Company may elect on or after the date of any adjustment of the Exercise Price as a result of the calculations made in Section 11(b) or (c) to adjust the number of Rights,
18
in substitution for any adjustment in the number of Preferred Shares purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one hundred-thousandth) obtained by dividing the Exercise Price in effect immediately prior to adjustment of the Exercise Price by the Exercise Price in effect immediately after adjustment of the Exercise Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Exercise Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(h), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Exercise Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Exercise Price or the number of Preferred Shares issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Exercise Price per one one-thousandth of a Preferred Share and the number of one-thousandths of a Preferred Share which were expressed in the initial Rights Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing the Exercise Price below the par or stated value, if any, of the number of one-thousandths of a Preferred Share issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue as fully paid and nonassessable shares such number of one-thousandths of a Preferred Share at such adjusted Exercise Price.
(k) In any case in which this Section 11 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the number of one-thousandths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one-thousandths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided , however , that the Company shall deliver to such holder a due bill or
19
other appropriate instrument evidencing such holders right to receive such additional shares (fractional or otherwise) upon the occurrence of the event requiring such adjustment.
(l) Notwithstanding anything in this Section 11 to the contrary, prior to the Distribution Date, the Company shall be entitled to make such reductions in the Exercise Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Shares or Common Stock, (ii) issuance wholly for cash of any Preferred Shares or Common Stock at less than the current market price, (iii) issuance wholly for cash of Preferred Shares or Common Stock or securities which by their terms are convertible into or exchangeable for Preferred or Common Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Shares or Common Stock shall not be taxable to such stockholders.
(m) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or permit to be taken) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.
(n) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Common Stock payable in shares of Common Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding Common Stock (by reverse stock split or otherwise) into a smaller number of shares of Common Stock, or (D) issue any shares of its capital stock in a reclassification of the shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such event, except as otherwise provided in Section 11(a) and Section 7(e) hereof: (1) each share of Common Stock (or shares of capital stock issued in such reclassification of the Common Stock) outstanding immediately following such time shall have associated with it the number of Rights as were associated with one share of Common Stock immediately prior to the occurrence of the event described in clauses (A)-(D) above; (2) the Exercise Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall be adjusted so that the Exercise Price thereafter shall equal the result obtained by multiplying the Exercise Price in effect immediately prior to such time by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the event described in clauses (A)-(D) above, and the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such event; provided , however , that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of such Right; and (3) the number of one-thousandths of a Preferred Share (or shares of such other capital stock) issuable upon the exercise of each Right outstanding after such event shall equal the number of one-thousandths of a Preferred Share (or shares of such other capital stock) as were issuable with respect to one Right immediately prior to such event. Each share of Common Stock that shall become outstanding after an adjustment has been made pursuant to this Section 11(n) shall have associated with it the number of Rights, exercisable at the Exercise Price and for the number of one-thousandths of a Preferred Share (or shares of such other capital stock) as one share of Common Stock has associated with it immediately following the adjustment made
20
pursuant to this Section 11(n). If an event occurs which would require an adjustment under both this Section 11(n) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(n) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.
Section 12. Certificate of Adjusted Exercise Price or Number of Shares . Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Preferred Shares a copy of such certificate and (c) if a Distribution Date has occurred, mail a brief summary thereof to each holder of a Rights Certificate in accordance with Section 26 hereof. Notwithstanding the foregoing sentence, the failure of the Company to make such certification or give such notice shall not affect the validity of such adjustment or the force or effect of the requirement for such adjustment. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment contained therein and shall not be deemed to have knowledge of such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power .
(a) In the event that, following a Triggering Event, directly or indirectly: (i) the Company shall consolidate with, or merge with and into, any other Person (other than a wholly-owned Subsidiary of the Company in a transaction the principal purpose of which is to change the state of incorporation of the Company and which complies with Section 11(m) hereof); (ii) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such merger, all or part of the shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person (or the Company); or (iii) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company or one or more of its wholly owned Subsidiaries in one or more transactions, each of which individually (and together) complies with Section 11(m) hereof), then, concurrently with and in each such case: (a) each holder of a Right (except as provided in Section 7(e) hereof) shall thereafter have the right to receive, upon the exercise thereof, at a price equal to the Total Exercise Price applicable immediately prior to the occurrence of the Section 13 Event in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, nonassessable and freely tradeable shares of Common Stock of the Principal Party (as hereinafter defined), free of any liens, encumbrances, rights of first
|
21
refusal or other adverse claims, as shall be equal to the result obtained by dividing such Total Exercise Price by 50% of the Current Per Share Market Price of the shares of Common Stock of such Principal Party on the date of consummation of such Section 13 Event; provided , however , that the Exercise Price and the number of shares of Common Stock of such Principal Party so receivable upon exercise of a Right shall be subject to further adjustment as appropriate in accordance with Section 11(e) hereof; (b) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (c) the term Company shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (d) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Stock) in connection with the consummation of any such transaction as may be necessary to ensure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (e) upon the subsequent occurrence of any consolidation, merger, sale or transfer of assets or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled to receive, upon exercise of a Right and payment of the Total Exercise Price as provided in this Section 13(a), such cash, shares, rights, warrants and other property which such holder would have been entitled to receive had such holder, at the time of such transaction, owned the shares of Common Stock of the Principal Party receivable upon the exercise of such Right pursuant to this Section 13(a), and such Principal Party shall take such steps (including, but not limited to, reservation of shares of stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property. (f) For purposes hereof, the earning power of the Company and its Subsidiaries shall be determined in good faith by the Companys Board of Directors on the basis of the operating earnings of each business operated by the Company and its Subsidiaries during the three fiscal years preceding the date of such determination (or, in the case of any business not operated by the Company or any Subsidiary during three full fiscal years preceding such date, during the period such business was operated by the Company or any Subsidiary). (b) For purposes of this Agreement, the term Principal Party shall mean: (i) in the case of any transaction described in clause (i) or (ii) of Section 13(a) hereof: (A) the Person that is the issuer of the securities into which the shares of Common Stock are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer the shares of Common Stock of which have the greatest aggregate |
22
market value of shares outstanding, or (B) if no securities are so issued, (x) the Person that is the other party to the merger, if such Person survives said merger, or, if there is more than one such Person, the Person the shares of Common Stock of which have the greatest aggregate market value of shares outstanding or (y) if the Person that is the other party to the merger does not survive the merger, the Person that does survive the merger (including the Company if it survives) or (z) the Person resulting from the consolidation; and (ii) in the case of any transaction described in clause (iii) of Section 13(a) hereof, the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if more than one Person that is a party to such transaction or transactions receives the same portion of the assets or earning power so transferred and each such portion would, were it not for the other equal portions, constitute the greatest portion of the assets or earning power so transferred, or if the Person receiving the greatest portion of the assets or earning power cannot be determined, whichever of such Persons is the issuer of shares of Common Stock having the greatest aggregate market value of shares outstanding; provided , however , that in any such case described in the foregoing clause (b)(i) or (b)(ii), if the shares of Common Stock of such Person are not at such time or have not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect Subsidiary of another Person the shares of Common Stock of which are and have been so registered, the term Principal Party shall refer to such other Person, or (2) if such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stock of which are and have been so registered, the term Principal Party shall refer to whichever of such Persons is the issuer of shares of Common Stock having the greatest aggregate market value of shares outstanding, or (3) if such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly by the same Person, the rules set forth in clauses (1) and (2) above shall apply to each of the owners having an interest in the venture as if the Person owned by the joint venture was a Subsidiary of both or all of such joint venturers, and the Principal Party in each such case shall bear the obligations set forth in this Section 13 in the same ratio as its interest in such Person bears to the total of such interests. |
(c) The Company shall not consummate any Section 13 Event unless the Principal Party shall have a sufficient number of authorized shares of Common Stock that have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement confirming that such Principal Party shall, upon consummation of such Section 13 Event, assume this Agreement in accordance with Sections 13(a) and 13(b) hereof, that all rights of first refusal or preemptive rights in respect of the issuance of shares of Common Stock of such Principal Party upon exercise of outstanding Rights have been waived, that there are no rights, warrants, instruments or securities outstanding or any agreements or arrangements which, as a result of the consummation of such transaction, would eliminate or substantially diminish the benefits intended to be afforded by the Rights and that such transaction shall not result in a default by such Principal Party under this Agreement,
23
and further providing that, as soon as practicable after the date of such Section 13 Event, such Principal Party will:
(i) prepare and file a registration statement under the Securities Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date, and similarly comply with applicable state securities laws; (ii) use its best efforts to list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on a national securities exchange or to meet the eligibility requirements for quotation on Nasdaq and list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on Nasdaq; and (iii) deliver to holders of the Rights historical financial statements for such Principal Party which comply in all respects with the requirements for registration on Form F-1 (or any successor form) under the Securities Act. |
In the event that at any time after the occurrence of a Triggering Event some or all of the Rights shall not have been exercised at the time of a transaction described in this Section 13, the Rights which have not theretofore been exercised shall thereafter be exercisable in the manner described in Section 13(a) (without taking into account any prior adjustment required by Section 11(a)(ii)).
(d) In case the Principal Party for purposes of Section 13(b) hereof has provision in any of its authorized securities or in its certificate of incorporation or by-laws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue (other than to holders of Rights pursuant to Section 13 hereof), in connection with, or as a consequence of, the consummation of a Section 13 Event, shares of Common Stock or Equivalent Shares of such Principal Party at less than the then Current Per Share Market Price thereof or securities exercisable for, or convertible into, shares of Common Stock or Equivalent Shares of such Principal Party at less than such then Current Per Share Market Price, or (ii) providing for any special payment, tax or similar provision in connection with the issuance of the shares of Common Stock of such Principal Party pursuant to the provisions of Section 13 hereof, then, in such event, the Company hereby agrees with each holder of Rights that it shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with or as a consequence of, the consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time after the Distribution Date, effect or permit to occur any Section 13 Event, if (i) at the time or immediately after such Section 13 Event there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise
24
eliminate the benefits intended to be afforded by the Rights, (ii) prior to, simultaneously with or immediately after such Section 13 Event, the stockholders of the Person who constitutes, or would constitute, the Principal Party for purposes of Section 13(b) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates or Associates or (iii) the form or nature of organization of the Principal Party would preclude or limit the exercisability of the Rights.
(f) The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares .
(a) The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable, as determined pursuant to this Agreement.
(b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share). Interests in fractions of Preferred Shares in integral multiples of one one-thousandth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-thousandth of a Preferred Share, the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of a Preferred Share. For purposes of this Section 14(b), the current market value of a Preferred Share shall be one thousand times the closing price of a share of Common Stock (as determined pursuant to the terms hereof) for the Trading Day immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock upon the exercise or exchange of Rights. In lieu of such fractional shares of Common Stock, the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of a share of Common Stock. For purposes of this Section 14(c), the current market value of a share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the terms hereof) for the Trading Day immediately prior to the date of such exercise.
25
(d) The holder of a Right by the acceptance of the Right expressly waives his or her right to receive any fractional Rights or any fractional shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share) upon exercise of a Right.
Section 15. Rights of Action . All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the shares of Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the shares of Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the shares of Common Stock), may, in his or her own behalf and for his or her own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his or her right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders . Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the shares of Common Stock; (b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed; and (c) subject to Sections 6(a) and 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name the Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. |
Section 17. Rights Certificate Holder Not Deemed a Stockholder . No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose to be the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote
26
for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.
Section 18. The Rights Agent .
(a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. In no event will the Rights Agent be liable for special, indirect, incidental or consequential loss or damage of any kind whatsoever, even if the Rights Agent has been advised of the possibility of such loss or damage.
(b) The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Rights Certificate or certificate for the Preferred Shares or shares of Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document reasonably believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent . Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided , however , that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the
27
Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent . The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the written advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such written advice or opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Per Share Market Price) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt by the Rights Agent of a certificate furnished pursuant to Section 12 describing such change or adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to
28
this Agreement or any Rights Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Secretary or any Assistant Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five (5) Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
29
(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent . The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days written notice mailed to the Company and to each transfer agent of the Preferred Shares and the Common Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days written notice, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Preferred Shares and the Common Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after receiving written notice of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his or her Rights Certificate for inspection by the Company), then the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of any state of the United States, in good standing, which is authorized under such laws to exercise corporate trust or stockholder services powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least U.S.$100 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Preferred Shares and the Common Stock, and mail a written notice thereof to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates . Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so
30
issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement or upon the exercise, conversion or exchange of other securities of the Company outstanding at the date hereof or upon the exercise, conversion or exchange of securities hereinafter issued by the Company and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided , however , that (i) no such Rights Certificate shall be issued and this sentence shall be null and void ab initio if, and to the extent that, such issuance or this sentence would create a significant risk of or result in material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued or would create a significant risk of or result in such options or employee plans or arrangements failing to qualify for otherwise available special tax treatment and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption .
(a) The Company may, at its option and with the approval of the Board of Directors, at any time prior to the Close of Business on the earlier of (i) the close of business on the tenth day following the Shares Acquisition Date and (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of U.S. $0.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being herein referred to as the Redemption Price ) and the Company may, at its option, pay the Redemption Price either in shares of Common Stock (based on the Current Per Share Market Price thereof at the time of redemption) or cash. Such redemption of the Rights by the Company may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. The date on which the Board of Directors elects to make the redemption effective shall be referred to as the Redemption Date .
(b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption; provided , however , that the failure to give or any defect in, any such notice shall not affect the validity of such redemption. Within ten (10) days after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of shares of Common Stock prior to the Distribution Date.
31
Section 24. Exchange .
(a) Subject to applicable laws, rules and regulations, and subject to subsection 24(c) below, the Company may, at its option, by action of the Board of Directors, at any time after the occurrence of a Triggering Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the Exchange Ratio ). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Stock for or pursuant to the terms of any such plan or an Exempted Person), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to Section 24(a) and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall give public notice of any such exchange; provided , however , that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with Section 24(a), the Company shall either take such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights or alternatively, at the option of a majority of the Board of Directors, with respect to each Right (i) pay cash in an amount equal to the Current Value (as hereinafter defined), in lieu of issuing shares of Common Stock in exchange therefor, or (ii) issue debt or equity securities or a combination thereof, having a value equal to the Current Value, in lieu of issuing shares of Common Stock in exchange for each such Right, where the value of such securities shall be determined by a nationally recognized investment banking firm selected by majority vote of the Board of Directors, or (iii) deliver any combination of cash, property, shares of Common Stock and/or other securities having a value equal to the Current Value in exchange for each Right. For purposes of this Section 24(c) only, the Current Value shall mean the product of the Current Per Share Market Price of shares of Common Stock on the date of the occurrence of the event described above in subparagraph (a), multiplied by the number of shares of Common Stock for
32
which the Right otherwise would be exchangeable if there were sufficient shares available. To the extent that the Company determines that some action need be taken pursuant to clauses (i), (ii) or (iii) of this Section 24(c), the Board of Directors may temporarily suspend the exercisability of the Rights for a period of up to sixty (60) days following the date on which the event described in Section 24(a) shall have occurred, in order to seek any authorization of additional shares of Common Stock and/or to decide the appropriate form of distribution to be made pursuant to the above provision and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended.
(d) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock (as determined pursuant to the terms hereof).
(e) The Company may, at its option, by majority vote of the Board of Directors, at any time before any Person has become an Acquiring Person, exchange all or part of the then outstanding Rights for rights of substantially equivalent value, as determined reasonably and with good faith by the Board of Directors, based upon the advice of one or more nationally recognized investment banking firms.
(f) Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to subsection 24(e) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of rights in exchange therefor as has been determined by the Board of Directors in accordance with subsection 24(e) above. The Company shall give public notice of any such exchange; provided , however , that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the transfer agent for the shares of Common Stock of the Company. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Rights will be effected.
Section 25. Notice of Certain Events .
(a) In case the Company shall propose to effect or permit to occur any Triggering Event or Section 13 Event, the Company shall give notice thereof to each holder of Rights in accordance with Section 26 hereof at least twenty (20) days prior to occurrence of such Triggering Event or such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which
33
shall specify the event and the consequences of the event to holders of Rights under Sections 11(a)(ii) and 13 hereof.
Section 26. Notices . Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:
Safe Bulkers, Inc.
|
Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:
American Stock Transfer & Trust
Company
|
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate shall be sufficiently given or made if sent by first class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments . Prior to the occurrence of a Distribution Date, the Company may supplement or amend this Agreement in any respect without the approval of any holders of Rights and the Rights Agent shall, if the Company so directs, execute such supplement or amendment. From and after the occurrence of a Distribution Date, the Company and the Rights Agent may from time to time supplement or amend this Agreement without the approval of any holders of Rights in order to (i) cure any ambiguity or omission, (ii) correct or supplement any provision contained herein which may be defective or
34
inconsistent with any other provisions herein, (iii) shorten or lengthen any time period hereunder or (iv) to change or supplement the provisions hereunder in any manner that the Company may deem necessary or desirable and that shall not adversely affect the interests of the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the delivery of a certificate from an appropriate officer of the Company that states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of shares of Common Stock.
Section 28. Successors . All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc . For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board, or the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights Certificates and all other parties and (y) not subject the Board to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement . Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the shares of Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the shares of Common Stock).
Section 31. Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or
35
unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided , however , that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the Close of Business on the tenth day following the date of such determination by the Board of Directors.
Section 32. Governing Law . This Agreement and each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of New York and for all purposes shall be governed by and construed in accordance with the laws of such jurisdiction applicable to contracts to be made and performed entirely within such jurisdiction.
Section 33. Counterparts . This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings . Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
36
IN WITNESS WHEREOF, the parties have executed this Stockholders Rights Agreement as of the date first written above.
SAFE BULKERS, INC., | ||
by | /s/ Polys Hajioannou | |
Name: Polys Hajioannou | ||
Title: Chief Executive Officer | ||
AMERICAN STOCK TRANSFER & TRUST | ||
COMPANY, | ||
by | /s/ Herbert J. Lemmer | |
Name: Herbert J. Lemmer | ||
Title: Vice President |
[ Signature Page to Stockholders Rights Agreement ]
Exhibit A
STATEMENT OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES
OF
SERIES A PARTICIPATING PREFERRED STOCK OF SAFE BULKERS, INC.
The undersigned, [ ] and [ ] do hereby certify:
1. That they are the duly elected and acting President and Secretary, respectively, of Safe Bulkers, Inc., a Marshall Islands corporation (the Company ).
2. That pursuant to the authority conferred by the Companys Amended and Restated Articles of Incorporation, the Companys Board of Directors on [Month] [ $ ], 2008 adopted the following resolution designating and prescribing the relative rights, preferences and limitations of the Companys Series A Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors (the Board ) of the Company by the Articles of Incorporation, the Board hereby establishes a series of preferred stock, par value U.S. $0.01 per share, and fixes the designation and certain powers, preferences and other special rights of the shares of such series, and certain qualifications, limitations and restrictions thereon, as follows:
Section 1. Designation and Amount . The shares of such series shall be designated as Series A Participating Preferred Stock . The Series A Participating Preferred Stock shall have a par value of U.S. $0.01 per share, and the number of shares constituting such series shall initially be 1,000,000, which number the Board may from time to time increase or decrease (but not below the number then outstanding).
Section 2. Proportional Adjustment . In the event the Company shall at any time after the issuance of any share or shares of Series A Participating Preferred Stock (i) declare any dividend on the common stock of the Company, par value U.S. $0.001 per share (the Common Stock ), payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Company shall simultaneously effect a proportional adjustment to the number of outstanding shares of Series A Participating Preferred Stock.
Section 3. Dividends and Distributions .
(a) Subject to the prior and superior right of the holders of any shares of any series of preferred stock ranking prior and superior to the shares of Series A Participating Preferred Stock with respect to dividends, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive when, as and if declared by the Board out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of March, June, September and December in each year (each such date being referred to herein as a Quarterly Dividend Payment Date ), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by
A-1
reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Participating Preferred Stock.
(b) The Company shall declare a dividend or distribution on the Series A Participating Preferred Stock as provided in paragraph (a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of Series A Participating Preferred Stock from the Quarterly Dividend Payment Date immediately preceding the date of issue of such shares of Series A Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share by share basis among all such shares at the time outstanding. The Board may fix a record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.
Section 4. Voting Rights . The holders of shares of Series A Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series A Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Company.
(b) Except as otherwise provided herein or required by law, the holders of shares of Series A Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Company.
(c) Except as otherwise provided herein or required by law, holders of Series A Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 5. Certain Restrictions .
(a) The Company shall not declare any dividend on, make any distribution on, or redeem or purchase or otherwise acquire for consideration any shares of Common Stock after
A-2
the first issuance of a share or fraction of a share of Series A Participating Preferred Stock unless concurrently therewith it shall declare a dividend on, make a distribution on, or redeem or purchase or otherwise acquire for consideration the Series A Participating Preferred Stock as required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or distributions payable on the Series A Participating Preferred Stock as provided in Section 3 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Participating Preferred Stock outstanding shall have been paid in full, the Company shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock; (ii) declare or pay dividends on, make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with Series A Participating Preferred Stock, except dividends paid ratably on the Series A Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Participating Preferred Stock; (iv) purchase or otherwise acquire for consideration any shares of Series A Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(c) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (a) of this Section 5, purchase or otherwise acquire such shares at such time and in such manner.
Section 6. Reacquired Shares . Any shares of Series A Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board, subject to the conditions and restrictions on issuance set forth herein and, in the Articles of Incorporation, as then amended.
Section 7. Liquidation, Dissolution or Winding Up . Upon any liquidation, dissolution or winding up of the Company, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive an aggregate amount per share equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock plus an
A-3
amount equal to any accrued and unpaid dividends on such shares of Series A Participating Preferred Stock.
Section 8. Consolidation, Merger, etc . In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.
Section 9. No Redemption . The shares of Series A Participating Preferred Stock shall not be redeemable.
Section 10. Ranking . The Series A Participating Preferred Stock shall rank junior to all other series of the Companys preferred stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.
Section 11. Amendment . The Articles of Incorporation of the Company shall not be further amended in any manner which would materially alter or change the powers, preference or special rights of the Series A Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority of the outstanding shares of Series A Participating Preferred Stock, voting separately as a class.
Section 12. Fractional Shares . Series A Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Participating Preferred Stock.
RESOLVED FURTHER, that the Board hereby authorizes and directs the President or any Vice President and the Secretary or any Assistant Secretary of this Company to prepare and file a Statement of Designation of Rights, Preferences and Privileges in accordance with the foregoing resolution and the provisions of Marshall Islands law and to take such actions as they may deem necessary or appropriate to carry out the intent of the foregoing resolution.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
A-4
We further declare, under penalty of perjury, that the foregoing Statement of Designation is the act and deed of the Company and that the facts stated therein are true and correct.
Executed at [ ] on [Month] [ ], 2008.
|
|
President
|
|
Secretary |
A-5
Exhibit B
[FORM OF RIGHTS CERTIFICATE]
B-1
Exhibit C
SUMMARY OF RIGHTS
Distribution and Transfer of Rights: | ||
Distribution Date: | The rights will separate from the common stock and | |
become exercisable after (1) the tenth day after a | ||
person or group acquires ownership of 15% or more | ||
of the companys common stock or (2) the 10th | ||
business day (or such later date as determined by the | ||
companys board of directors) after a person or group | ||
announces a tender or exchange offer which would | ||
result in that person or group holding 15% or more of | ||
the companys common stock | ||
Preferred Stock Purchaseable Upon | On the Distribution Date, each holder of a right will | |
Exercise of Rights: | be entitled to purchase for U.S.$25.00 (the Exercise | |
Price ) a fraction (1/1000th) of one share of the | ||
companys preferred stock which has similar | ||
economic terms as one share of common stock. | ||
Flip-in: | If an acquiring person (an Acquiring Person ) | |
acquires more than 15% of the companys common | ||
stock then each holder of a right (except that | ||
acquiring person) will be entitled to buy at the | ||
Exercise Price, a number of shares of the companys | ||
common stock which has a then current market value | ||
of twice the Exercise Price. | ||
Flip-over: | If after an Acquiring Person acquires more than 15% | |
of the companys common stock, the company | ||
merges into another company (either as the surviving | ||
corporation or as the disappearing entity) or the | ||
company sells more than 50% of its assets or earning | ||
power, then each holder of a right (except for those | ||
owned by the Acquiring Person) will be entitled to | ||
purchase at the Exercise Price, a number of shares of | ||
common stock of the surviving entity which has a | ||
then current market value of twice the Exercise Price. | ||
Exchange Provision: | Any time after the date an Acquiring Person obtains | |
more than 15% of the companys common stock and | ||
before that Acquiring Person acquires more than 50% | ||
of the companys outstanding common stock, the | ||
company may exchange each right owned by all | ||
other rights holders, in whole or in part, for one share |
C-1
of the companys common stock. | ||
Redemption of Rights: | The company can redeem the rights at any time prior | |
to a public announcement that a person has acquired | ||
ownership of 15% or more of the companys | ||
common stock. | ||
Expiration of Rights: | The rights expire on the earliest of (1) May 14, 2018 | |
or (2) the exchange or redemption of the rights as | ||
described above. | ||
Amendment of Terms of Rights: | The terms of the rights and the Stockholder Rights | |
Plan may be amended without the consent of the | ||
rights holders at any time on or prior to the | ||
Distribution Date. After the Distribution Date, the | ||
terms of the rights and the Stockholder Rights Plan | ||
may be amended to make changes, which do not | ||
adversely affect the rights of the rights holders (other | ||
than the Acquiring Person). | ||
Voting Rights: | The rights will not have any voting rights. | |
Anti-dilution Provisions: | The rights will have the benefit of certain customary | |
anti-dilution protection. |
C-2
EXHIBIT 10.6
CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT
AMONG
SAFE BULKERS, INC.,
VORINI HOLDINGS INC.,
POLYS HAJIOANNOU AND
NICOLAOS HADJIOANNOU
Table of Contents | ||
Page | ||
ARTICLE I | ||
Definitions | ||
SECTION 1.01. Definitions | 2 | |
ARTICLE II | ||
The Initial Contribution | ||
SECTION 2.01. Transfer by the Shareholders of the Subsidiary Shares | 3 | |
SECTION 2.02. Issuance of shares of Vorini Common Stock | 3 | |
SECTION 2.03. Acknowledgement of the Shareholders receipt of shares of Vorini Common Stock | 3 | |
SECTION 2.04. Conversion of Subsidiary Shares | 4 | |
ARTICLE III | ||
The Company Contribution | ||
SECTION 3.01. Transfer by Vorini of Subsidiary Shares | 4 | |
SECTION 3.02. Issuance of shares of Company Common Stock | 4 | |
SECTION 3.03. Acknowledgement of Vorinis receipt of Company Common Stock | 4 | |
ARTICLE IV | ||
Representations and Warranties | ||
SECTION 4.01. Representations and Warranties of the Shareholders and Vorini | 4 | |
SECTION 4.02. DISCLAIMER OF WARRANTIES | 5 | |
ARTICLE V
|
||
Further Assurances
|
||
SECTION 5.01. Further Assurances | 6 |
i
Page | ||
ARTICLE VI | ||
ARBITRATION | ||
SECTION 6.01. Disputes | 7 | |
SECTION 6.02. Designation of Arbitrator | 7 | |
SECTION 6.03. Further Disputes | 7 | |
SECTION 6.04. Relief and Awards | 7 | |
ARTICLE VII | ||
Miscellaneous | ||
SECTION 7.01. Survival of Representations and Warranties | 7 | |
SECTION 7.02. Costs | 8 | |
SECTION 7.03. Agreement Relating to Aggregate Retained Earnings | 8 | |
SECTION 7.04. Headings; References; Interpretation | 8 | |
SECTION 7.05. Successors and Assigns | 8 | |
SECTION 7.06. No Third Party Rights | 8 | |
SECTION 7.07. Counterparts | 9 | |
SECTION 7.08. Governing Law | 9 | |
SECTION 7.09. Severability | 9 | |
SECTION 7.10. Deed; Bill of Sale; Assignment | 9 | |
SECTION 7.11. Amendment or Modification | 9 | |
SECTION 7.12. Entire Agreement | 9 |
ii
CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT (this Agreement ) dated as of [•], 2008 (the Effective Date ), among Safe Bulkers, Inc., a corporation formed under the laws of the Republic of the Marshall Islands (the Company ), Vorini Holdings Inc., a corporation formed under the laws of the Republic of the Marshall Islands ( Vorini ), Polys Hajioannou, an individual ( P. Hajioannou ), and Nicolaos Hadjioannou, an individual ( N. Hadjioannou and, together with P. Hajioannou, the Shareholders ).
RECITALS
WHEREAS, the Company was formed on December 11, 2007, pursuant to the Marshall Islands Business Corporations Act (the BCA ) for the purpose of, among other things, acquiring and owning all of the outstanding common shares of the Subsidiaries (as defined below), each of which is directly or indirectly owned by the Shareholders;
WHEREAS, in order to accomplish the objectives and purposes in the preceding recital and in connection with the Closing (as defined below), the parties hereto desire that each of the following shall occur in the order set forth below following the execution of the Underwriting Agreement (as defined below) and prior to the Closing:
1. | The Shareholders shall transfer to Vorini all of the outstanding shares of each Subsidiary (all such shares collectively, the Subsidiary Shares ). As consideration therefore, Vorini shall issue an aggregate total of 100 shares of common stock of Vorini, par value $0.01 per share (the Vorini Common Stock ) to the Shareholders in the following allocation: 90 shares of Vorini Common Stock to P. Hadjioannou and 10 shares of Vorini Common Stock to N. Hadjioannou, which shall represent all of the outstanding shares of Vorini Common Stock (such transaction, the Initial Contribution ); | |
2. | Immediately subsequent to the Initial Contribution, Vorini shall convert, or cause to be converted, each Subsidiary Share that is held in bearer form into a registered Subsidiary Share (the Conversion ); and | |
3. | Immediately subsequent to the Conversion, Vorini, on behalf of itself and the Shareholders, shall transfer to the Company the Subsidiary Shares. As consideration therefor, the Company shall issue to Vorini, 54,500,000 shares of common stock of the Company, par value $0.001 per share (the Company Common Stock ), which shall represent all of the outstanding shares of Company Common Stock (such transaction, the Company Contribution ). |
WHEREAS, upon the Closing, Vorini, through the underwriters of the Offering (as defined below) (the Underwriters ) and pursuant to the Underwriting Agreement (as defined below), intends to sell up to 10,000,000 shares (or such other amount of shares set forth in the Underwriting Agreement) of Company Common Stock, subject to the Underwriters overallotment option under the Underwriting Agreement, to the public,
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. For the purposes of this Agreement:
Agreement has the meaning set forth in the preamble.
Assets has the meaning set forth in Section 4.02 .
BCA has the meaning set forth in the recitals.
Closing shall mean the closing of the Offering.
Closing Date shall mean the date of the Closing.
Company has the meaning set forth in the preamble.
Company Common Stock has the meaning set forth in the recitals. Company Contribution has the meaning set forth in the recitals. Conversion has the meaning set forth in the recitals.
Effective Date has the meaning set forth in the preamble.
Initial Contribution has the meaning set forth in the recitals.
Laws or Law means any and all laws, statutes, ordinances, rules or regulations promulgated by a governmental authority, orders of a governmental authority, judicial decisions, decisions of arbitrators or determinations of any governmental authority or court.
Manager shall mean Safety Management Overseas S.A., a corporation formed under the laws of Panama and the manager of the Vessels.
2
Offering means the initial public offering contemplated by the Registration Statement.
Parties means the parties to this Agreement and their successors and permitted assigns.
Registration Statement means the registration statement on Form F-1 filed by the Company on or about May 16, 2008 for the Offering, as may be amended.
Shareholders has the meaning set forth in the preamble.
Subsidiaries means the Liberian companies set forth on Exhibit A hereto.
Subsidiary Shares has the meaning set forth in the recitals.
Underwriters has the meaning set forth in the recitals.
Underwriting Agreement means the Underwriting Agreement to be entered into by and among the Company, Vorini, the Underwriters and the other parties thereto, as contemplated by the Registration Statement.
Vessels means the vessels owned or operated by the Subsidiaries and newbuild vessels that are, as of the date hereof, contracted to be acquired by the Subsidiaries.
Vorini has the meaning set forth in the preamble.
Vorini Common Stock has the meaning set forth in the recitals.
ARTICLE II
The Initial Contribution
SECTION 2.01. Transfer by the Shareholders of the Subsidiary Shares. Effective immediately following execution of the Underwriting Agreement, the Shareholders hereby contribute, assign, convey, transfer and deliver to Vorini all of their right, title and interest in and to the Subsidiary Shares, and Vorini hereby acquires and accepts from the Shareholders all the right, title and interest of the Shareholders in and to the Subsidiary Shares.
SECTION 2.02. Issuance of shares of Vorini Common Stock. Effective immediately following execution of the Underwriting Agreement, Vorini hereby issues to P. Hajioannou 90 shares of Vorini Common Stock and to N. Hadjioannou 10 shares of Vorini Common Stock.
SECTION 2.03. Acknowledgement of the Shareholders receipt of shares of Vorini Common Stock. As consideration for the Subsidiary Shares, P. Hajioannou
hereby acknowledges receipt of 90 shares of Vorini Common Stock and N. Hadjioannou hereby acknowledges receipt of 10 shares of Vorini Common Stock.
SECTION 2.04. Conversion of Subsidiary Shares. Each of the Parties hereto acknowledge and agree that, following the Initial Contribution and prior to the Company Contribution, Vorini shall take all steps necessary to convert, or cause to be converted, each Subsidiary Share held by Vorini in bearer form into a registered Subsidiary Share.
ARTICLE III
The Company Contribution
SECTION 3.01. Transfer by Vorini of Subsidiary Shares. Effective immediately following the Conversion, Vorini, hereby assigns, conveys, transfers and delivers to the Company all of its right, title and interest in and to the Subsidiary Shares, and the Company hereby acquires and accepts from Vorini all the right, title and interest of Vorini in and to the Subsidiary Shares.
SECTION 3.02. Issuance of shares of Company Common Stock. Effective immediately following the Conversion, the Company hereby issues to Vorini, 54,500,000 shares of Company Common Stock.
SECTION 3.03. Acknowledgement of Vorinis receipt of Company Common Stock. Effective immediately following the Conversion, as consideration for the Subsidiary Shares, Vorini hereby acknowledges receipt of 54,500,000 shares of Company Common Stock.
ARTICLE IV
Representations and Warranties
SECTION 4.01. Representations and Warranties of the Shareholders and Vorini . The Shareholders and Vorini hereby, jointly and severally, represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Each of the Subsidiaries is a corporation duly formed, validly existing and in good standing under Liberian law and has the power to own, lease, charter, operate or otherwise hold its assets and to conduct its businesses as presently conducted.
(b) Authority; Execution and Delivery; Enforceability. Each of the Shareholders and Vorini has full power and authority to execute this Agreement and to consummate the transactions contemplated hereby. The execution and delivery by each of the Shareholders and Vorini of this Agreement and the consummation by each of the Shareholders and Vorini of the transactions contemplated hereby have been duly
4
authorized by all necessary corporate action. Each of the Shareholders and Vorini has duly executed and delivered this Agreement, and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity at law.
(c) No Conflicts; Consents. The execution, delivery and performance by the Shareholders and Vorini of this Agreement will not conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under any provision of (i) their or any Subsidiarys certificate of formation or certificate of incorporation or limited liability company agreement, bylaws or other organizational documents, (ii) any lien, encumbrance, security interest, pledge, mortgage, charge, other claim, contract, lease, license, indenture, agreement, commitment or other legally binding arrangement to which they or any Subsidiary is a party or by which any of their or any Subsidiarys assets may be bound or (iii) any applicable Law. Except as already obtained, no material consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any federal, state, local or foreign governmental authority is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.
(d) The Subsidiary Shares. The Subsidiary Shares have been duly and validly issued, are fully paid and non-assessable and free of preemptive rights. Vorini has, and will convey to the Company, good and valid title to the Subsidiary Shares which comprise all of the issued and outstanding shares in the Subsidiaries, free and clear of all mortgages, liens, security interests, covenants, options, claims, restrictions, or encumbrances of any kind. There are no outstanding options, warrants or other rights to acquire any shares of capital stock or securities convertible into or exercisable for the capital stock of any Subsidiary. With respect to the Subsidiary Shares, there is no further obligation to make any capital contribution to the applicable Subsidiary.
SECTION 4.02. DISCLAIMER OF WARRANTIES. (a) EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING, THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT NONE OF THE PARTIES HAS MADE, OR MAKES AND EACH SUCH PARTY SPECIFICALLY NEGATES, DISCLAIMS AND DENIES ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, ORAL OR WRITTEN, PAST OR PRESENT, REGARDING (i) THE VALUE, NATURE, QUALITY OR CONDITION OF THE SUBSIDIARIES AND THE ASSETS OWNED BY THE SUBSIDIARIES (INCLUDING THE VESSELS) (THE ASSETS), INCLUDING THE ENVIRONMENTAL CONDITION OF SUCH ASSETS GENERALLY, INCLUDING, THE PRESENCE OR ABSENCE OF HAZARDOUS SUBSTANCES OR OTHER MATTERS IN, ON OR ABOUT SUCH ASSETS, (ii) THE INCOME TO BE DERIVED FROM SUCH ASSETS, (iii) THE SUITABILITY OF SUCH ASSETS FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BE
5
CONDUCTED THEREON, THEREBY OR THEREWITH, (iv) THE COMPLIANCE OF OR BY SUCH ASSETS OR THEIR OPERATION WITH ANY LAWS (INCLUDING ENVIRONMENTAL PROTECTION OR POLLUTION LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS), OR (v) THE SEAWORTHINESS, HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF SUCH ASSETS. EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING, EACH PARTY ACKNOWLEDGES AND AGREES THAT IT HAS HAD THE OPPORTUNITY TO INSPECT THE RESPECTIVE ASSETS OF THE SUBSIDIARIES AND IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE RESPECTIVE ASSETS OF THE SUBSIDIARIES AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY ANY OF THE OTHER PARTIES. EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING, NONE OF THE PARTIES IS LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE ASSETS OF THE SUBSIDIARIES FURNISHED BY ANY AGENT, EMPLOYEE, SERVANT OR THIRD PARTY. EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING, EACH OF THE PARTIES HEREBY ACKNOWLEDGES THAT, TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE ASSETS OWNED BY THE SUBSIDIARIES, AS PROVIDED FOR HEREIN, ARE CONVEYED ON AN AS IS, WHERE IS CONDITION WITH ALL FAULTS, AND THE ASSETS OF THE SUBSIDIARIES ARE CONVEYED SUBJECT TO ALL OF THE MATTERS CONTAINED IN THIS SECTION. THIS SECTION 4.02 SHALL SURVIVE SUCH CONVEYANCE OR THE TERMINATION OF THIS AGREEMENT. THE PROVISIONS OF THIS SECTION 4.02 HAVE BEEN NEGOTIATED BY THE PARTIES AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION, NEGATION AND DENIAL OF ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE ASSETS OF THE OPERATING SUBSIDIARIES THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE, EXCEPT AS SET FORTH IN THIS AGREEMENT OR ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING.
ARTICLE V
Further Assurances
SECTION 5.01. Further Assurances. From time to time, and without any further consideration, as and when requested by any Party, each Party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as such other Party may
6
reasonably deem necessary to consummate the transactions contemplated by this Agreement including, in the case of the Shareholders and Vorini, executing and delivering to the Company such assignments, deeds, bills of sale, consents and other instruments as the Company may reasonably request as necessary for such purpose.
ARTICLE VI
ARBITRATION
SECTION 6.01. Disputes. All disputes arising out of this Agreement shall be arbitrated in London in the following manner. One arbitrator is to be appointed by the Company, a second by Vorini and the Shareholders (acting together) relevant to such arbitration and a third by the two so chosen. Their decision or that of any two of the arbitrators shall be final and, for the purpose of enforcing any award, this Agreement may be made a rule of the court. The arbitrators shall be commercial persons, conversant with shipping matters. Such arbitration is to be conducted in accordance with the Arbitration Act of 1996 or any statutory modification or re-enactment thereof.
SECTION 6.02. Designation of Arbitrator. In the event that the Company or Vorini and the Shareholders (acting together) shall state a dispute and designate an arbitrator, in writing, the other party shall have twenty (20) Business Days to designate its own arbitrator. Upon failure to do so, the arbitrator appointed by the other party can conduct the arbitration and render an award hereunder.
SECTION 6.03. Further Disputes. Until such time as the arbitrators finally close the hearings, either of the Company or Vorini and the Shareholders (acting together) shall have the right by written notice served on the arbitrators and on the other party to specify further disputes or differences under this Agreement for hearing and determination.
SECTION 6.04. Relief and Awards. The arbitrators may grant any relief, and render an award, which they or a majority of them deem just and equitable and within the scope of the Agreement of the parties, including but not limited to the posting of security. Awards pursuant to this Article VI may include costs, including a reasonable allowance for attorneys fees, and judgments may be entered upon any award made herein in any court having jurisdiction.
ARTICLE VII
Miscellaneous
SECTION 7.01. Survival of Representations and Warranties. The representations and warranties of the Shareholders and Vorini in this Agreement and in or under any documents, instruments and agreements delivered pursuant to this Agreement, will survive the completion of the transactions contemplated hereby regardless of any independent investigations that the Company may make or cause to be made, or
knowledge it may have, prior to the date of this Agreement and will continue in full force and effect for a period of one year from the date of this Agreement. At the end of such period, such representations and warranties will terminate, and no claim may be brought by the Company against the Shareholders or Vorini thereafter based upon such representations and warranties.
SECTION 7.02. Costs. The Company shall pay any and all sales, use and similar taxes arising out of the conveyances and deliveries to be made hereunder and shall pay all documentary, filing, recording, transfer, deed and conveyance taxes and fees required in connection therewith.
SECTION 7.03. Agreement Relating to Aggregate Retained Earnings. In the event that the aggregate retained earnings of the Subsidiaries for the period prior to the Company Contribution should be reduced from the aggregate amount used for purposes of the determination of the aggregate amount available for the payment of dividends to the Shareholders prior to the Offering, whether as a result of the existence of material facts or actual or contingent liabilities that are later discovered or for any other reason, Vorini shall make a payment to the Company in an amount equal to the excess, if any, of the amount of such aggregate dividends over the amount that should have been available as aggregate retained earnings.
SECTION 7.04. Headings; References; Interpretation. All Article and Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof. The words hereof, herein and hereunder and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement. All references herein to Articles and Sections shall, unless the context requires a different construction, be deemed to be references to the Articles and Sections of this Agreement, respectively. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The use herein of the word including following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter, and whenever the words include, includes or including are used in this Agreement, they shall be deemed to be followed by the words without limitation.
SECTION 7.05. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
SECTION 7.06. No Third Party Rights. The provisions of this Agreement are intended to bind the Parties as to each other and are not intended to and do not create rights in any other person or confer upon any other person any benefits, rights
8
or remedies and no person is or is intended to be a third party beneficiary of any of the provisions of this Agreement.
SECTION 7.07. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Parties. Delivery of an executed page to this Agreement by facsimile transmission or email transmission in PDF document format, shall be effective as delivery of an original executed counterpart hereof.
SECTION 7.08. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of England.
SECTION 7.09. Severability. If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other persons or circumstances.
SECTION 7.10. Deed; Bill of Sale; Assignment. To the extent required and permitted by applicable Law, this Agreement shall also constitute a deed, bill of sale or assignment of the Subsidiary Shares, the Vorini Shares, the Company Common Stock and the Vorini Shares described in Articles II, III and IV.
SECTION 7.11. Amendment or Modification. This Agreement may be amended or modified from time to time only by the written agreement of all the Parties hereto.
SECTION 7.12. Entire Agreement. This Agreement constitutes the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.
[ Signature Page Follows ]
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties set forth below.
SAFE BULKERS, INC., | ||
by:
|
||
Name:
Title: |
||
VORINI HOLDINGS INC., | ||
by:
|
||
Name:
Title: |
||
POLYS HAJIOANNOU | ||
NICOLAOS HADJIOANNOU | ||
[SIGNATURE PAGE TO CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT]
EXHIBIT A
Maxdekatria Shipping Corporation (Liberia)
Eniadefhi Shipping Corporation (Liberia) Eniaprohi Shipping Corporation (Liberia) Eptaprohi Shipping Corporation (Liberia) Efragel Shipping Corporation (Liberia) Marindou Shipping Corporation (Liberia) Avstes Shipping Corporation (Liberia) Kerasies Shipping Corporation (Liberia) Marathassa Shipping Corporation (Liberia) Staloudi Shipping Corporation (Liberia) Maxdeka Shipping Corporation (Liberia) Pemer Shipping Ltd. (Liberia) Petra Shipping Ltd. (Liberia) Marinouki Shipping Corporation (Liberia) Pelea Shipping Ltd. (Liberia) Soffive Shipping Corporation (Liberia) Maxpente Shipping Corporation (Liberia) Maxenteka Shipping Corporation (Liberia) Maxdodeka Shipping Corporation (Liberia) |
Clause
|
Page
|
|
1
|
Purpose
and definitions
|
1
|
2
|
The
Commitment and the Loan
|
11
|
3
|
Interest
and Interest Periods
|
12
|
4
|
Currencies
|
14
|
5
|
Repayment
and prepayment
|
17
|
6
|
Commitment
commission, fees and expenses
|
21
|
7
|
Payments
and taxes; accounts and calculations
|
22
|
8
|
Representations
and warranties
|
23
|
9
|
Undertakings
|
28
|
10
|
Conditions
|
34
|
11
|
Events
of Default
|
35
|
12
|
Indemnities
|
39
|
13
|
Unlawfulness
and increased costs
|
41
|
14
|
Security
and set-off
|
42
|
15
|
Accounts
|
43
|
16
|
Assignment,
transfer and lending office
|
44
|
17
|
Notices
and other matters
|
46
|
18
|
Governing
law and jurisdiction
|
47
|
Schedule
1 Form of Drawdown Notice
|
48
|
Schedule
2 Documents and evidence required as conditions precedent
|
50
|
Schedule
3 Calculation of Additional Cost
|
55
|
Schedule
4 Form of Interest Period Letter
|
58
|
Schedule
5 Form of Mortgage
|
59
|
Schedule
6 Form of Deed of Covenant
|
65
|
Schedule
7 Form of General Assignment
|
66
|
Schedule
8 Form of Manager’s Undertaking
|
67
|
Schedule
9 Form of Master Swap Agreement
|
68
|
Schedule
10 Form of Master Agreement Security Deed
|
69
|
(1) |
MARATHASSA
SHIPPING CORPORATION
as
Borrower, and
|
(2) |
THE
ROYAL BANK OF SCOTLAND plc
as
Bank.
|
1 |
Purpose
and
definitions
|
1.1 |
Purpose
|
1.2 |
Definitions
|
(a)
|
for
interest rate fixing purposes:
|
(i)
|
in
relation to a rate fixing in respect of euro, a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer
system (TARGET) is operating; and
|
(ii)
|
in
relation to a rate fixing in respect of any Optional Currency or
Dollars,
a day on which banks are open for business in the principal financial
centre in, respectively, the jurisdiction of the relevant Optional
Currency or New York City; and
|
(b)
|
for
all other purposes (including, but not limited to, payments and receiving
notices):
|
(i)
|
on
which banks are open for business in London;
and
|
(ii)
|
in
relation to payments in euros, a day on which banks are open for
business
in such other principal financial centre or centres of relevant
Participating Member States as the Bank may nominate;
and
|
(iii)
|
in
relation to payments in any Optional Currency or Dollars, a day on
which
banks are open for business in the principal financial centre in,
respectively, the jurisdiction of the relevant Optional Currency
or New
York City;
|
(a)
|
the
rate of interest for such period which appears on page 248 of the
Dow
Jones Telerate screen (or such other page on the Dow Jones Telerate
screen
as may
|
(b)
|
if
the relevant rate of EURIBOR cannot be determined in accordance with
paragraph (a) above, the rate (rounded upwards if necessary to the
nearest
one sixteenth of one per cent) the Bank offers for deposits in an
amount
approximately equal to the amount in relation to which EURIBOR is
to be
determined for a period equivalent to such period to prime banks
in the
London Interbank Market at or about 11:00 a.m. (London time) on the
Quotation Date for such period;
|
(a)
|
actual,
constructive, compromised or arranged total loss of the Ship;
or
|
(b)
|
the
Compulsory Acquisition of the Ship;
or
|
(c)
|
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Borrower from such
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation within thirty (30) days after the occurrence
thereof;
|
1.3 |
Headings
|
1.4 |
Construction
of certain terms
|
1.4.1
|
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Agreement and references to this Agreement
include
its schedules;
|
1.4.2
|
references
to (or to any specified provision of) this Agreement or any other
document
shall be construed as references to this Agreement, that provision
or that
document as in force for the time being and as amended in accordance
with
terms thereof, or, as the case may be, with the agreement of the
relevant
parties;
|
1.4.3
|
references
to a “regulation” include any present or future regulation, rule,
directive, requirement, request or guideline (whether or not having
the
force of law) of any agency, authority, central bank or government
department or any self-regulatory or other national or supra-national
authority;
|
1.4.4
|
words
importing the plural shall include the singular and vice
versa;
|
1.4.5
|
references
to a time of day are to London
time;
|
1.4.6
|
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.7
|
references
to a “guarantee” include references to an indemnity or other assurance
against financial loss including, without limitation, an obligation
to
purchase assets or services as a consequence of a default by any
other
person to pay any Indebtedness and “guaranteed” shall be construed
accordingly; and
|
1.4.8
|
references
to any enactment shall be deemed to include references to such enactment
as re-enacted, amended or extended.
|
2
|
The
Commitment and the Loan
|
2.1 |
Agreement
to lend
|
(a)
|
Twenty
eight million Dollars ($28,000,000),
or
|
(b)
|
Seventy
per cent (70%) of the market value of the Ship as determined pursuant
to
the valuation delivered to the Bank under schedule 2 Part 1 paragraph
9,
|
2.2 |
Drawdown
|
2.3 |
Amount
|
(a)
|
Twenty
eight million Dollars ($28,000,000),
or
|
(b)
|
Seventy
per cent (70%) of the market value of the Ship as determined pursuant
to
the valuation delivered to the Bank under schedule 2 Part 1 paragraph
9,
|
2.4 |
Availability
|
2.5 |
Termination
of Commitment
|
2.6 |
Application
of Proceeds
|
3
|
Interest
and Interest Periods
|
3.1 |
Normal
interest rate
|
3.2 |
Selection
of Interest Periods
|
3.3 |
Determination
of Interest Periods
|
3.3.1
|
the
first Interest Period in respect of the Loan or any Tranches into
which it
may be divided on the Drawdown Date shall commence on the Drawdown
Date
and each subsequent Interest Period in respect of any Tranche shall
commence on the last day of the previous Interest Period in respect
of
such Tranche;
|
3.3.2
|
Interest
Periods in respect of different Tranches shall end on the same
day,
|
3.3.3
|
if
any Interest Period would otherwise overrun a Repayment Date, then,
in the
case of the last Repayment Date, such Interest Period shall end on
such
Repayment Date, and in the case of any other Repayment Date or Repayment
Dates the Loan shall be divided into parts so that there is one part
in
the amount of the repayment instalment due on each Repayment Date
falling
during that Interest Period and having an Interest Period ending
on the
relevant Repayment Date and another part in the amount of the balance
of
the Loan having an Interest Period ascertained in accordance with
clause
3.2 and the other provisions of this clause 3.3 and the expression
“Interest Period in respect of the Loan” when used in clause 4 and
elsewhere in this Agreement refers to the Interest Period in respect
of
the balance of the Loan; and
|
3.3.4
|
if
the Borrower fails to specify the duration of an Interest Period
in
accordance with the provisions of clause 3.2 and this clause 3.3
such
Interest Period shall have a duration of six (6) months or such other
period as shall comply with this clause
3.3.
|
3.4 |
Default
interest
|
3.5 |
Notification
of Interest Periods and interest
rate
|
3.6 |
Market
disruption;
non-availability
|
3.6.1
|
If
and whenever, at any time prior to the commencement of any Interest
Period, the Bank shall have determined (which determination shall,
in the
absence of manifest error, be
conclusive):
|
(a)
|
that
adequate and fair means do not exist for ascertaining LIBOR or, as
the
case may be, EURIBOR during such Interest Period;
or
|
(b)
|
that
deposits in Dollars are not available to the Bank in the London Interbank
Market in the ordinary course of business in sufficient amounts to
fund
the Loan for such Interest Period;
|
3.6.2
|
During
the period of ten (10) days after any Determination Notice has been
given
by the Bank under clause 3.6.1, the Bank shall certify an alternative
basis (the “
Substitute
Basis
”)
for maintaining the Loan. The Substitute Basis may (without limitation)
include alternative interest periods, alternative currencies or
alternative rates of interest but shall include a margin above the
cost of
funds including Additional Cost, if any, to the Bank equivalent to
the
Margin. Each Substitute Basis so certified shall be binding upon
the
Borrower and shall take effect in accordance with its terms from
the date
specified in the Determination Notice until such time as the Bank
notifies
the Borrower that none of the circumstances specified in clause 3.6.1
continues to exist whereupon the normal interest rate fixing provisions
of
this Agreement shall apply.
|
4
|
Currencies
|
4.1 |
Selection
of currencies
|
4.2 |
Limit
on currencies;
non-availability
|
4.2.1
|
A
Tranche may not be drawn down in, converted into or remain outstanding
in
an Optional Currency if:
|
(a)
|
in
consequence thereof there would be more than two (2) Tranches;
or
|
(b)
|
the
Bank notifies the Borrower not later than 3 p.m. on the fourth Banking
Day
before the date on which such Tranche is to be drawn down or the
beginning
of the relevant Interest Period that deposits of such Optional Currency
are not readily available to the Bank in an amount comparable with
such
Tranche; or
|
(c)
|
the
Bank determines (which determination shall be conclusive) at any
time
prior to 10 a.m. (local time in the place of payment) on the first
day of
the relevant Interest Period that by reason of any change in currency
availability, currency exchange rates or exchange controls it is
or will
be impracticable for such Tranche to be drawn down in, converted
into or
remain outstanding in that Optional Currency;
or
|
(d)
|
a
Default has occurred and is continuing;
or
|
(e)
|
a
Transaction is outstanding under the Master Swap Agreement,
|
4.2.2
|
The
Borrower shall not be allowed to convert the Loan or any Tranche
on more
than four (4) occasions in any twelve month period. The first twelve-month
period shall commence on the Drawdown Date and each subsequent
twelve-month period shall commence on the expiry of the previous
such
period.
|
4.3 |
Currency
amounts on drawdown
|
4.3.1
|
Drawdown
in Optional Currency
|
4.3.2
|
Drawdown
in Dollars
|
4.4 |
Currency
amount on conversion
|
4.5 |
Notional
obligations
|
4.6 |
Currency
Correction
|
4.7 |
Release
of moneys in Cash Collateral
Account
|
4.8 |
Incidental
costs and expenses
|
5
|
Repayment
and prepayment
|
5.1 |
Repayment
|
5.1.1
|
Subject
to the terms of this Agreement, the Borrower shall repay the Loan
by
twenty four consecutive instalments, one such instalment to be repaid
on
each of the Repayment Dates. Subject to the provisions of this Agreement,
the amount of each of the first six (6) instalments shall be Nine
hundred
fifty five thousand Dollars ($955,000) or the equivalent amount in
an
Optional Currency calculated in accordance with clause 5.7 and the
amount
of each of the seventh to the twenty-third instalment inclusive shall
be
Eight hundred and fifteen thousand Dollars ($815,000) or the equivalent
amount in an Optional Currency calculated in accordance with clause
5.7
and the amount of the last instalment shall be Eight million four
hundred
and fifteen thousand Dollars ($8,415,000) or the equivalent amount
in an
Optional Currency calculated in accordance with clause 5.7. If the
Commitment is not drawn in full, the amount of each instalment shall
be
reduced proportionately.
|
5.1.2
|
The
Borrower shall, during the period commencing twelve (12) months after
the
Drawdown Date and ending one hundred and eight (108) months after
the
Drawdown Date, have the option (subject to paragraph (e) below) at
any
time to defer the payment of up to two repayment instalments payable
pursuant to clause 5.1.1 (other than the final instalment) in whole
(subject to paragraph (f) below);
|
(a)
|
such
option shall be exercisable by a written notice to the Bank from
the
Borrower which specifies the instalment to be deferred and which
is
received by the Bank at least one (1) month before the Repayment
Date upon
which the relevant instalment falls
due;
|
(b)
|
each
such notice shall be irrevocable once
given;
|
(c)
|
upon
each occasion that an instalment is deferred pursuant to this proviso,
the
amount of each of the remaining instalments shall be increased pro
rata by
the amount of the relevant instalment
deferred;
|
(d)
|
upon
each occasion that an instalment is deferred pursuant to this clause
5.1.2, the Borrower shall pay to the Bank a flat fee of one per cent
(1%)
of the amount deferred within 15 days from the date the notice to
defer is
given, pursuant to paragraph (a)
above;
|
(e)
|
such
option may only be exercised if (i) the written notice to the Bank
has
been received within the time period specified in paragraph (a) above
and
(ii) at the time the relevant notice is received by the Bank no Default
has occurred; and
|
(f)
|
in
the event that all the deferred instalments, are subsequently repaid
or
prepaid by the Borrower pursuant to clause 5.2, the Borrower shall
have
the right on each occasion to defer up to two further repayment
instalments on the same basis as provided in this clause
5.1.2.
|
5.2 |
Voluntary
prepayment
|
5.2.1
|
without
premium or penalty, on any Interest Payment Date relating to the
part of
the Loan being prepaid together with any amounts payable under clause
12
and accrued interest to the date of prepayment and any other sums
then
payable under this Agreement and/or the Master Swap Agreement and/or
the
other Security Documents or any of them in respect of the Loan;
and
|
5.2.2
|
at
any other time upon payment to the Bank of accrued interest to the
date of
prepayment and such sum as the Bank in its absolute discretion shall
determine to be the loss (excluding loss of Margin on the amount
prepaid
to the end of the then current Interest Period), cost and expense
incurred
by the Bank as a result of the prepayment not being made on an Interest
Payment Date for any part of the Loan being prepaid and any other
sums
then payable under this Agreement and/or the Master Swap Agreement
and/or
the other Security Documents or any of
them.
|
5.3 |
Master
Swap Agreement, Repayments and
Prepayments
|
5.3.1
|
Notwithstanding
any provision of the Master Swap Agreement to the contrary, in the
case of
a prepayment of all or part of the Loan (including, without limit,
upon a
Total Loss in accordance with clause 5.4 and under clause 9.2) then
subject to clause 5.3.2 the Bank shall be entitled but not obliged
(and,
where relevant, may do without the consent of the Borrower, where
it would
otherwise be required whether under the Master Swap Agreement or
otherwise) to amend, re-book, supplement, cancel, close out, net
out,
terminate, liquidate, transfer or assign all or any part of the rights,
benefits and obligations created by any Transaction and/or the Master
Swap
Agreement and/or to obtain or re-establish any hedge or related trading
position in any manner and with any person the Bank in its absolute
discretion may determine and both the Bank’s and the Borrower’s continuing
obligations under any Transaction and/or Master Swap Agreement shall,
unless agreed otherwise by the Bank, be calculated so far as the
Bank
considers it practicable by reference to the amended repayment schedule
for the Loan taking into account the fact that less than the full
amount
of the Loan remains outstanding.
|
5.3.2
|
If
less than the full amount of the Loan remains outstanding, following
a
prepayment under this Agreement and the Bank in its absolute discretion
agrees, following a written request of the Borrower, that the Borrower
may
be permitted to maintain all or part of a Transaction in an amount
not
wholly matched with or linked to all or part of the Loan, the Borrower
shall within ten (10) days of being notified by the Bank of such
requirement, provide the Bank with, or procure the provision to the
Bank
of, such additional security as shall in the opinion of the Bank
be
adequate to secure the performance of such Transaction, which additional
security shall take such form, be
|
5.3.3
|
The
Borrower shall on the first written demand of the Bank indemnify
the Bank
in respect of all losses, costs and expenses (including, but not
limited
to, legal costs and expenses) incurred or sustained by the Bank as
a
consequence of or in relation to the effecting of any matter or
Transactions referred to in this clause
5.3.
|
5.3.4
|
Notwithstanding
any provision of the Master Swap Agreement to the contrary, if for
any
reason a Transaction has been entered into but the Loan is not drawn
down
under this Agreement then, subject to clause 5.3.5 the Bank shall
be
entitled but not obliged (and, where relevant, may do so without
the
consent of the Borrower where it would otherwise be required whether
under
the Master Swap Agreement or otherwise) to amend, re-book, supplement,
cancel, close out, net out, terminate, liquidate, transfer or assign
all
or any part of the rights, benefits and obligations created by such
Transaction and/or the Master Swap Agreement and/or to obtain or
re-establish any hedge or related trading position in any manner
and with
any person the Bank in its absolute discretion may
determine.
|
5.3.5
|
If
a Transaction has been entered into but the Loan is not drawn down
under
this Agreement and the Bank in its absolute discretion agrees, following
a
written request of the Borrower, that the Borrower may be permitted
to
maintain all or part of a Transaction, the Borrower shall within
ten (10)
days of being notified by the Bank of such requirement, provide the
Bank
with, or procure the provision to the Bank of, such additional security
as
shall in the opinion of the Bank be adequate to secure the performance
of
such Transaction, which additional security shall take such form,
be
constituted by such documentation and be entered into between such
parties, as the Bank in its absolute discretion may approve or require,
and each document comprising such additional security shall constitute
a
Credit Support Document for the purposes of the Master Swap Agreement
and/or otherwise.
|
5.3.6
|
Without
prejudice to or limitation of the obligations of the Borrower under
clause
5.3.3, in the event that the Bank exercises any of its rights under
clauses 5.3.1, 5.3.2, 5.3.3 or 5.3.4 and such exercise results in
all or
part of a Transaction being terminated such Transaction or the part
thereof terminated (which shall for the purposes hereof be treated
as a
separate Transaction) in each case shall be treated under the Master
Swap
Agreement in the same manner as if it were a Terminated Transaction
(as
defined in Section 14 of the Master Swap Agreement) pursuant to an
Event
of Default (as so defined in that Section 14) by the Borrower and,
accordingly, the Bank shall be permitted to recover from the Borrower
a
payment for early termination calculated in accordance with the provisions
of section 6(e)(i) of the Master Swap Agreement in respect of such
Transaction.
|
5.4 |
Prepayment
on Total Loss
|
5.4.1
|
in
the case of an actual total loss of the Ship on the actual date and
at the
time the Ship was lost or, if such date is not known, on the date
on which
the Ship was last reported;
|
5.4.2
|
in
the case of a constructive total loss of the Ship, upon the date
and at
the time notice of abandonment of the Ship is given to the insurers
of the
Ship for the time being (provided a claim for total loss is admitted
by
such insurers) or, if such insurers do not forthwith admit such a
claim,
at the date and at the time at which either a total loss is subsequently
admitted by the insurers or a total loss is subsequently adjudged
by a
competent court of law or arbitration tribunal to have
occurred;
|
5.4.3
|
in
the case of a compromised or arranged total loss, on the date upon
which a
binding agreement as to such compromised or arranged total loss has
been
entered into by the insurers of the
Ship;
|
5.4.4
|
in
the case of Compulsory Acquisition, on the date upon which the relevant
requisition of title or other compulsory acquisition occurs;
and
|
5.4.5
|
in
the case of hijacking, theft, condemnation, capture, seizure, arrest,
detention or confiscation of the Ship (other than where the same
amounts
to Compulsory Acquisition of the Ship) by any Government Entity,
or by
persons purporting to act on behalf of any Government Entity, which
deprives the Borrower of the use of the Ship for more than thirty
(30)
days, upon the expiry of the period of thirty (30) days after the
date
upon which the relevant hijacking, theft, condemnation, capture,
seizure,
arrest, detention or confiscation
occurred.
|
5.5 |
Amounts
payable on prepayment
|
5.6 |
Notice
of prepayment; reduction of repayment
instalments
|
5.7 |
Currency
amounts repayable
|
6
|
Commitment
commission, fees and
expenses
|
6.1 |
Fees
|
6.1.1
|
The
Borrower shall pay to the Bank a total fee of One hundred and twenty
seven
thousand Dollars ($127,000) (comprising of an arrangement fee of
Sixty
seven thousand two hundred Dollars ($67,200) and a commitment fee
of Fifty
nine thousand eight hundred Dollars ($59,800)), of which total fee
the
Borrower has paid to the Bank Twenty thousand eight hundred and thirty
three Dollars ($20,833) on 21 October 2003, Ten thousand nine hundred
and
seventeen Dollars ($10,917) on 8 March 2004, Thirty one thousand
seven
hundred fifty dollars ($31,750) on 31 April 2004 and Thirty one thousand
seven hundred fifty dollars ($31,750) on 5 August
2004.
|
6.1.2
|
The
Borrower will pay the balance of the total fee being Thirty one thousand
seven hundred fifty Dollars ($31,750) on the earlier of (i) 30 April
2005
and (ii) the Drawdown Date;
|
6.1.3
|
The
fee referred to in clause 6.1.1 shall be payable in full by the Borrower
to the Bank, and shall not be repayable, whether or not any part
of the
Commitment is ever advanced.
|
6.2 |
Expenses
|
6.2.1
|
in
connection with the negotiation, preparation, execution and, where
relevant, registration of the Security Documents and of any amendment
or
extension of or the granting of any waiver or consent under, any
of the
Security Documents and/or the Master Swap Agreement;
and
|
6.2.2
|
in
contemplation of, or otherwise in connection with, the enforcement
of, or
preservation of any rights under, any of the Security Documents and/or
the
Master Swap Agreement, or otherwise in respect of the moneys owing
under
any of the Security Documents and/or the Master Swap Agreement (including,
for the avoidance of doubt, expenses incurred in connection with
the Bank
obtaining any further insurance opinion(s) in respect of the Insurances
for the Ship as may be required by the Bank during the Security Period),
together with interest at the rate referred to in clause 3.4 from
the date
on which such expenses were incurred to the date of payment (as well
after
as before judgment).
|
6.3 |
Value
Added Tax
|
6.4 |
Stamp
and other duties
|
7
|
Payments
and taxes; accounts and
calculations
|
7.1 |
No
set-off or counterclaim
|
7.2 |
Payment
by the Bank
|
7.3 |
Non-Banking
Days
|
7.4 |
Calculations
|
7.5 |
Certificates
conclusive
|
7.6 |
Grossing-up
for Taxes
|
7.7 |
Loan
account
|
8
|
Representations
and warranties
|
8.1 |
Continuing
representations and
warranties
|
8.1.1
|
Due
incorporation
|
8.1.2
|
Corporate
power
|
8.1.3
|
Binding
obligations
|
8.1.4
|
No
conflict with other obligations
|
8.1.5
|
No
litigation
|
8.1.6
|
No
filings required
|
8.1.7
|
Choice
of law
|
8.1.8
|
No
immunity
|
8.1.9
|
Consents
obtained
|
8.2 |
Initial
representations and
warranties
|
8.2.1
|
Pari
passu
|
8.2.2
|
No
default under other Indebtedness
|
8.2.3
|
Information
|
8.2.4
|
No
withholding Taxes
|
8.2.5
|
No
Default
|
8.2.6
|
the
Ship
|
(a)
|
in
the absolute ownership of the Borrower who will on and after the
Drawdown
Date be the sole, legal and beneficial owner of the
Ship;
|
(b)
|
registered
in the name of the Borrower through the Registry as a ship under
the laws
and flag of the Flag State;
|
(c)
|
operationally
seaworthy and in every way fit for service;
and
|
(d)
|
classed
with the Classification free of all requirements and recommendations
of
the Classification Society;
|
8.2.7
|
Ship’s
employment
|
8.2.8
|
Freedom
from Encumbrances
|
8.2.9
|
Compliance
with Environmental Laws and
Approvals
|
(a)
|
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have complied with
the
provisions of all Environmental
Laws;
|
(b)
|
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have obtained all
Environmental Approvals and are in compliance with all such Environmental
Approvals; and
|
(c)
|
neither
the Borrower nor to the best of the Borrower’s knowledge and belief
(having made due enquiry) any of its Environmental Affiliates has
received
notice of any Environmental Claim that the Borrower or any such
Environmental Affiliate is not in compliance with any Environmental
Law or
any Environmental Approval;
|
8.2.10
|
No
Environmental Claims
|
8.2.11
|
No
potential Environmental Claims
|
8.2.12
|
No
material adverse change
|
8.2.13 |
ISPS
Code
|
8.2.14 |
Copies
true and complete
|
8.3 |
Repetition
of representations and
warranties
|
9
|
Undertakings
|
9.1 |
General
|
9.1.1
|
Notice
of Default
|
9.1.2
|
Consents
and licences
|
9.1.3
|
Use
of proceeds
|
9.1.4
|
Pari
passu
|
9.1.5
|
Financial
statements
|
9.1.6
|
Delivery
of reports
|
9.1.7
|
Provision
of further information
|
9.1.8
|
Obligations
under Security Documents
|
9.1.9
|
Compliance
with Code
|
9.1.10
|
Withdrawal
of DOC and SMC
|
9.1.11
|
Issuance
of DOC and SMC
|
9.2 |
Security
value maintenance
|
9.2.1
|
Security
shortfall
|
(a)
|
prepay
within a period of fifteen (15) days of the date of receipt by the
Borrower of the Bank’s said notice such sum in Dollars as will result in
the Security Requirement after such prepayment (taking into account
any
other repayment of the Loan made between the date of the notice and
the
date of such prepayment) being equal to the Security Value;
or
|
(b)
|
within
fifteen (15) days of the date of receipt by the Borrower of the Bank’s
said notice constitute to the satisfaction of the Bank such further
security for the Loan as shall be acceptable to the Bank having a
value
for security purposes (as determined by the Bank in its absolute
discretion) at the date upon which such further security shall be
constituted which, when added to the Security Value, shall not be
less
than the Security Requirement as at such date;
or
|
(c)
|
within
fifteen (15) days of the date of receipt by the Borrower of the Bank’s
said notice, pay such additional amount to the credit of the Cash
Collateral Account as will result in the Security Value after such
payment
being not less than the Security Requirement as at the date of such
payment.
|
9.2.2
|
Valuation
of Ship
|
9.2.3
|
Information
|
9.2.4
|
Costs
|
9.2.5
|
Valuation
of additional security
|
9.2.6
|
Documents
and evidence
|
9.2.7
|
Security
release
|
9.2.8
|
ISPS
Code compliance
|
(a)
|
maintain
at all times a valid and current ISSC in respect of the
Ship;
|
(b)
|
immediately
notify the Bank in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the ISSC in respect of
the
Ship; and
|
(c)
|
procure
that the Ship will comply at all times with the ISPS
Code;
|
9.3 |
Negative
undertakings
|
9.3.1
|
Negative
pledge
|
9.3.2
|
No
merger
|
9.3.3
|
Disposals
|
9.3.4
|
Other
business
|
9.3.5
|
Acquisitions
|
9.3.6
|
Other
obligations
|
9.3.7
|
No
borrowing
|
9.3.8
|
Repayment
of borrowings
|
9.3.9
|
Guarantees
|
9.3.10
|
Loans
|
9.3.11
|
Sureties
|
9.3.12
|
Share
capital and distribution
|
9.3.13
|
Change
of Ownership
|
9.3.14
|
Subsidiaries
|
9.3.15
|
Manager
|
9.4 |
Cash
Collateral Account
Undertaking
|
10
|
Conditions
|
10.1 |
Documents
and evidence
|
10.1.1
|
the
Bank, or its duly authorised representative, shall have received,
not
later than two (2) Banking Days before the day on which the Drawdown
Notice for the Loan is given, the documents and evidence specified
in Part
1 of schedule 2 in form and substance satisfactory to the Bank;
and
|
10.1.2
|
the
Bank, or its duly authorised representative, shall have received,
on or
prior to the Drawdown Date, the documents and evidence specified
in Part 2
of schedule 2 in form and substance satisfactory to the
Bank.
|
10.2 |
General
conditions precedent
|
10.2.1
|
the
representations and warranties contained in clauses 8.1 and 8.2 are
true
and correct on and as of each such time as if each was made with
respect
to the facts and circumstances existing at such time;
and
|
10.2.2
|
no
Default shall have occurred and be continuing or would result from
the
making of the Loan.
|
10.3 |
Waiver
of conditions precedent
|
10.4 |
Further
conditions precedent
|
11
|
Events
of Default
|
11.1 |
Events
|
11.1.1
|
Non-payment
:
any Security Party fails to pay any sum payable by it under any of
the
Security Documents at the time, in the currency and in the manner
stipulated in the Security Documents (and so that, for this purpose,
sums
payable on demand shall be treated as having been paid at the stipulated
time if paid within three (3) Banking Days of demand);
or
|
11.1.2
|
Master
Swap Agreement
:
(i) an Event of Default or Potential Event of Default (in each case
as
defined in the Master Swap Agreement) has occurred and is continuing
under
the Master Swap Agreement or (ii) an Early Termination Date (as defined
in
the Master Swap Agreement) has occurred or been or become capable
of being
effectively designated under the Master Swap Agreement or (iii) a
person
entitled to do so gives notice of an Early Termination Date under
section
6(b)(iv) of the Master
|
11.1.3
|
Breach
of Insurance and certain other obligations
:
the Borrower fails to obtain and/or maintain the Insurances (as defined
in, and in accordance with the requirements of, the Security Documents)
or
if any insurer in respect of such Insurances cancels the Insurances
or
disclaims liability by reason, in either case, of mis-statement in
any
proposal for the Insurances or for any other failure or default on
the
part of the Borrower or any other person or the Borrower commits
any
breach of or omits to observe any of the obligations or undertakings
expressed to be assumed by it under clauses 9.2, 9.3 or 9.4;
or
|
11.1.4
|
Breach
of other obligations
:
any Security Party commits any breach of or omits to observe any
of its
obligations or undertakings expressed to be assumed by it under any
of the
Security Documents (other than those referred to in clauses 11.1.1,
11.1.2
and 11.1.3 above) and, in respect of any such breach or omission
which in
the opinion of the Bank is capable of remedy, such action as the
Bank may
require shall not have been taken within fourteen (14) days of the
Bank
notifying the relevant Security Party of such default and of such
required
action; or
|
11.1.5
|
Misrepresentation
:
any representation or warranty made or deemed to be made or repeated
by or
in respect of any Security Party in or pursuant to any of the Security
Documents or in any notice, certificate or statement referred to
in or
delivered under any of the Security Documents is or proves to have
been
incorrect or misleading in any material respect;
or
|
11.1.6
|
Cross-default
:
any Indebtedness of the Borrower is not paid when due or any Indebtedness
of the Borrower becomes (whether by declaration or automatically
in
accordance with the relevant agreement or instrument constituting
the
same) due and payable prior to the date when it would otherwise have
become due (unless as a result of the exercise by the Borrower of
a
voluntary right of prepayment), or any creditor of the Borrower becomes
entitled to declare any such Indebtedness due and payable or any
facility
or commitment available to the Borrower relating to Indebtedness
is
withdrawn, suspended or cancelled by reason of any default (however
described) of the person concerned unless the Borrower shall have
satisfied the Bank that such withdrawal, suspension or cancellation
will
not affect or prejudice in any way the Borrower’s ability to pay its debts
as they fall due and fund its commitments, or any guarantee given
by any
Security Party in respect of Indebtedness is not honoured when due
and
called upon; or
|
11.1.7
|
Legal
process
:
any judgment or order made against the Borrower is not stayed or
complied
with within seven (7) days or a creditor attaches or takes possession
of,
or a distress, execution, sequestration or other process is levied
or
enforced upon or sued out against, any of the undertakings, assets,
rights
or revenues of the Borrower and is not discharged within seven (7)
days;
or
|
11.1.8
|
Insolvency
:
the Borrower is unable or admits inability to pay its debts as they
fall
due, suspends making payments on any of its debts or announces an
intention to do so, becomes insolvent, has assets the value of which
is
less than the value of its liabilities (taking into account contingent
and
prospective liabilities) or suffers the declaration of a moratorium
in
respect of any of its Indebtedness;
or
|
11.1.9
|
Reduction
or loss of capital
:
a
meeting is convened by the Borrower for the purpose of passing any
resolution to purchase, reduce or redeem any of its share capital;
or
|
11.1.10
|
Winding
up
:
any corporate action, legal proceedings or other procedure or step
is
taken for the purpose of winding up or an order is made or resolution
passed for the winding up of the Borrower or a notice is issued convening
a meeting for the purpose of passing any such resolution;
or
|
11.1.11
|
Administration
:
any petition is presented, notice is given or other step is taken
for the
purpose of the appointment of an administrator of the Borrower or
the Bank
believes that any such petition or other step is imminent or an
administration order is made in relation to the Borrower;
or
|
11.1.12
|
Appointment
of receivers and managers
:
any administrative or other receiver is appointed of the Borrower
or any
part of its assets and/or undertaking or any other steps are taken
to
enforce any Encumbrance over all or any part of the assets of the
Borrower; or
|
11.1.13
|
Compositions
:
any steps are taken, or negotiations commenced, by the Borrower or
by any
of its creditors with a view to the general readjustment or rescheduling
of all or part of its indebtedness or to proposing any kind of
composition, compromise or arrangement involving such company and
any of
its creditors; or
|
11.1.14
|
Analogous
proceedings
:
there occurs, in relation to the Borrower in any country or territory
in
which it carries on business or to the jurisdiction of whose courts
any
part of its assets is subject, any event which, in the reasonable
opinion
of the Bank, appears in that country or territory to correspond with,
or
have an effect equivalent or similar to, any of those mentioned in
clauses
11.1.6 to 11.1.12 (inclusive) or any Security Party otherwise becomes
subject, in any such country or territory, to the operation of any
law
relating to insolvency, bankruptcy or liquidation;
or
|
11.1.15
|
Cessation
of business
:
the Borrower suspends or ceases or threatens to suspend or cease
to carry
on its business; or
|
11.1.16
|
Seizure
:
all or a material part of the undertaking, assets, rights or revenues
of,
or shares or other ownership interests in the Borrower are seized,
nationalised, expropriated or compulsorily acquired by or under the
authority of any government; or
|
11.1.17
|
Invalidity
:
any of the Security Documents shall at any time and for any reason
become
invalid or unenforceable or otherwise cease to remain in full force
and
effect, or if the validity or enforceability of any of the Security
Documents shall at any time
|
11.1.18
|
Unlawfulness
:
it becomes impossible or unlawful at any time for any Security Party,
to
fulfil any of the covenants and obligations expressed to be assumed
by it
in any of the Security Documents or for the Bank to exercise the
rights or
any of them vested in it under any of the Security Documents or otherwise;
or
|
11.1.19
|
Repudiation
:
any Security Party repudiates any of the Security Documents or does
or
causes or permits to be done any act or thing evidencing an intention
to
repudiate any of the Security Documents;
or
|
11.1.20
|
Encumbrances
enforceable
:
any Encumbrance (other than Permitted Liens) in respect of any of
the
property (or part thereof) which is the subject of any of the Security
Documents becomes enforceable; or
|
11.1.21
|
Material
adverse change
:
there occurs, in the opinion of the Bank, a material adverse change
in the
financial condition of the Borrower by reference to the financial
position
of the Borrower as described by the Borrower to the Bank in the
negotiation of this Agreement; or
|
11.1.22
|
Arrest
:
the Ship is arrested, confiscated, seized, taken in execution, impounded,
forfeited, detained in exercise or purported exercise of any possessory
lien or other claim or otherwise taken from the possession of the
Borrower
and the Borrower shall fail to procure the release of the Ship within
a
period of fourteen (14) days thereafter;
or
|
11.1.23
|
Registration
:
the registration of the Ship under the laws and flag of the Flag
State is
cancelled or terminated without the prior written consent of the
Bank;
or
|
11.1.24
|
Unrest
:
the Flag State becomes involved in hostilities or civil war or there
is a
seizure of power in the Flag State by unconstitutional means if,
in any
such case, such event could in the opinion of the Bank reasonably
be
expected to have a material adverse effect on the security constituted
by
any of the Security Documents; or
|
11.1.25
|
Environment
:
the Borrower and/or any of its Environmental Affiliates fails to
comply
with any Environmental Law or any Environmental Approval or the Ship
is
involved in any incident which gives rise or may give rise to an
Environmental Claim if, in any such case, such non-compliance or
incident
or the consequences thereof could, in the opinion of the Bank, reasonably
be expected to have a material adverse effect on the business, assets,
operations, property or financial condition of the Borrower or any
other
Security Party or on the security constituted by any of the Security
Documents; or
|
11.1.26
|
P&I
:
the Borrower or any other person fails or omits to comply with any
requirements of the protection and indemnity association or other
insurer
with which the Ship is entered for insurance or insured against protection
and indemnity risks
|
11.1.27
|
Ownership
:
there is any change in the legal ownership of the shares in the Borrower
from that existing at the date of this Agreement;
or
|
11.1.28
|
Material
events
:
any other event occurs or circumstance arises which, in the opinion
of the
Bank, is likely materially and adversely to affect either (i) the
ability
of any Security Party to perform all or any of its obligations under
or
otherwise to comply with the terms of any of the Security Documents
or the
Master Swap Agreement or (ii) the security created by any of the
Security
Documents;
|
11.2 |
Acceleration
|
11.2.1
|
the
obligation of the Bank to make the Commitment available shall be
terminated, whereupon the Commitment shall be reduced to zero forthwith;
and/or
|
11.2.2
|
the
Loan and all interest and commitment commission accrued and all other
sums
payable under the Security Documents have become due and payable,
whereupon the same shall, immediately or in accordance with the terms
of
such notice, become due and
payable.
|
11.3 |
Demand
basis
|
12
|
Indemnities
|
12.1 |
Miscellaneous
indemnities
|
12.1.1
|
any
default in payment by the Borrower of any sum under any of the Security
Documents when due;
|
12.1.2
|
the
occurrence of any other Event of
Default;
|
12.1.3
|
any
prepayment of the Loan or part thereof being made under clause 5.2,
5.3,
9.2.1 or 13.1, or any other repayment of the Loan or part thereof
being
made otherwise than on an Interest Payment Date relating to the part
of
the Loan prepaid or repaid; or
|
12.1.4
|
the
Loan not being made for any reason (excluding any default by the
Bank)
after the Drawdown Notice has been
given,
|
12.2 |
Currency
indemnity
|
12.3 |
Environmental
indemnity
|
13
|
Unlawfulness
and increased costs
|
13.1 |
Unlawfulness
|
13.2 |
Increased
costs
|
13.2.1
|
subject
the Bank to Taxes or change the basis of Taxation of the Bank with
respect
to any payment under any of the Security Documents (other than Taxes
or
Taxation on the overall net income, profits or gains of the Bank
imposed
in the jurisdiction in which its principal or lending office under
this
Agreement is located); and/or
|
13.2.2
|
increase
the cost to, or impose an additional cost on, the Bank or its holding
company in making or keeping the Commitment available or maintaining
or
funding all or part of the Loan;
and/or
|
13.2.3
|
reduce
the amount payable or the effective return to the Bank under any
of the
Security Documents; and/or
|
13.2.4
|
reduce
the Bank’s or its holding company’s rate of return on its overall capital
by reason of a change in the manner in which it is required to allocate
capital resources to the Bank’s obligations under any of the Security
Documents; and/or
|
13.2.5
|
require
the Bank or its holding company to make a payment or forego a return
on or
calculated by reference to any amount received or receivable by the
Bank
under any of the Security Documents;
and/or
|
13.2.6
|
require
the Bank or its holding company to incur or sustain a loss (including
a
loss of future potential profits) by reason of being obliged to deduct
all
or part of the Commitment or the Loan from its capital for regulatory
purposes,
|
(a)
|
the
Bank shall notify the Borrower in writing of such event promptly
upon its
becoming aware of the same; and
|
(b)
|
the
Borrower shall on demand pay to the Bank the amount which the Bank
specifies (in a certificate setting forth the basis of the computation
of
such amount but not including any matters which the Bank or its holding
company regards as confidential) is required to compensate the Bank
and/or
(as the case may be) its holding company for such liability to Taxes,
cost, reduction, payment, foregone return or
loss.
|
13.3 |
Exception
|
14
|
Security
and set-off
|
14.1 |
Application
of moneys
|
14.1.1
|
first
in or towards payment of all unpaid fees and expenses which may be
owing
to the Bank under any of the Security Documents and/or the Master
Swap
Agreement;
|
14.1.2
|
secondly
in or towards payment of any arrears of interest owing in respect
of the
Loan or any part thereof;
|
14.1.3
|
thirdly
in or towards repayment of the Loan (whether the same is due and
payable
or not);
|
14.1.4
|
fourthly
in or towards payment to the Bank for any loss suffered by reason
of any
such payment in respect of principal not being effected on an Interest
Payment Date relating to the part of the Loan
repaid;
|
14.1.5
|
fifthly,
in or towards payment to the Bank of any sum owing to the Bank under
the
Master Swap Agreement;
|
14.1.6
|
sixthly
in or towards payment to the Bank of any other sums owing to it under
any
of the other Security Documents;
and
|
14.1.7
|
seventhly
the surplus (if any) shall be paid to the Borrower or to whomsoever
else
may be entitled to receive such
surplus.
|
14.2 |
Set-off
|
14.2.1
|
The
Borrower authorises the Bank (without prejudice to any of the Bank’s
rights at law, in equity or otherwise), at any time and without notice
to
the Borrower, to apply any credit balance to which the Borrower is
then
entitled standing upon any account of the Borrower with any branch
of the
Bank in or towards satisfaction of any sum due and payable from the
Borrower to the Bank under any of the Security Documents. For this
purpose, the Bank is authorised to purchase with the moneys standing
to
the credit of such account such other currencies as may be necessary
to
effect such application. The Bank shall not be obliged to exercise
any
right given to it by this clause 14.2. The Bank shall notify the
Borrower
forthwith upon the exercise or purported exercise of any right of
set-off
giving full details in relation
thereto.
|
14.2.2
|
Without
prejudice to its rights hereunder and/or under the Master Swap Agreement,
the Bank may at the same time as, or at any time after, any Default
under
this Agreement or the Borrower’s default under the Master Swap Agreement,
set-off any amount due now or in the future from the Borrower to
the Bank
under this Agreement against any amount due from the Bank to the
Borrower
under the Master Swap Agreement and apply the first amount in discharging
the second amount. The effect of any set-off under this clause 14.2.2
shall be effective to extinguish or, as the case may require, reduce
the
liabilities of the Bank under the Master Swap
Agreement.
|
14.3 |
Further
assurance
|
14.4 |
Conflicts
|
15
|
Accounts
|
15.1 |
General
|
15.2 |
Cash
Collateral Account:
withdrawals
|
15.3 |
Application
of accounts
|
15.4 |
Charging
of Cash Collateral Account
|
16
|
Assignment,
transfer and lending
office
|
16.1 |
Benefit
and burden
|
16.2 |
No
assignment by Borrower
|
16.3 |
Assignment
by Bank
|
16.4 |
Transfer
|
16.4.1
|
with
the prior written consent of the Borrower (such consent not to be
unreasonably withheld and the request for which shall be promptly
responded to), unless the Transferee shall be a Subsidiary or the
holding
company of the Bank (in which case no such consent shall be required,
the
Borrower consenting to any such transfer by its execution of this
Agreement); and
|
16.4.2
|
if
the Transferee, by delivery of such undertaking as the Bank may approve,
becomes bound by the terms of this Agreement and agrees to perform
all or,
as the case may be, part of the Bank’s obligations under this
Agreement.
|
16.5 |
Documenting
assignments and transfers
|
16.6 |
Lending
office
|
16.7 |
Disclosure
of information
|
17
|
Notices
and other matters
|
17.1 |
Notices
|
17.1.1
|
be
in writing delivered personally or by first-class prepaid letter
(airmail
if available) or facsimile transmission or other means of
telecommunication in permanent written
form;
|
17.1.2
|
be
deemed to have been received, subject as otherwise provided in the
relevant Security Document, in the case of a letter, when delivered
personally or three (3) days after it has been put in to the post
and, in
the case of a facsimile transmission or other means of telecommunication
in permanent written form, at the time of despatch (provided that
if the
date of despatch is not a business day in the country of the addressee
or
if the time of despatch is after the close of business in the country
of
the addressee it shall be deemed to have been received at the opening
of
business on the next such business day);
and
|
17.1.3
|
be
sent:
|
(a)
|
to
the Borrower at:
|
(b)
|
to
the Bank at:
|
17.2 |
No
implied waivers, remedies
cumulative
|
17.3 |
English
language
|
18
|
Governing
law and jurisdiction
|
18.1 |
Law
|
18.2 |
Submission
to jurisdiction
|
18.3 |
Contracts
(Rights of Third Parties) Act
1999
|
To:
|
The
Royal Bank of Scotland plc
Shipping
Business Centre
5-10
Great Tower Street
London
EC3P 3H
England
|
Dollar
Amount
|
Currency
in which Tranche
is
to be outstanding
|
Interest
Period
|
Please
credit the funds to:
|
The
Safety Account
|
(a)
|
no
event or circumstance has occurred and is continuing which constitutes
a
Default;
|
(b)
|
the
representations and warranties contained in clauses 8.1 and 8.2
of the
Loan Agreement are true and correct at the date hereof as if made
with
respect to the facts and circumstances existing at such
date;
|
(c)
|
the
borrowing to be effected by the drawdown of the Loan will be within
our
corporate powers, has been validly authorised by appropriate corporate
action and will not cause any limit on our borrowings (whether
imposed by
statute, regulation, agreement or otherwise) to be exceeded;
and
|
(d)
|
there
has been no material adverse change in our financial position from
that
described by us to the Bank in the negotiation of the Loan
Agreement.
|
For
and on behalf of
|
MARATHASSA
SHIPPING CORPORATION
|
1 |
Ship
conditions
|
1.1 |
Registration
and Encumbrances
|
1.2 |
Classification
|
1.3 |
Insurance
|
2 |
Constitutional
documents
|
3 |
Corporate
authorisations
|
(i)
|
being
true and correct;
|
(ii)
|
being
duly passed at meetings of the directors of such Security Party and
of the
shareholders of such Security Party each duly convened and
held;
|
(iii)
|
not
having been amended, modified or revoked;
and
|
(iv)
|
being
in full force and effect
|
4 |
Specimen
signatures
|
5 |
Certificate
of incumbency
|
6 |
Borrower’s
consents and approvals
|
7 |
Other
consents and approvals
|
8 |
Certified
Management Agreement
|
9 |
Valuation
|
10 |
Insurance
opinion
|
1 |
Security
Documents, letters and other
documents
|
2 |
Mortgage
registration
|
3 |
Notices
of assignment
|
4 |
Cyprus
opinion
|
5 |
Liberian
legal opinion
|
6 |
Further
opinions
|
7 |
Borrower’s
process agent
|
8 |
Manager’s
process agent
|
9 |
Registration
forms
|
10 |
Manager’s
confirmation
|
11 |
Application
for DOC and SMC
|
12 |
ISPS
Code
|
13 |
Mortgagee’s
Interest Insurance Premia
|
14 |
Builder’s
Certificate
|
15 |
Fee
|
16 |
Due
Diligence
|
1
|
The
Additional Cost is an addition to the interest rate to compensate
the Bank
for the cost of compliance with (a) the requirements of the Bank
of
England and/or the Financial Services Authority (or, in either case,
any
other authority which replaces all or any of its functions) or (b)
the
requirements of the European Central
Bank.
|
2
|
On,
or as soon as possible after, the first day of each Interest Period,
the
Bank shall calculate, as a percentage rate, its Additional Cost in
accordance with the following paragraphs. The Additional Cost will
be
expressed as a percentage rate per annum and will be rounded up to
four
decimal places.
|
3
|
The
Additional Cost when the Bank lends from an office in any member
state of
the European Union that has adopted or adopts the Euro as its lawful
currency in accordance with legislation of the European Union relating
to
Economic and Monetary Union will be the percentage (expressed as
a per
annum rate) which is its reasonable determination of the cost of
complying
with the minimum reserve requirements of the European Central Bank
in
respect of loans made from that
office.
|
4
|
The
Additional Cost for the Bank lending from an office in the United
Kingdom
will be calculated as follows:
|
(a) |
in
relation to a sterling Loan:
|
(b) |
in
relation to a Loan in any currency other than
sterling:
|
A
|
is
the percentage of Eligible Liabilities (assuming these to be in excess
of
any stated minimum) which that Lender is from time to time required
to
maintain as an interest free cash ratio deposit with the Bank of
England
to comply with cash ratio
requirements.
|
B
|
is
the percentage rate of interest (excluding the Margin and the Additional
Cost and, if any part of the Loan has not been paid on its due date,
the
additional rate of interest specified in clause 3.4 payable for the
relevant Interest Period on the
Loan.
|
C
|
is
the percentage (if any) of Eligible Liabilities which that Lender
is
required from time to time to maintain as interest bearing Special
Deposits with the Bank of England.
|
D
|
is
the percentage rate per annum payable by the Bank of England to the
Agent
on interest bearing Special
Deposits.
|
E
|
is
designed to compensate the Bank for amounts payable under the Fees
Rules
and is calculated by the Bank as being the most recent rate of charge
payable by it to the Financial Services Authority under the Fees
Rules in
respect of the relevant financial year of the Financial Services
Authority
(calculated for this purpose by the Bank as being the average of
the Fee
Tariffs applicable to the Bank for that financial year) and expressed
in
pounds per £1,000,000 of the Tariff Base of the
Bank.
|
5
|
For
the purposes of this schedule:
|
(a)
|
“
Eligible
Liabilities
”
and “
Special
Deposits
”
have the meanings given to them from time to time under or pursuant
to the
Bank of England Act 1998 or (as may be appropriate) by the Bank of
England;
|
(b)
|
“
Fees
Rules
”
means the rules on periodic fees contained in the Supervision manual
of
the Financial Services Authority’s Handbook of rules and guidance or such
other law or regulation as may be in force from time to time in respect
of
the payment of fees for the acceptance of
deposits;
|
(c)
|
“
Fee
Tariffs
”
means the fee tariffs specified in the Fees Rules under the activity
group
A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee
required
pursuant to the Fees Rules but taking into account any applicable
discount
rate);
|
(d)
|
“
Tariff
Base
”
has the meaning given to it in, and will be calculated in accordance
with,
the Fees Rules; and
|
(e)
|
“
pounds
”
and “
£
”
means the lawful currency of the United
Kingdom.
|
6
|
In
application of the above formulae, A, B, C and D will be included
in the
formulae as figures and not as percentages (i.e. 5 per cent. will
be
included in the formula as 5 and not a 0.05). A negative result obtained
by subtracting D from B shall be taken as zero. The resulting figures
shall be rounded to four decimal
places.
|
7
|
Any
determination by the Bank in accordance with this schedule in relation
to
a formula, the Additional Cost or any amount payable to it shall,
in the
absence of manifest error, be conclusive and binding on the
Borrower.
|
8
|
The
Bank may from time to time, after consultation with the Borrowers,
determine and notify the Borrowers of any amendments which need to
be made
to this schedule to comply with any change in law, regulation or
any
requirements from time to time
|
For
and on behalf of
|
MARATHASSA
SHIPPING CORPORATION
|
I.M.O.
No.
CALL
SIGN
|
Name
of Ship
|
Year
of Registry or Date
of
Provisional
Registry/Port
of Registry
|
||
9279783
P3ZN9
|
Maritsa
|
2004,
Limassol, Cyprus
|
Whether
a Sailing,
Steam
or Motor Ship
|
Horse
Power of Engines,
if any |
Motor
Ship
|
8,550
kw
|
Length
(Article 2(8))
|
217.81
|
Breadth
(Regulation 2(3))
|
32.26
|
19.30
|
Gross:
40,002
|
Net:
26,101
|
SIGNED,
SEALED AND DELIVERED
|
)
|
as a DEED by |
)
|
by
|
)
|
as
the duly authorised attorney-in-fact
|
)
|
of
|
)
|
|
)
|
MARATHASSA
SHIPPING CORPORATION
|
)
|
pursuant
to a Power of Attorney
|
)
|
dated
2005
|
)
|
in
the presence of:
|
)
|
SIGNED,
SEALED AND DELIVERED
|
)
|
by
|
)
|
as
the duly authorised Attorney of
|
)
|
)
|
|
pursuant
to a Power of Attorney
|
)
|
)
|
|
in
the presence of:
|
)
|
Name:
Title:
Seat:
of
Consular Officer/Notary Public/Certifying
Officer
|
(Seal)
|
|
Registrar of Cyprus Ships |
THE
COMMON SEAL OF
|
)
|
)
|
|
was
hereunto affixed
|
)
|
in
the presence of:-
|
)
|
SIGNED,
SEALED AND DELIVERED
|
)
|
by
|
)
|
and
|
)
|
as
the duly authorised Attorney/
|
)
______________
|
Signatories
of
|
)
|
pursuant
to a Power of Attorney/
|
)
|
Instruments
of Procuration dated
|
)
______________
|
in
|
)
|
the
presence of:-
|
)
|
Name:
Title:
Seat:
of
Consular Officer/Notary Public/Certifying
Officer
|
Clause
|
Page
|
|
1
|
Definitions
|
1
|
2
|
Representations
and warranties
|
6
|
3
|
Mortgage
of the Ship
|
7
|
4
|
Covenant
to pay
|
7
|
5
|
Continuing
security and other matters
|
7
|
6
|
Covenants
|
8
|
7
|
Powers
of Mortgagee to protect security and remedy defaults
|
18
|
8
|
Powers
of Mortgagee on Event of Default
|
18
|
9
|
Application
of moneys
|
21
|
10
|
Remedies
cumulative and other provisions
|
21
|
11
|
Costs
and indemnity
|
22
|
12
|
Attorney
|
22
|
13
|
Further
assurance
|
23
|
14
|
Notices
|
23
|
15
|
Counterparts
|
24
|
16
|
Severability
of provisions
|
24
|
17
|
Law,
jurisdiction and language
|
24
|
(1)
|
MARATHASSA
SHIPPING CORPORATION
whose registered office is at 80 Broad Street, Monrovia, Republic
of
Liberia (the “
Owner
”);
and
|
(2)
|
THE
ROYAL BANK OF SCOTLAND plc
whose registered office is at 36 St. Andrew Square, Edinburgh EH2
2YB,
Scotland, acting for the purposes of this Deed through its branch
at The
Shipping Business Centre, 5-10 Great Tower Street, London, EC3P 3HX,
England (the “
Mortgagee
”).
|
(A)
|
the
Owner is the sole, absolute and unencumbered, legal and beneficial
owner
of one- hundred one hundredth (100/100th) shares in the Ship described
in
clause 1.2;
|
(B) |
by
a Loan Agreement dated 2005 and made between (1) the Owner (therein
referred to as the “
Borrower
”) and (2) the Mortgagee
(therein referred to as the “
Bank
”), the Mortgagee agreed
(inter alia) to advance by way of a multicurrency loan to the Owner,
upon
the terms and conditions therein contained, a sum of up to Twenty
eight
million Dollars ($28,000,000) or the Equivalent Amount in an Optional
Currency or Optional Currencies;
|
(C) |
by
a Master Swap Agreement dated 2005 and made between (1) the Owner
and (2) the Mortgagee, the Mortgagee agreed the terms and conditions
upon
which it would enter into an interest rate swap transaction or
transactions with the Owner in respect of the Loan (whether in whole
or in
part as the case may be from time to
time);
|
(D)
|
the
Owner has executed in favour of the Mortgagee a statutory mortgage
of even
date herewith in account current form constituting a first priority
Cyprus
mortgage of one hundred one hundredth (100/100th) shares in the said
Ship;
and
|
(E)
|
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the Deed
of
Covenant referred to in the Loan Agreement but shall nonetheless
continue
in full force and effect notwithstanding any discharge of the
Mortgage.
|
1
|
Definitions
|
1.1 |
Defined
expressions
|
1.2 |
Definitions
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including, without limitation, Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee or any Receiver in connection with the exercise of
the
powers referred to in or granted by this Deed or otherwise payable
by the
Owner in accordance with clause 11;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee or any Receiver until the date of receipt or recovery
thereof (whether before or after judgment) at a rate per annum calculated
in accordance with clause 3.4 of the Loan Agreement (as conclusively
certified by the Mortgagee or such Receiver, as the case may
be);
|
(a)
|
the
Ship;
|
(b)
|
the
Insurances;
|
(c)
|
the
Earnings; and
|
(d)
|
any
Requisition Compensation;
|
(a)
|
actual,
constructive, compromised or arranged total loss of the Ship;
or
|
(b)
|
the
Compulsory Acquisition of the Ship;
or
|
(c)
|
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Owner from such hijacking,
theft, condemnation, capture, seizure, arrest, detention or confiscation
within thirty (30) days after the occurrence thereof;
and
|
1.3 |
Insurance
terms
|
1.3.1
|
“
excess
risks
”
means the proportion (if any) of claims for general average, salvage
and
salvage charges and under the ordinary collision clause not recoverable
in
consequence of the value at which the Ship is assessed for the purpose
of
such claims exceeding her insured
value;
|
1.3.2
|
“
protection
and indemnity risks
”
means the usual risks (including oil pollution and freight, demurrage
and
defence cover) covered by a United Kingdom protection and indemnity
association or a protection and indemnity association which is managed
in
London (including, without limitation, 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 8 of the Institute Time Clauses (Hulls)
(1/11/95) or the Institute Amended Running Down Clause (1/11/95)
or any
equivalent provision); and
|
1.3.3
|
“
war
risks
”
includes those risks covered by the standard form of English marine
policy
with Institute War and Strikes Clauses (Time) (1/10/83) attached
or
similar cover.
|
1.4 |
Construction
of Mortgage terms
|
1.4.1
|
references
to “interest” shall be construed as references to interest covenanted to
be paid in accordance with clause 4.1.2 and any interest specified
in
paragraph (b) of the definition of “Expenses” in clause
1.2;
|
1.4.2
|
references
to “principal” shall be construed as references to all moneys (other than
interest) for the time being comprised in the Outstanding
Indebtedness;
|
1.4.3
|
the
expression “all sums for the time being owing to the Mortgagee” means the
whole of the Outstanding Indebtedness;
and
|
1.4.4
|
the
expression “Account Current” means an account or accounts which shall be
kept by the Owner with the Mortgagee and from which the Mortgagee
may
(without giving notice or making any demand) debit any part of the
Outstanding Indebtedness.
|
1.5 |
Headings
|
1.6 |
Construction
of certain terms
|
1.6.1
|
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Deed and references to this Deed include its
schedules;
|
1.6.2
|
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.6.3
|
words
importing the plural shall include the singular and vice
versa;
|
1.6.4
|
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.6.5
|
references
to a “
guarantee
”
shall include references to an indemnity or other assurance against
financial loss including, without limitation, an obligation to purchase
assets or services as a consequence of a default by any other person
to
pay any Indebtedness and “
guaranteed
”
shall be construed accordingly; and
|
1.6.6
|
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.7 |
Conflict
with Loan Agreement
|
2
|
Representations
and warranties
|
2.1 |
The
Owner hereby represents and warrants to the Mortgagee
that:
|
2.1.1
|
it
is the sole, absolute, legal and beneficial owner of the
Ship;
|
2.1.2
|
the
Ship is not subject to any charter which, if entered into after the
date
of this Deed, would have required the consent of the Mortgagee under
clause 6.1.15, and there is no existing or intended agreement or
arrangement whereby the Earnings may be
|
2.1.3
|
neither
the Mortgaged Property nor any part thereof is subject to any Encumbrance
save as constituted by the Mortgage and this Deed and the General
Assignment or otherwise permitted by the terms of this Deed;
and
|
2.1.4
|
it
has power and is entitled to register the Ship under the laws and
flag of
Cyprus.
|
3
|
Mortgage
of the Ship
|
4
|
Covenant
to pay
|
4.1 |
In
consideration of the advance by the Mortgagee to the Owner on or
before
the date hereof of the total principal sum of Twenty eight million
Dollars
($28,000,000) or the Equivalent Amount in an Optional Currency
or Optional
Currencies (receipt of which sum the Owner hereby acknowledges)
in
accordance with the provisions of the Loan Agreement, the Owner
hereby
covenants with the Mortgagee:
|
4.1.1
|
to
repay the Loan by the instalments and on the dates referred to and
otherwise in the manner and upon the terms set out in the Loan
Agreement;
|
4.1.2
|
to
pay interest on the Loan, and on any overdue interest or other moneys
payable under the Loan Agreement, at the rate or rates from time
to time
applicable thereto in the manner and upon the terms set out in the
Loan
Agreement;
|
4.1.3
|
to
pay all other moneys payable by the Owner under the Security Documents
or
any of them at the times and in the manner therein specified;
and
|
4.1.4
|
to
pay and discharge to the Mortgagee the Master Swap Agreement Liabilities
on their due date.
|
5
|
Continuing
security and other matters
|
5.1 |
Continuing
Security
|
5.1.1
|
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance by the Owner with all of the covenants, terms and conditions
contained in the Security Documents to which the Owner is or is to
be a
party, express or implied and the security so created shall not be
satisfied by any intermediate payment or satisfaction of any part
of the
amount hereby and thereby secured (or by any settlement of accounts
between
|
5.1.2
|
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any other of the Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
5.1.3
|
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
5.2 |
Rights
additional
|
5.3 |
No
enquiry
|
5.4 |
Obligations
of Owner and Mortgagee
|
5.5 |
Discharge
of Mortgage
|
6
|
Covenants
|
6.1 |
The
Owner hereby covenants with the Mortgagee and undertakes throughout
the
Security Period:
|
6.1.1
|
Insurance
|
(a)
|
Insured
risks, amounts and terms
|
(i)
|
against
fire and usual marine risks (including excess risks) and war risks,
on an
agreed value basis, in such amounts (but not in any event less than
whichever shall be the greater of the market value of the Ship for
the
time being and One hundred and ten per cent (110%) of the aggregate
of the
Loan and the Master Swap Agreement Liabilities) and upon such terms
as
shall from time to time be approved in writing by the Mortgagee;
and
|
(ii)
|
against
protection and indemnity risks (including pollution risks for the
highest
amount in respect of which cover is or may become available for ships
of
the same type, size, age and flag as the Ship and a freight, demurrage
and
defence cover) for the full value and tonnage of the Ship (as approved
in
writing by the Mortgagee) and upon such terms as shall from time
to time
be approved in writing by the Mortgagee;
and
|
(iii)
|
in
respect of such other matters of whatsoever nature and howsoever
arising
in respect of which insurance would be maintained by a prudent owner
of
the Ship;
|
(b)
|
Approved
brokers, insurers and associations
|
(c)
|
Fleet
liens, set-off and cancellation
|
(d)
|
Payment
of premiums and calls
|
(e)
|
Renewal
|
(f)
|
Guarantees
|
(g)
|
Hull
policy documents, notices, loss payable clauses and brokers’
undertakings
|
(h)
|
Associations’
loss payable clauses, undertakings and
certificates
|
(i)
|
Extent
of cover and exclusions
|
(j)
|
Correspondence
with brokers and associations
|
(k)
|
Independent
report
|
(l)
|
Collection
of claims
|
(m)
|
Employment
of Ship
|
(n)
|
Application
of recoveries
|
(o)
|
Assignment
of Insurances
|
6.1.2
|
Ship’s
name and registration
|
6.1.3
|
Repair
|
6.1.4
|
Modification;
removal of parts; equipment owned by third
parties
|
(a)
|
make
any modification to the Ship in consequence of which her structure,
type
or performance characteristics could or might be materially altered
or her
value materially reduced; or
|
(b)
|
remove
any material part of the Ship or any equipment the value of which
is such
that its removal from the Ship would materially reduce the value
of the
Ship without replacing the same with equivalent parts or equipment
which
are owned by the Owner free from Encumbrances;
or
|
(c)
|
install
on the Ship any equipment owned by a third party which cannot be
removed
without causing damage to the structure or fabric of the
Ship;
|
6.1.5
|
Maintenance
of class; compliance with
regulations
|
6.1.6
|
Surveys
|
6.1.7
|
Inspection
|
6.1.8
|
Prevention
of and release from arrest
|
6.1.9
|
Employment
|
6.1.10
|
Information
|
6.1.11
|
Notification
of certain events
|
(a)
|
any
damage to the Ship requiring repairs the cost of which will or might
exceed the Casualty Amount;
|
(b)
|
any
occurrence in consequence of which the Ship has or may become a Total
Loss;
|
(c)
|
any
requisition of the Ship for hire;
|
(d)
|
any
requirement or recommendation made by any insurer or the Classification
Society or by any competent authority which is not, or cannot be,
complied
with in accordance with its terms;
|
(e)
|
any
arrest or detention of the Ship or any exercise or purported exercise
of a
lien or other claim on the Ship or the Earnings or Insurances or
any part
thereof;
|
(f)
|
any
petition or notice of meeting to consider any resolution to wind
up the
Owner (or any event analogous thereto under the laws of the place
of its
incorporation);
|
(g)
|
the
occurrence of any Default; or
|
(h)
|
the
occurrence of any Environmental Claim against the Owner or the Ship
or any
incident, event or circumstances which may give rise to any such
Environmental Claim;
|
6.1.12
|
Payment
of outgoings and evidence of
payments
|
6.1.13
|
Encumbrances
|
6.1.14
|
Sale
or other disposal
|
6.1.15
|
Chartering
|
(a)
|
on
demise charter for any period;
|
(b)
|
by
any time or consecutive voyage charter for a term which exceeds or
which
by virtue of any optional extensions therein contained may exceed
thirteen
(13) months’ duration;
|
(c)
|
on
terms whereby more than two (2) months’ hire (or the equivalent) is
payable in advance;
|
(d)
|
below
the market rate prevailing at the time when the Ship is fixed or
other
than on arms’ length terms;
|
6.1.16
|
Sharing
of Earnings
|
6.1.17
|
Payment
of Earnings
|
6.1.18
|
Repairers’
liens
|
6.1.19
|
Manager
|
6.1.20
|
Registration
of Mortgage
|
6.1.21
|
Notice
of Mortgage
|
6.1.22
|
Conveyance
on default
|
6.1.23
|
Anti-drug
abuse
|
6.1.24
|
Compliance
with Environmental Laws
|
7
|
Powers
of Mortgagee to protect security and remedy
defaults
|
7.1 |
Protective
action
|
7.2 |
Remedy
of defaults
|
7.2.1
|
if
the Owner fails to comply with any of the provisions of clause 6.1.1
the
Mortgagee shall be entitled (but not bound) to effect and thereafter
to
maintain all such insurances upon the Ship as in its discretion it
may
think fit in order to procure the compliance with such provisions
or
alternatively, to require the Ship (at the Owner’s risk) to remain in, or
to proceed to and remain in a port designated by the Mortgagee until
such
provisions are fully complied with;
|
7.2.2
|
if
the Owner fails to comply with any of the provisions of clauses 6.1.3,
6.1.5 or 6.1.6, the Mortgagee shall be entitled (but not bound) to
arrange
for the carrying out of such repairs, changes or surveys as it may
deem
expedient or necessary in order to procure the compliance with such
provisions; and
|
7.2.3
|
if
the Owner fails to comply with any of the provisions of clause 6.1.8
the
Mortgagee shall be entitled (but not bound) to pay and discharge
all such
debts, damages, liabilities and outgoings as are therein mentioned
and/or
to take any such measures as it may deem expedient or necessary for
the
purpose of securing the release of the Ship in order to procure the
compliance with such provisions
|
8
|
Powers
of Mortgagee on Event of
Default
|
8.1 |
Powers
|
8.1.1
|
to
take possession of the Ship;
|
8.1.2
|
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
8.1.3
|
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of any other part of the Mortgaged Property, and to
take
over or institute (if necessary using the name of the Owner) all
such
proceedings in connection therewith as the Mortgagee in its absolute
discretion thinks fit, and, in the case of the Insurances, to permit
the
brokers through whom collection or recovery is effected to charge
the
usual brokerage therefor;
|
8.1.4
|
to
discharge, compound, release or compromise claims in respect of the
Ship
or any other part of the Mortgaged Property which have given or may
give
rise to any charge or lien or other claim on the Ship or any other
part of
the Mortgaged Property or which are or may be enforceable by proceedings
against the Ship or any other part of the Mortgaged
Property;
|
8.1.5
|
to
sell the Ship or any share or interest therein with or without prior
notice to the Owner, and with or without the benefit of any charterparty,
and free from any claim by the Owner (whether in admiralty, in equity,
at
law or by statute) by public auction or private contract, at such
place
and upon such terms as the Mortgagee in its absolute discretion may
determine, with power to postpone any such sale, or otherwise to
sell the
Ship pursuant to the Mortgagee’s statutory power of sale under section 35
of the Merchant Shipping (Registration of Ships Sales and Mortgages)
Law
of 1963 (as amended) and without being answerable for any loss occasioned
by such sale or resulting from postponement thereof and with power,
where
the Mortgagee purchases the Ship, to make payment of the sale price
by
making an equivalent reduction in the amount of the Outstanding
Indebtedness in the manner referred to in clause
9.1;
|
8.1.6
|
to
manage, insure, maintain and repair the Ship, and to employ, sail
or lay
up the Ship in such manner and for such period as the Mortgagee,
in its
absolute discretion, deems expedient accounting only for net profits
arising from any such employment;
and
|
8.1.7
|
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 8.1.
|
8.2 |
Receiver
|
8.2.1
|
Appointment
|
8.2.2
|
Remuneration
|
8.2.3
|
Liability
of mortgagee in possession
|
8.3 |
Dealings
with Mortgagee or Receiver
|
9
|
Application
of moneys
|
9.1 |
Application
|
9.2 |
Shortfalls
|
10
|
Remedies
cumulative and other
provisions
|
10.1 |
No
implied waivers; remedies
cumulative
|
10.2 |
Delegation
|
10.3 |
Incidental
powers
|
11
|
Costs
and indemnity
|
11.1 |
Costs
|
11.2 |
Mortgagee’s
and Receiver’s indemnity
|
12
|
Attorney
|
12.1 |
Power
|
12.2 |
Exercise
of power
|
12.3 |
Filings
|
13
|
Further
assurance
|
14
|
Notices
|
15
|
Counterparts
|
16
|
Severability
of provisions
|
17
|
Law,
jurisdiction and language
|
17.1 |
Law
|
17.2 |
Submission
to jurisdiction
|
SIGNED,
SEALED and DELIVERED as a DEED
|
)
|
|||
by
|
)
|
|||
for
and on behalf of
|
)
|
|||
)
|
||||
MARATHASSA
SHIPPING CORPORATION
|
)
|
|||
pursuant
to a power of attorney
|
)
|
|||
dated
2005
|
)
|
_____________________ | ||
in
the presence of:
|
)
|
Attorney-in-Fact
|
||
_____________________ | ||||
Witness
|
||||
Name:
|
||||
Address:
|
||||
Occupation:
|
||||
SIGNED,
SEALED and DELIVERED
|
)
|
|||
as
a DEED
|
)
|
|||
by
|
)
|
|||
for
and on behalf of
|
)
|
|||
THE
ROYAL BANK OF SCOTLAND plc
|
)
|
_____________________ | ||
pursuant
to a power of attorney
|
)
|
Attorney-in-Fact
|
||
dated
|
)
|
|||
in
the presence of:
|
)
|
Witness
|
Name:
|
Address:
|
Occupation:
|
MARATHASSA SHIPPING CORPORATION
|
(1) | ||
and
|
|||
THE
ROYAL BANK OF SCOTLAND plc
|
(2) |
Page
|
||
1
|
Definitions
|
1
|
2
|
Assignment
and application of funds
|
5
|
3
|
Continuing
security and other matters
|
7
|
4
|
Powers
of Mortgagee to protect security and remedy defaults
|
9
|
5
|
Powers
of Mortgagee on Event of Default
|
9
|
6
|
Attorney
|
10
|
7
|
Further
assurance
|
11
|
8
|
Costs
and indemnities
|
11
|
9
|
Remedies
cumulative and other provisions
|
11
|
10
|
Notices
|
12
|
11
|
Counterparts
|
12
|
12
|
Law
and jurisdiction
|
12
|
Schedule 1 Forms of Loss Payable Clauses |
14
|
|
Schedule 2 Form of Notice of Assignment of Insurances |
15
|
(1)
|
MARATHASSA
SHIPPING CORPORATION
a
company incorporated in Liberia whose registered office is at 80
Broad
Street, Monrovia, Republic of Liberia (the “
Owner
”);
and
|
(2)
|
THE
ROYAL BANK OF SCOTLAND plc
a
company incorporated in Scotland whose registered office is at 36
St.
Andrew Square, Edinburgh EH2 2YB, Scotland, acting for the purposes
of
this Deed through its branch at The Shipping Business Centre, 5-10
Great
Tower Street, London, EC3P 3HX, England (the “
Mortgagee
”).
|
(A)
|
by
an Agreement (the “
Loan
Agreement
”)
dated
2005 and made between the Owner (1) (therein referred to as the
“
Borrower
”)
and the Mortgagee (2) (therein referred to as the “
Bank
”)
the Mortgagee agreed (inter alia) to advance by way of a multicurrency
loan to the Owner, upon the terms and conditions therein contained
the sum
of up to Twenty eight million Dollars ($28,000,000) or the Equivalent
Amount in an Optional Currency or Optional Currencies (the “
Loan
”);
|
(B)
|
by
a Master Swap Agreement dated
2005 and made between (1) the Owner and (2) the Mortgagee, the Mortgagee
agreed the terms and conditions upon which it would enter into an
interest
rate swap transaction or transactions with the Owner in respect of
the
Loan (whether in whole or in part as the case may be from time to
time);
|
(C)
|
pursuant
to the Loan Agreement there has been or will be executed by the Owner
in
favour of the Mortgagee a first priority Cyprus statutory ship mortgage
in
account current form and deed of covenant collateral thereto (together
the
“
Mortgage
”)
on the vessel
Maritsa
documented
in the name of the Owner under the laws and flag of the Republic
of Cyprus
under IMO Number 9279783 (the “
Ship
”)
and the Mortgage of even date herewith has been or will be registered
in
the Registry of Cyprus Ships as security for the payment by the Owner
of
the Outstanding Indebtedness (as that expression is defined in the
Mortgage); and
|
(D)
|
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the General
Assignment referred to in the Loan Agreement but shall nonetheless
continue in full force and effect notwithstanding any discharge of
the
Mortgage.
|
1
|
Definitions
|
1.1 |
Defined
expressions
|
1.2 |
Definitions
|
(a)
|
the
Earnings;
|
(b)
|
the
Insurances; and
|
(c)
|
any
Requisition Compensation;
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including without limitation Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee in connection with the exercise of the powers referred
to in
or granted by the Loan Agreement, the Mortgage, this Deed or any
other of
the Security Documents or otherwise
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee until the date of receipt or recovery thereof (whether
before or after judgment) at a rate per annum calculated in accordance
with clause 3.4 of the Loan Agreement (as conclusively certified
by the
Mortgagee);
|
1.3 |
Headings
|
1.4 |
Construction
of certain terms
|
1.4.1
|
references
to clauses and schedules are to be construed as references to clauses
of
and schedules to this Deed and references to this Deed include its
schedules;
|
1.4.2
|
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.4.3
|
words
importing the plural shall include the singular and vice
versa;
|
1.4.4
|
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.5
|
references
to a “
guarantee
”
include references to an indemnity or other assurance against financial
loss including, without limitation, an obligation to purchase assets
or
services as a consequence of a default by any other person to pay
any
Indebtedness and “
guaranteed
”
shall be construed accordingly; and
|
1.4.6
|
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.5 |
Conflict
with Loan Agreement
|
2
|
Assignment
and application of funds
|
2.1 |
Assignment
|
2.1.1
|
Earnings
|
2.1.2
|
Insurances
|
(a)
|
any
moneys payable under the Insurances, other than any moneys payable
under
any loss of earnings insurance, shall be payable in accordance with
the
terms of the relevant Loss Payable Clause and the Mortgagee will
not in
the meantime give any notification to the contrary to the insurers
as
contemplated by the Loss Payable
Clauses;
|
(b)
|
any
insurance moneys received by the Mortgagee in respect of any major
casualty (as specified in the relevant Loss Payable Clause) shall,
unless
prior to receipt or whilst such moneys are in the hands of the Mortgagee
there shall have occurred a Default (whereupon such insurance monies
shall
be applied in accordance with clause 2.3 or clause 2.6 (as the case
may
be)), be paid over to the Owner upon the Owner furnishing evidence
satisfactory to the Mortgagee that all loss and damage resulting
from such
casualty has been properly made good and repaired, and that all repair
accounts and other liabilities whatsoever in connection with the
casualty
have been fully paid and discharged by the Owner, provided however
that
the insurers with whom the fire and usual marine risks insurances
are
effected may, in the case of a major casualty,
and
|
(c)
|
any
moneys payable under any loss of earnings insurance shall be payable
in
accordance with the terms of the relevant Loss Payable Clause and
shall be
subject to such provisions of this clause 2 as shall apply to Earnings
and
the Mortgagee will not give any notification to the insurers as
contemplated in such Loss Payable Clause unless and until the Mortgagee
shall have become entitled under clause 2.1.1 to direct that the
Earnings
be paid to the Mortgagee.
|
2.2 |
Notice
|
2.3 |
Application
|
2.3.1
|
recovery
under the Insurances (other than under any loss of earnings insurance
and
any such sum or sums as may have been received by the Mortgagee in
accordance with the relevant Loss Payable Clause in respect of a
major
casualty as therein defined and paid over to the Owner as provided
in
clause 2.1.2(b) or which fall to be otherwise applied under clause
2.6);
and
|
2.3.2
|
Requisition
Compensation
|
2.4 |
Shortfalls
|
2.5 |
Application
of Earnings received by
Mortgagee
|
2.5.1
|
if
received by the Mortgagee, or in the hands of the Mortgagee, prior
to the
occurrence of an Event of Default be retained by the Mortgagee and
shall
be paid over by the Mortgagee to the Owner at such times, in such
amounts
and for such purposes and/or shall be applied by the Mortgagee in
or
towards satisfaction of any sums from time to time accruing due and
payable by the Owner under the Security Documents or any of them
or by
virtue of payment demanded thereunder, in each case as the Mortgagee
may
in its absolute discretion
determine;
|
2.5.2
|
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.5.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.6 |
Application
of Insurances received by
Mortgagee
|
2.6.1
|
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of a Default but prior to the occurrence of an Event of
Default, be retained by the Mortgagee and shall be paid over by the
Mortgagee to the Owner at such times, in such amounts and for such
purposes and/or shall be applied by the Mortgagee in or towards
satisfaction of any sums from time to time accruing due and payable
by the
Owner under the Security Documents or any of them or by virtue of
payment
demanded thereunder, in each case as the Mortgagee may in its absolute
discretion determine;
|
2.6.2
|
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.6.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.7 |
Use
of Owner’s name
|
2.8 |
Reassignment
|
3
|
Continuing
security and other matters
|
3.1 |
Continuing
security
|
3.1.1
|
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance with all of the covenants, terms and conditions contained
in
the Security Documents, express or implied, and that the security
so
created shall not be satisfied by any intermediate payment or satisfaction
of any part of the amount hereby and thereby secured (or by any settlement
of accounts between the Owner or any other person who may be liable
to the
Mortgagee in respect of the Outstanding Indebtedness or any part
thereof
and the Mortgagee);
|
3.1.2
|
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any other of the Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
3.1.3
|
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
3.2 |
Rights
additional
|
3.3 |
No
enquiry
|
3.4 |
Obligations
of Owner and Mortgagee
|
3.5 |
Discharge
of Mortgage
|
4
|
Powers
of Mortgagee to protect security and remedy
defaults
|
4.1 |
Protective
action
|
4.2 |
Remedy
of defaults
|
5
|
Powers
of Mortgagee on Event of
Default
|
5.1 |
Powers
|
5.1.1
|
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
5.1.2
|
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of the Earnings or Requisition Compensation or any
part
thereof, and to take over or institute (if necessary using the name
of the
Owner) all such proceedings in connection therewith as the Mortgagee
in
its absolute discretion thinks fit, and, in the
|
5.1.3
|
to
discharge, compound, release or compromise claims in respect of the
Earnings, Insurances or Requisition Compensation or any part thereof
which
have given or may give rise to any charge or lien or other claim
on the
Earnings, Insurances or Requisition Compensation or any part thereof
or
which are or may be enforceable by proceedings against the Earnings,
Insurances or Requisition Compensation or any part thereof;
and
|
5.1.4
|
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 5.1.
|
6
|
Attorney
|
6.1 |
Appointment
|
6.2 |
Exercise
of power
|
6.3 |
Filings
|
7
|
Further
assurance
|
7.1 |
The
Owner hereby further undertakes at its own expense from time to time
to
execute, sign, perfect, do and (if required) register every such
further
assurance, document, act or thing as in the opinion of the Mortgagee
may
be necessary or desirable for the purpose of more effectually mortgaging
and charging the Assigned Property or perfecting the security constituted
or intended to be constituted by this
Deed.
|
8
|
Costs
and indemnities
|
8.1 |
Costs
|
8.2 |
Mortgagee’s
indemnity
|
9
|
Remedies
cumulative and other
provisions
|
9.1 |
No
implied waivers; remedies
cumulative
|
9.2 |
Delegation
|
9.3 |
Incidental
powers
|
10
|
Notices
|
10.1 |
The
provisions of clause 17.1 of the Loan Agreement shall apply mutatis
mutandis in respect of any certificate, notice, demand or other
communication given or made under this
Deed.
|
11
|
Counterparts
|
11.1 |
This
Deed may be entered into in the form of two counterparts, each executed
by
one of the parties, and, provided both the parties shall so execute
this
Deed, each of the executed counterparts, when duly exchanged or delivered,
shall be deemed to be an original but, taken together, they shall
constitute one instrument.
|
12
|
Law
and jurisdiction
|
12.1 |
Law
|
12.2 |
Submission
to jurisdiction
|
12.3 |
Contracts
(Rights of Third Parties) Act
1999
|
1 |
Hull
and machinery (marine and war
risks)
|
(a)
|
all
claims hereunder in respect of an actual or constructive or compromised
or
arranged total loss, and all claims in respect of a major casualty
(that
is to say any casualty the claim in respect of which exceeds $500,000
(or
the equivalent in any other currency) inclusive of any deductible)
shall
be paid in full to the Mortgagee or to its order;
and
|
(b)
|
all
other claims hereunder shall be paid in full to the Owner or to its
order,
unless and until the Mortgagee shall have notified the insurers hereunder
to the contrary, whereupon all such claims shall be paid to the Mortgagee
or to its order.
|
2 |
Protection
and indemnity risks
|
3 |
Loss
of earnings
|
SIGNED,
SEALED and DELIVERED
|
)
|
|
as
a DEED
|
)
|
|
by
|
)
|
|
for
and on behalf of
|
)
|
|
MARATHASSA
SHIPPING CORPORATION
|
)
|
__________________ |
pursuant
to a power of attorney
|
)
|
Attorney-in-Fact
|
dated
2005
|
)
|
|
in
the presence of:
|
)
|
|
__________________ | ||
Witness
|
||
Name:
|
||
Address:
|
||
Occupation:
|
||
SIGNED,
SEALED and DELIVERED
|
)
|
|
as
a DEED
|
)
|
|
by
|
)
|
|
for
and on behalf of
|
)
|
|
THE
ROYAL BANK OF SCOTLAND plc
|
)
|
|
pursuant
to a power of attorney
|
)
|
__________________ |
dated
|
)
|
Attorney-in-Fact
|
in
the presence of:
|
)
|
Witness
|
Name:
|
Address:
|
Occupation:
|
To:
|
The
Royal Bank of Scotland plc
The
Shipping Business Centre
5-10
Great Tower Street
London
EC3P 3HX
England
|
From:
|
Safety
Management Overseas S.A.
Edificio
Torre Universal
Piso
12 Avenida Federico Boyd
P.O.
Box 8807 Panama
Republic
of Panama
|
1 |
Loan
Agreement
|
2 |
Confirmation
of appointment
|
3 |
Representation
and warranty
|
4 |
Undertakings
|
(a)
|
the
Manager will not agree or purport to agree to any amendment or variation
of the Management Agreement without the prior written consent of
the
Bank;
|
(b)
|
the
Manager will not, without the prior written consent of the Bank,
take any
action or institute any proceedings or make or assert any claim on
or in
respect of the Ship or its policies and contracts of insurance (which
expression includes all entries of the Ship in a protection and indemnity
or war risks association) which are from time to time during the
Security
Period (as such term is defined in the General Assignment dated
2005 (the “
General
Assignment
”)
executed by the Borrower in favour of the Bank in relation to the
Ship’s
Earnings (as such term is defined below), Insurances and Requisition
Compensation (as such term is defined in the General Assignment))
in place
or taken out or entered into by or for the benefit of the Borrower
(whether in the sole name of the Borrower or in the joint names of
the
Borrower and the Bank or otherwise) in respect of the Ship and her
Earnings (as such term is defined below) or otherwise howsoever in
connection with the Ship and all benefits thereof (including claims
of
whatsoever nature and return of premiums) (together the “
Insurances
”)
or all moneys whatsoever from time to time due or payable to the
Borrower
during the Security Period (as such term is defined in the General
Assignment) arising out of the use or operation of the Ship including
(but
without limiting the generality of the foregoing) all freight, hire
and
passage moneys, income arising under pooling arrangements, 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
(the
“
Earnings
”)
or any other property or other assets of the Borrower which the Bank
has
previously advised the Manager are subject to any encumbrance or
right of
set-off in favour of the Bank by virtue of any of the security documents
executed in favour of the Bank pursuant to the Loan
Agreement;
|
(c)
|
the
Manager does hereby subordinate any claim that it may have against
the
Borrower or otherwise in respect of the Ship and its Earnings, Insurances
and Requisition Compensation (as such term is defined in the General
Assignment) to the claims of the Bank under the Loan Agreement and
the
other Security Documents (as such term is defined in the General
Assignment) and undertakes to exercise no right to which it may be
entitled in respect of the Borrower and/or the Ship and/or its Earnings
and/or Insurances and/or Requisition Compensation (as such term is
defined
in the General Assignment) in competition with the
Bank;
|
(d)
|
the
Manager will discontinue any such action or proceedings or claim
which may
have been taken, instituted or made or asserted, promptly upon notice
from
the Bank to do so;
|
(e)
|
the
Manager will promptly notify the Bank if at any time the amount owed
by
the Borrower to the Manager pursuant to the Management Agreement
(whether
in respect of the Manager’s remuneration or disbursements or otherwise)
exceeds US$100,000 or the equivalent in other currencies;
and
|
(f)
|
the
Manager will provide the Bank with such information concerning the
Ship as
the Bank may from time to time reasonably
require.
|
5 |
Insurance
assignment
|
(a)
|
By
way of security for the aggregate of the Loan and interest accrued
and
accruing thereon, the Expenses (as such term is defined in the General
Assignment) the Master Swap Agreement Liabilities (as such term is
defined
in the General Assignment) and all other sums of money from time
to time
owing by the Borrower to the Bank, whether actually or contingently,
under
the Security Documents (as such term is defined in the General Assignment)
the Master Agreement Liabilities (as such term is defined in the
General
Assignment) or any of them to which the Borrower is or is to be a
party
(the “
Outstanding
Indebtedness
”)
the Manager with full title guarantee hereby irrevocably and
unconditionally assigns and agrees to assign to the Bank all of the
Manager’s rights, title and interest in and to and the benefit of the
Insurances.
|
(b)
|
The
Manager hereby undertakes to procure that a duly completed notice
in the
form set out in Appendix 2 to this letter is given to all insurers
of the
Ship and to procure that such notice is promptly endorsed on all
policies
and entries in respect of the Insurances and agrees promptly to authorise
and/or instruct any broker, insurer or association with or through
whom
Insurances may be effected to endorse on any policy or entry or otherwise
to give effect to such loss payable clause as may be stipulated by
the
Bank.
|
(c)
|
The
Bank shall, at the Manager’s cost, re-assign to the Manager all the
Manager’s right, title and interest in the Insurances upon the Outstanding
Indebtedness being discharged in full to the satisfaction of the
Bank.
|
(d)
|
Any
moneys in respect of the Insurances which would (but for the assignment
contained in clause 5(a) above) be payable to the Manager shall be
applied
in accordance with clauses 2.1.2, 2.3, 2.5 and 2.6 (as the case may
be) of
the General Assignment.
|
6 |
Law
and jurisdiction
|
(a)
|
The
agreement constituted by this letter shall be governed by and construed
in
accordance with English law.
|
(b)
|
The
Manager agrees, for the benefit of the Bank, that any legal action
or
proceedings arising out of or in connection with this letter against
the
Manager or any of its assets may be brought in the English courts.
The
Manager irrevocably and unconditionally submits to the jurisdiction
of
such courts and whoever
|
(c)
|
No
term of this Letter is enforceable under the Contracts (Rights of
Third
Parties) Act 1999 by a person who is not a party to this
letter.
|
Yours
faithfully
|
Safety
Management Overseas
S.A.
|
SIGNED
|
For
and on behalf of
|
1. |
Interpretation
|
2. |
Obligations
|
(i) |
in
the same currency; and
|
(ii) |
in
respect of the same Transaction,
|
3. |
Representations
|
4. |
Agreements
|
5. |
Events
of Default and Termination
Events
|
6. |
Early
Termination
|
7. |
Transfer
|
8. |
Contractual
Currency
|
9. |
Miscellaneous
|
10. |
Offices;
Multibranch Parties
|
11. |
Expenses
|
12. |
Notices
|
13. |
Governing
Law and Jurisdiction
|
14. |
Definitions
|
Marathassa
Shipping Corporation
|
The
Royal Bank of Scotland plc
|
|||
(Name
of Party)
|
(Name
of Party)
|
|||
By:
|
By:
|
|||
Name:
Title:
Date:
|
Name:
Title:
Date:
|
(a) |
“Specified
Entity”
means
in relation to Party A for the purpose
of:-
|
Section 5(a)(v), (vi) and (vii) | ) Not applicable |
Section 5(b)(iv), | ) |
Section 5(a)(v), | ) |
Section 5(a)(vi), | ) Any Affiliate of Party B |
Section 5(a)(vii), | ) |
Section 5(b)(iv), | ) |
(b)
|
“Specified
Transaction”
will
have the meaning specified in Section 14 of this
Agreement.
|
(c)
|
The
“Cross
Default”
provisions
of Section 5(a)(vi) will not apply to Party
A.
|
(d)
|
The
“Credit
Event Upon Merger”
provisions
of Section 5(b)(iv) will apply to Party A and will apply to Party
B.
|
(e)
|
The
“Automatic
Early Termination”
provision
of Section 6(a) will not apply to Party A and will not apply to Party
B.
|
(f)
|
Payments
on Early Termination.
For
the purpose of Section 6(e) of this
Agreement:-
|
(i) |
Market
Quotation will apply.
|
(ii) |
The
Second Method will apply.
|
(g)
|
“Termination
Currency”
means
such currency of any Transaction as may be selected by the party
which is
not the Defaulting Party or the Affected Party, as the case may be,
if
such currency is freely available and convertible or, if there are
two
Affected Parties such currency as may be agreed between the parties
if
such currency is freely available and, otherwise, United States
Dollars.
|
(h)
|
Additional
Termination Event
will apply.
|
(a)
|
Payer
Representations
.
For
the purpose of Section 3(e) of this Agreement, Party A and Party
B will
both make the following representation:
-
|
(i)
|
the
accuracy of any representations made by the other party pursuant
to
Section 3(f) of this Agreement;
|
(ii)
|
the
satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii)
of
this Agreement and the accuracy and effectiveness of any document
provided
by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this
Agreement; and
|
(iii)
|
the
satisfaction of the agreement of the other party contained in Section
4(d)
of this Agreement;
|
(b)
|
Payee
Representations
.
For
the purpose of Section 3(f) of this
Agreement:-
|
(a)
|
Tax
forms, documents or certificates to be delivered:- Not
applicable
|
(b)
|
Other
documents to be delivered where relevant
are:-
|
Party
required
to deliver document |
Form/Document/
Certificate |
Date
by which
to be delivered |
Covered
by
Section 3(d) Representation |
|||
Party
A /
Party B |
Such
evidence of the due authorisation of the person(s) signing this
Agreement and each Confirmation on its behalf as either Party may
reasonably request
|
Date
of execution
of this Agreement |
Yes
|
|||
Party
B
|
A
copy of the Memorandum and Articles of Association and Certificate
of
Incorporation (or other constitutive documents) of Party B
|
Date
of execution
of
this Agreement
|
Yes
|
Party
B
|
A
copy of the resolution of the board of directors of this Agreement
of
Party B approving this Agreement and the Transactions contemplated
hereby
and authorising a specified person or persons to execute this Agreement
and any Confirmation on behalf of Party B
|
Date
of execution
of
this Agreement
|
Yes
|
|||
Party
B
|
Copies
of such statutory and/or regulatory consents, of this Agreement approvals
and authorisations as may be necessary for Party B to enter into
this
Agreement and the Transactions contemplated hereby
|
Date
of execution
of
this Agreement
|
Yes
|
|||
Party
B
|
Confirmation
in form and substance satisfactory to of this Agreement Party A that
all
conditions precedent relating to the Loan Facility (as defined in
Section
14 pursuant to Part 5(e) of the Schedule to this Agreement) have
been met
in full (as set out in clause 9 of the Loan Facility)
|
Date
of execution
of
this Agreement
|
Yes
|
|||
Party
B
|
The
Credit Support Documents referred to of this Agreement in Part 4(f)
of the
Schedule to this Agreement duly executed by the parties
thereto
|
Date
of execution
of
this Agreement
|
Yes
|
|||
Party
B
|
Legal
opinion(s) in form and substance satisfactory of this Agreement to
Party A
from solicitor(s)/law firm(s) approved by Party A
|
Date
of execution
of
this Agreement
|
Yes
|
Party
B
|
A
copy of the written acceptance by Party B’s Process Agent (as defined in
Part 4(b) of the Schedule to this Agreement) of its appointment to
receive
for Party B and on its behalf service of process in any Proceedings
under
this Agreement
|
Date
of execution
of
this Agreement
|
Yes
|
|||
Party
B
|
The
annual financial statements of Party B
|
Upon
demand in respect of those which became publicly available prior
to the
date of this Agreement and, in respect of those statements, which
are not
publicly available as at the date hereof, as soon as possible and,
in any
event, within 120 days of the end of Party B’s financial year (or as soon
as practicable after becoming publicly available)
|
Yes
|
|||
Party
B
|
A
copy of the Memorandum and Articles of Association and Certificate
of
Incorporation (or other constitutive documents) of each Credit Support
Provider of Party B
|
Date
of execution
of
this Agreement
|
Yes
|
|||
Party
B
|
A
copy of the resolution of the board of directors of this Agreement
of each
Credit Support Provider of Party B approving the Credit Support
Document(s) and authorising a specified person or persons to execute
the
Credit Support Document(s) on its behalf
|
Date
of execution
of
this Agreement
|
Yes
|
Party
B
|
Copies
of such statutory and/or regulatory consents, of this Agreement approvals
and authorisations as may be necessary for each Credit Support Provider
of
Party B to execute the Credit Support Document(s)
|
Date
of execution
of
this Agreement
|
Yes
|
|||
Party
B
|
The
annual financial statements (where produced) of each Credit Support
Provider of Party B
|
Upon
demand in respect of those which became publicly available prior
to the
date of this Agreement and, in respect of those statements, which
are not
publicly available as at the date hereof, as soon as possible and,
in any
event, within 120 days of the end of each Credit Support Provider
of Party
B’s financial year (or as soon as practicable after becoming publicly
available)
|
Yes
|
(a) |
Addresses
for Notices
.
For
the purpose of Section 12(a) of this
Agreement:-
|
Address:
|
c/o
RBS Financial Markets
280
Bishopsgate
London
EC2M 4RB
United
Kingdom
|
Attention:
Fax:
Telephone:
|
Swaps
Administration
+44
207 085 5050
+44
207 087 5000
|
Address:
|
c/o
RBS Financial Markets
|
135 Bishopsgate, London, EC2M 3UR
|
|
Attention:
|
Head
of Legal, Financial Markets
|
Telephone
No:
|
+44
207 085 8411
|
32
Karamanli Avenue
|
|
16605
Voula
|
|
Athens,
Greece
|
|
George
Papadopoulos
|
|
Facsimile
No.:
|
0030
210 895 6900
|
(b) |
Process
Agent.
For
the purpose of Section 13(c) of this
Agreement:-
|
(c) |
Offices.
The
provisions of Section 10(a) will not apply to this
Agreement.
|
(d) |
Multibranch
Party.
For
the purpose of Section 10(c) of this
Agreement:-
|
(e)
|
Calculation
Agent
The
Calculation Agent is Party A unless otherwise specified in a Confirmation
in relation to the relevant
Transaction.
|
(f)
|
Credit
Support Document.
Details
of any Credit Support Document(s):-
|
(g)
|
Credit
Support Provider.
Credit
Support Provider does not apply in relation to Party
A.
|
(h)
|
Governing
Law
.
This
Agreement will be governed by and construed in accordance with English
law.
|
(i)
|
Netting
of Payments
.
Subparagraph
(ii) of Section 2(c) of this Agreement will apply to all Transactions
with
effect from the date of this Agreement, except as mutually agreed
by Party
A and Party B and detailed in the relevant Confirmation(s) evidencing
a
Transaction or group(s) of Transactions, as the case may
be.
|
(j)
|
“Affiliate”
will
have the meaning specified in Section 14 of this
Agreement.
|
(a)
|
Representations
.
Section
3(a) of this Agreement is hereby amended by, firstly, the deletion
of the
word “and” at the end of subsection (iv); secondly, the substitution of a
semi-colon for the full-stop at the end of subsection (v); and, thirdly,
the addition of the following
subsections:-
|
“
(vi)
|
Capacity.
It
is acting as principal (and not as agent or any other capacity, fiduciary
or otherwise) and
|
(vii)
|
Physical
Delivery.
In
respect of any physically-settled Transactions, it will, at the time
of
delivery, be the legal and beneficial owner, free of liens and
encumbrances, of any securities or commodities, which it delivers
to the
other party.”
|
(b)
|
Relationship
Between Parties.
Each
party will be deemed to represent to the other party on the date
on which
it enters into a Transaction that (absent a written agreement between
the
parties that expressly imposes affirmative obligations to the contrary
for
that Transaction):-
|
(i)
|
Non-Reliance
.
It
is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that
Transaction is appropriate or proper for it based upon its own judgement
and upon advice from such advisors as it has deemed necessary. It
is not
relying on any communication (written or oral) of the other party
as
investment advice or as a recommendation to enter into that Transaction;
it being understood that information and explanations related to
the terms
and conditions of a Transaction shall not be considered investment
advice
or a recommendation to enter into that Transaction. No communication
(written or oral) received from the other party shall be deemed to
be an
assurance or guarantee as to the expected results of that
Transaction.
|
(ii)
|
Assessment
and Understanding
.
It
is capable of assessing the merits of and understanding (on its own
behalf
or through independent professional advice), and understands and
accepts,
the terms, conditions and risks of that Transaction. It is also capable
of
assuming, and assumes, the risks of that
Transaction.
|
(iii)
|
Status
of Parties
.
The
other party is not acting as a fiduciary for or an adviser to it
in
respect of that Transaction.
|
(c) |
Set-off
.
The
following provision is incorporated as Section 6(f) of this
Agreement:
|
“6(f)
|
Any
amount (the “Early Termination Amount”) payable to one party (the Payee)
by the other party (the Payer) under Section 6(e), in circumstances
where
there is a Defaulting Party or one Affected Party, will, at the option
of
the party (“X”) other than the Defaulting Party or the Affected Party (and
without prior notice to the Defaulting Party or the Affected Party),
be
reduced by its set-off against any amount(s) (the “Other Agreement
Amount”) payable (whether at such time or in the future or upon the
occurrence of a contingency) by the Payee to the Payer (irrespective
of
the currency, place of payment or booking office of the obligation)
under
any other agreement(s) between the Payee and the Payer or instrument(s)
or
undertaking(s) issued or executed by one party to, or in favour of,
the
other party (and the Other Agreement Amount will be discharged promptly
and in all respects to the extent it is so set-off). X will give
notice to
the other party of any set-off effected under this Section
6(f).
|
(d)
|
Recording
of Conversations
.
Each
party to this Agreement acknowledges and agrees to the tape recording
of
conversations between the parties to this Agreement whether by one
or
other or both the parties.
|
(e)
|
Loan
Facility
.
Section
14 of this Agreement is hereby amended by the incorporation of the
following Definition:-
|
(f)
|
Security
.
Party
B irrevocably and unconditionally undertakes and confirms to Party
A that
the obligations to Party A by Party B pursuant to this Agreement
shall be
secured by the Security Documents as defined in the Loan
Facility.
|
(g)
|
Additional
Representations
.
Without
prejudice to Part 5(a) of the Schedule to this Agreement, in addition
to
the Representations made by each party pursuant to Section 3 of this
Agreement, Party B also makes to Party A the representations and
warranties set out in clause 8 of the Loan Facility, which clause
shall be
incorporated, mutatis mutandis, into this Agreement as if set out
in this
Agreement in full and which representations and warranties will be
deemed
to be repeated by Party B on each Effective Date and each Scheduled
Payment Date in respect of a
Transaction.
|
(h)
|
Default
under Loan Facility
.
In
addition to the Events of Default set out in Section 5(a) of this
Agreement, in relation to Party B only, the occurrence or existence
of any
of the events or circumstances included as an “Event of Default” in clause
11 of the Loan Facility (whether or not the Loan Facility at the
time of
any such occurrence or existence is still in force and effect or
has been
terminated or amended or the indebtedness owed by Party B to Party
A under
the Loan Facility has been repaid in full) shall constitute an Event
of
Default under this Agreement and Party B shall be the Defaulting
Party,
such that the provisions of the aforementioned clause 11 of the Loan
Facility shall be incorporated, mutatis mutandis, into this Agreement
as
if set out in this Agreement in
full.
|
(i)
|
during
such time as any indebtedness owed by Party B to Party A under the
Loan
Facility remains outstanding, Party B undertakes with Party A to
comply
with the Undertakings (subject to all grace periods, conditions,
provisions for consents and/or waivers in respect of the Undertakings
provided for in the Loan Facility);
and
|
(ii)
|
at
any time after all such indebtedness under the Loan Facility has
been
repaid or prepaid in full, the Undertakings shall, mutatis mutandis,
take
effect as Undertakings of Party B directly in favour of Party A pursuant
to this Agreement.
|
(i)
|
Interest
Periods under the Loan Facility
.
In the event that the parties enter into a Transaction for the specific
purpose of hedging (either in whole or in part) Party B’s indebtedness to
Party A under the Loan Facility, it is hereby agreed that interest
periods
under the Loan Facility shall be of the same duration as Calculation
Periods in respect of the relevant Transaction, such that interest
payment
dates under the Loan Facility shall coincide in all respects with
Payment
Dates in respect of that Transaction. For this purpose, both parties
agree
that payments due to or from each other pursuant to the relevant
Transaction may (if Party A so determines at its sole discretion)
be set
off against payments due to or from each other pursuant to the Loan
Facility.
|
(j)
|
Party
A and Party B agree that, in certain circumstances referred to in
the Loan
Facility including, without limit, clause 5.3, the obligations of
Party A
and Party B under this Agreement shall be recalculated in accordance
with
the provisions thereof.
|
(k)
|
2000
ISDA Definitions
.
The
2000 Definitions published by ISDA (the “Definitions”) are incorporated by
reference herein.
|
(l)
|
Contracts
(Rights of Third Parties) Act 1999
.
No term of this Agreement is enforceable by a person who is not a
party to
it.
|
MARATHASSA SHIPPING CORPORATION
|
(1)
|
||
and
|
|||
THE
ROYAL BANK OF SCOTLAND plc
|
(2) |
Clause
|
Page
|
|
1
|
Definitions
|
1
|
2
|
Restrictions
|
3
|
3
|
First
fixed charge
|
3
|
4
|
Further
documentation etc
|
3
|
5
|
Representations
|
4
|
6
|
Notices
|
5
|
7
|
Supplemental
|
5
|
8
|
Law
and jurisdiction
|
5
|
(1)
|
MARATHASSA
SHIPPING CORPORATION
,
a
company incorporated in the Republic of Liberia having its registered
office at 80 Broad Street, Monrovia, Liberia (the “
Owner
”);
and
|
(2)
|
THE
ROYAL BANK OF SCOTLAND plc
,
a
company incorporated in Scotland whose registered office is at 36
St.
Andrew Square, Edinburgh EH2 2YB, Scotland, acting for the purposes
of
this Deed through its branch at The Shipping Business Centre, 5-10
Great
Tower Street, London, EC3P 3HX, England (the “
Lender
”).
|
(A)
|
By
a loan agreement
dated ,
2005 and made between (i) the Owner as borrower and (ii) the Lender
as
lender (the “
Loan
Agreement
”),
the Lender agreed to make available to the Owner upon the terms and
conditions therein described a multicurrency loan of up to Twenty
eight
million Dollars ($28,000,000) or the Equivalent Amount in an Optional
Currency or Optional Currencies;
|
(B) |
The
Owner has entered into or may enter into one or more Transactions
(as such
term is defined in the 1992 ISDA Master Agreement dated
,
2005 between the Owner and the Lender (the “
Master
Agreement
”))
as evidenced by one or more Confirmations (as such term is defined
in the
Master Agreement) which are governed by the Master Agreement;
and
|
(C)
|
It
is a condition precedent to the Lender advancing the loan under the
Loan
Agreement that the Owner as security for, inter alia, its obligations
under the Loan Agreement shall execute this
Deed.
|
1 |
Definitions
|
1.1
|
In
this Deed, unless the context otherwise requires, the following
expressions shall have the following
meanings:
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature suffered, incurred or paid by the Lender in connection
with the exercise of the powers referred to in or granted by the
Loan
Agreement, the Master Swap Agreement, this Deed or any of the other
Security Documents or otherwise payable by the Owner;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Lender until the date of receipt or recovery thereof (whether
before or after
|
1.2
|
For
the purposes of this Deed an amount shall be deemed to be outstanding
and
to be due and payable to the Lender if the Lender is then entitled
to
demand payment of that amount, notwithstanding that it has not yet
served
a demand.
|
1.3
|
Clause
1.1 (Purpose) and clause 1.2 (Definitions) of the Loan Agreement
shall
apply with any necessary modifications for the purposes of this
Deed.
|
2 |
Restrictions
|
2.1
|
In
this clause references to assignment includes the creation, or permitting
to arise, of any form of beneficial interest or Security Interest
and
every other kind of disposition.
|
2.2
|
An
act or transaction which is contrary to, or inconsistent with, this
clause
shall be void as regards the
Lender.
|
3 |
First
fixed charge
|
3.1
|
The
Owner with full title guarantee, hereby charges and agrees to charge
and
releases and agrees to release to the Lender as a continuing security
for
payment of the Outstanding Indebtedness, by way of first fixed charge,
the
Secured Property.
|
3.2
|
Upon
the occurrence of a Default the charge shall become enforceable and
the
Lender shall be entitled then or at any later time or times to appropriate
all or any part of the Secured Property in or towards discharge of
the
then Outstanding Indebtedness or any part thereof, and may do so
notwithstanding that any maturity date attached to any part or parts
of
the Secured Property may not yet have
arrived.
|
3.3
|
A
certificate signed by a director or other senior officer of the Lender
and
which states that on a specified date and (if the certificate also
states
this) at a specified time the Lender exercised its rights under this
clause to appropriate a specified amount of Secured Property in the
discharge of a specified amount of the Outstanding Indebtedness shall
be
conclusive evidence that:
|
3.3.1 |
the
Lender’s liabilities in respect of the specified amount of Secured
Property; and
|
3.3.2 |
the
specified amount of Outstanding Indebtedness,
|
4
|
Further
documentation etc.
|
4.1
|
The
Owner shall execute forthwith any document which the Lender may specify
for the purpose of:
|
4.1.1 |
supplementing
the rights which this Deed confers on the Lender in relation to the
Secured Property; or
|
4.1.2 |
creating
a mortgage of the Secured Property to replace or supplement the charge
created in clause 3 above; or
|
4.1.3 |
registering
or otherwise perfecting this Deed or any mortgage created under clause
4.1.2 above; or
|
4.1.4 |
ensuring
or confirming the validity of anything done or to be done under this
Deed.
|
4.2
|
Any
such document shall be in the terms specified by the Lender and,
in the
case of a mortgage of the Secured Property, those terms may include
a
provision entitling the Lender, on or after a Default, to appropriate,
or
otherwise deal with, the Secured Property for the purpose of discharging
the Outstanding Indebtedness.
|
4.3
|
The
Owner shall also forthwith do any act and execute any document (including
a document which amends or replaces this Deed) which the Lender specifies
for the purpose of enabling or assisting the Lender to comply, in
relation
to the Secured Property and/or the Outstanding Indebtedness, with
any
requirement (legally binding or not) applicable to the Lender and,
in
particular, the requirements of any banking supervisory authority
with
regard to netting of cash
collateral.
|
4.4
|
For
the purpose of securing performance of the Owner’s obligations under
clauses 4.1 to 4.3, the Owner irrevocably appoints the Lender as
its
attorney, on its behalf and in its name or otherwise to sign or execute
any document which, in the opinion of the Lender, the Owner is obliged,
or
could be required, to sign or execute under any of the said clauses,
which
the Lender considers necessary or convenient for or in connection
with any
exercise or intended exercise of any rights which the Lender has
under
this Deed or any other purpose connected with this
Deed.
|
4.5
|
The
Lender may appoint any person or persons as its substitute under
that
power of attorney referred to in clause 4.4 and may also delegate
that
power of attorney to any person or
persons.
|
5
|
Representations
|
5.1
|
The
Owner represents and warrants to the Lender as
follows:
|
5.1.1 |
the
Owner is the sole legal and beneficial owner of the Secured Property
and
has good marketable title to it;
|
5.1.2 |
no
third party has or will have any interest, right or claim of any
kind in
relation to any of the Secured
Property;
|
5.1.3 |
the
Owner has the corporate power, and has taken all necessary corporate
action to authorise the execution of this Deed, the Loan Agreement
and the
Master Swap Agreement; and
|
5.1.4 |
nothing
in this Deed will or might result in the Owner contravening any law
or
regulation which is now in force or which has been published but
not yet
brought into force or any contractual or other obligation which the
Owner
now has to a third party.
|
6
|
Notices
|
6.1
|
Clause
17 (Notices and other matters) of the Loan Agreement will apply to
this
Deed mutatis mutandis as if references to the Loan Agreement were
references to this Deed.
|
7 |
Supplemental
|
7.1
|
This
Deed, including the charge created by clause 3, shall remain in force
as a
continuing security until the Security Period has
ended.
|
7.2
|
The
rights of the Lender under this Deed will not be discharged or prejudiced
by:
|
7.2.1 |
any
kind of amendment or supplement to the other Security
Documents;
|
7.2.2 |
any
arrangement or concession, including a rescheduling, which the Lender
may
make in relation to any of the Loan Agreement, the Master Swap Agreement
and the other Security Documents, or any action by the Lender and/or
the
Owner and/or any other party thereto which is contrary to the terms
of the
Loan Agreement, the Master Swap Agreement and the other Security
Documents;
|
7.2.3 |
any
release or discharge, whether granted by the Lender or effected by
the
operation of any law, of all or any of the obligations of the Owner
and/or
any other party thereto under any of the Loan Agreement, the Master
Swap
Agreement and the other Security
Documents;
|
7.2.4 |
any
change in the ownership and/or control of the Owner and/or any other
party
thereto and/or merger, demerger or reorganisation involving the Owner
and/or any other party thereto;
|
7.2.5 |
any
event or matter which is similar to, or connected with, any of the
foregoing;
|
7.3
|
Nothing
in this Deed excludes or restricts any right of counterclaim, set-off,
right to net payments, or any other right or remedy which the Lender
would
have had other than under the general law, the Loan Agreement, the
Master
Swap Agreement and the other Security
Documents.
|
8 |
Law
and jurisdiction
|
8.1
|
Law
|
8.2
|
Submission
to jurisdiction
|
8.3
|
Contracts
(Rights of Third Parties) Act
1999
|
|
|
19
April 2006
|
|
Global
Banking & Markets
Shipping
Business Centre
5-10
Great Tower Street
London
EC3P 3HX
|
|
Marathassa
Shipping Corporation
80
Broad Street,
Monrovia,
Republic of Liberia
|
Telephone:
+44 (0)20 7833 2121
Facsimile:
+44 (0)20 7615 0116
www.rbsmarkets.com
|
1
|
We
refer to the loan agreement dated 16 February 2005 (the “
Loan
Agreement
”)
made between (1) Marathassa Shipping Corporation as borrower (the
“
Borrower
”)
and (2) The Royal Bank of Scotland plc as lender (the “
Bank
”),
pursuant to which the Bank agreed (
inter
alia
)
to advance (and has advanced) by way of loan to the Borrower the
sum of
Twenty eight million Dollars
($28,000,000).
|
2
|
Words
and expressions defined in the Loan Agreement shall, unless the context
otherwise requires, have the same meaning where used in this
Letter.
|
3
|
The
Borrower has requested and, subject to paragraph 7 of this Letter,
the
Bank hereby agrees, that the Loan Agreement shall be hereby amended
with
effect on and from 20 February 2006, by deleting the definition of
“
Margin
”
in clause 1.2 and by inserting in its place the following new definition
of “
Margin
”.
|
4
|
Save
as amended by this Letter, the provisions of the Loan Agreement shall
continue in full force and effect and the Loan Agreement and this
Letter
shall be read and construed as one
instrument.
|
5
|
Each
of the other Security Documents and the obligations of the Security
Parties thereunder shall remain and continue in full force and effect
notwithstanding the amendments to the Loan Agreement contained in
this
Letter.
|
6
|
References
to “
the
Agreement
”
or “
the
Loan Agreement
”
in any of the Security Documents shall henceforth be references to
the
Loan Agreement as amended by this Letter and as from time to time
hereafter amended and shall also be deemed to include this Letter
and the
obligations of the Security Parties
hereunder.
|
7
|
Please
confirm your agreement and the other Security Parties’ agreement to the
above by signing, dating and returning the enclosed duplicate of
this
Letter to the Bank on or before 28 April 2006. On receipt by the
Bank of
the duly executed duplicate of this letter by the Security Parties
not
later than such date, the consent of the Bank referred to in paragraph
3
above shall become immediately effective with effect on and from
20
February 2006.
|
|
The
Royal Bank of Scotland plc
Registered
in Scotland No 90312
Registered
Office 36 St Andrew Square
Edinburgh
EH2 2YB
Authorised
and regulated by the
Financial
Services Authority
|
8
|
This
Letter is governed by, and shall be construed in accordance with,
the laws
of England.
|
Yours
faithfully
|
Authorised
Signatories
For
and on behalf of
THE
ROYAL BANK OF SCOTLAND plc
|
Attorney-in-fact
For
and on behalf of
MARATHASSA
SHIPPING CORPORATION
|
Authorised
Signatories
For
and on behalf of
SAFETY
MANAGEMENT OVERSEAS S.A.
(as
Manager)
|
EXHIBIT 10.9
|
|
Global Banking & Markets
Shipping Business Centre 5-10 Great Tower Street London EC3P 3HX |
|
|
|
Telephone: +44 (0)20 7085 5000
Facsimile: +44 (0)20 7085 7134 |
|
|
|
www.rbs.com/gbm |
14 May 2008
Marathassa Shipping Corporation
c/o Safety Management Overseas SA
32 Avenue Karamanli
166 73 Voula
PO Box 70677-106-6
Athens
GREECE
Attn. Mr Konstantinos Adamopoulos
Dear Sirs
Loan Agreement dated 16 February 2005 (the Loan Agreement) between The Royal Bank of Scotland plc (the Bank) and Marathassa Shipping Corporation (the Borrower)
We refer to the above Loan Agreement and to the restrictions placed on the Borrower regarding Change of Ownership as per clause 9.3.13. At the request of the Borrower, we have pleasure in confirming that the Bank is prepared to agree to the proposed transfer of ownership of the Borrower to Safe Bulkers Inc., a newly formed company to be listed on the NYSE and which will initially offer 20% of its shares to the public by virtue of an IPO. The remaining 80% of the shares will remain initially within the existing beneficial ownership and control of the Hadjioannou family as advised to the Bank.
Agreement is subject to the following amendments to the terms of the loan, which are to be documented by a supplemental agreement and such other supporting documentation as
The Royal Bank of Scotland plc
Registered in Scotland No 90312 Registered Office: 38 St Andrew Square Edinburgh EH2 2YB A member of the London Stock Exchange and authorised and regulated by the Financial Services Authority |
2
the Banks lawyers may require within 30 days of the successful placement of the IPO, the costs of which are to be borne by the Borrower:
Interest Margin: | 0. 75% pa. over LIBOR. | |||
Security: | To include, in addition to the existing security, the following:- | |||
|
||||
Documentation: |
|
|||
i. | Min Adjusted Net Worth of US$200m, | |||
ii. |
Min Free Liquidity of US$500k to be kept with RBS, excluding other similar requirements under loan facilities provided by the Bank to the Corporate Guarantor or other subsidiaries thereof.
|
|||
iii. | Debt not to exceed 70% of Adjusted Total Assets, and | |||
iv. | Debt not to exceed 550% of 12-month trailing EBITDA. | |||
|
3
Signing: |
The Supplemental Loan Agreement and other supplemental documentation to be executed on or before 15 June 2008, failing which this offer will lapse notwithstanding its acceptance.
|
This letter contains an outline of certain terms and conditions (it does not constitute a legally binding commitment on the Bank) which will, inter alia, be embodied in the Supplemental Loan Agreement and security documentation, such legal agreement and security documentation shall be governed by English law (except to the extent any security otherwise requires). The Documentation shall supersede this letter and all prior discussions and negotiations in relation to the loan facility.
The Bank shall be entitled to obtain such legal opinions from such jurisdictions as it may require and from lawyers appointed by it and the Borrower shall provide such corporate and other documentation as may be required by the Bank or its lawyers.
All other terms and conditions of the Loan Agreement shall remain unchanged and in full force and effect.
This offer remains subject to there being no facts, events or circumstances, now existing or hereafter arising, which come to our attention and which, in our good faith determination, materially adversely affect the Borrowers or any of the Security Parties business, assets, financial condition, operations or prospects, in which event the Bank reserves the right to terminate this offer.
Yours faithfully | ||
For THE ROYAL BANK OF SCOTLAND plc | ||
/s/ Stephen Moorby | /s/ Nicholas Pavlidis | |
STEPHEN MOORBY | NICHOLAS PAVLIDIS | |
SENIOR DIRECTOR, SHIP FINANCE | SENIOR DIRECTOR, SHIP FINANCE | |
Accepted on behalf of | ||
Marathassa Shipping Corporation | ||
/s/ Konstantinos Adamopoulos | ||
Konstantinos Adamopoulos | ||
14/5/08 |
Clause
|
Page
|
|
1
|
Purpose
and definitions
|
1
|
2
|
The
Commitment and the Loan
|
12
|
3
|
Interest
and Interest Periods
|
13
|
4
|
Currencies
|
16
|
5
|
Repayment
and prepayment
|
18
|
6
|
Commitment
commission, fees and expenses
|
22
|
7
|
Payments
and taxes; accounts and calculations
|
23
|
8
|
Representations
and warranties
|
25
|
9
|
Undertakings
|
30
|
10
|
Conditions
|
36
|
11
|
Events
of Default
|
37
|
12
|
Indemnities
|
42
|
13
|
Unlawfulness
and increased costs
|
43
|
14
|
Security
and set-off
|
44
|
15
|
Accounts
|
46
|
16
|
Assignment,
transfer and lending office
|
47
|
17
|
Notices
and other matters
|
48
|
18
|
Governing
law and jurisdiction
|
49
|
Schedule
1 Form of Drawdown Notice
|
51
|
|
Schedule
2 Documents and evidence required as conditions precedent
|
53
|
|
Schedule
3 Calculation of Additional Cost
|
58
|
|
Schedule
4 Form of Interest Period Letter
|
61
|
|
Schedule
5 Form of Mortgage
|
62
|
|
Schedule
6 Form of Deed of Covenant
|
63
|
|
Schedule
7 Form of General Assignment
|
64
|
|
Schedule
8 Form of Manager’s Undertaking
|
65
|
|
Schedule
9 Form of Master Swap Agreement
|
66
|
|
Schedule
10 Form of Master Agreement Security Deed
|
67
|
1 |
Purpose
and definitions
|
1.1
|
Purpose
|
1.2
|
Definitions
|
(a)
|
for
interest rate fixing purposes:
|
(i)
|
in
relation to a rate fixing in respect of euro, a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer
system (TARGET) is operating; and
|
(ii)
|
in
relation to a rate fixing in respect of any Optional Currency or
Dollars,
a day on which banks are open for business in the principal financial
centre in, respectively, the jurisdiction of the relevant Optional
Currency or New York City; and
|
(b)
|
for
all other purposes (including, but not limited to, payments and receiving
notices):
|
(i)
|
on
which banks are open for business in London;
and
|
(ii)
|
in
relation to payments in euros, a day on which banks are open for
business
in such other principal financial centre or centres of relevant
Participating Member States as the Bank may nominate;
and
|
(iii)
|
in
relation to payments in any Optional Currency or Dollars, a day on
which
banks are open for business in the principal financial centre in,
respectively, the jurisdiction of the relevant Optional Currency
or New
York City;
|
(a)
|
the
rate of interest for such period which appears on page 248 of the
Reuters
screen (or such other page on the Reuters screen as may customarily
be
used from time to time to display EURIBOR rates) at or about 11:00
a.m.
(Brussels time) on the Quotation Date for such period;
or
|
(b)
|
if
the relevant rate of EURIBOR cannot be determined in accordance with
paragraph (a) above, the rate (rounded upwards if necessary to the
nearest
one sixteenth of one per cent) the Bank offers for deposits in an
amount
approximately equal to the amount in relation to which EURIBOR is
to be
determined for a period equivalent to such period to prime banks
in the
London Interbank Market at or about 11:00 a.m. (London time) on the
Quotation Date for such period;
|
(a)
|
for
the period commencing on the Drawdown Date and ending on the date
falling
thirty-six (36) months thereafter, equal to one hundred per cent
(100%) of
(i) the Loan (or the Equivalent Amount in Dollars when the Loan or
part
thereof is denominated in an Optional Currency) and (ii) the cost
(if any)
(as certified by the Bank whose certificate shall, in the absence
of
manifest error, be conclusive and binding on the Borrower and the
Bank) of
terminating any Transaction entered into pursuant to the Master Swap
Agreement;
|
(b)
|
for
the period commencing one day after the date falling thirty-six (36)
months after the Drawdown Date and ending on the date falling seventy-two
(72) months after the Drawdown Date equal to one hundred and ten
per cent
(110%) of (i) the Loan (or the Equivalent Amount in Dollars when
the Loan
or part thereof is denominated in an Optional Currency) and (ii)
the cost
(if any) (as certified by the Bank whose certificate shall, in the
absence
of manifest error, be conclusive and binding on the Borrower and
the Bank)
of terminating any Transaction entered into pursuant to the Master
Swap
Agreement; and
|
(c)
|
for
the period commencing one day after the date falling seventy-two
(72)
months after the Drawdown Date and ending on the last day of the
|
Security
Period (as defined in the Deed of Covenant), equal to one hundred
and
twenty per cent (120%) of (i) the Loan (or the Equivalent Amount
in
Dollars when the Loan or part thereof is denominated in an Optional
Currency) and (ii) the cost (if any) (as certified by the Bank whose
certificate shall, in the absence of manifest error, be conclusive
and
binding on the Borrower and the Bank) of terminating any Transaction
entered into pursuant to the Master Swap
Agreement;
|
(a)
|
the
actual, constructive, compromised or arranged total loss of the Ship;
or
|
(b)
|
the
Compulsory Acquisition of the Ship;
or
|
(c)
|
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Borrower from such
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation within thirty (30) days after the occurrence
thereof;
|
1.3 |
Headings
|
1.4 |
Construction
of certain terms
|
1.4.1 |
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Agreement and references to this Agreement
include
its schedules;
|
1.4.2 |
references
to (or to any specified provision of) this Agreement or any other
document
shall be construed as references to this Agreement, that provision
or that
document as in force for the time being and as amended in accordance
with
terms thereof, or, as the case may be, with the agreement of the
relevant
parties;
|
1.4.3 |
references
to a “regulation” include any present or future regulation, rule,
directive, requirement, request or guideline (whether or not having
the
force of law) of any agency, authority, central bank or government
department or any self-regulatory or other national or supra-national
authority;
|
1.4.4 |
words
importing the plural shall include the singular and vice
versa;
|
1.4.5 |
references
to a time of day are to London
time;
|
1.4.6 |
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.7 |
references
to a “guarantee” include references to an indemnity or other assurance
against financial loss including, without limitation, an obligation
to
purchase assets or services as a consequence of a default by any
other
person to pay any Indebtedness and “guaranteed” shall be construed
accordingly; and
|
1.4.8 |
references
to any enactment shall be deemed to include references to such enactment
as reenacted, amended or extended.
|
2 |
The
Commitment and the Loan
|
2.1
|
Agreement
to lend
|
2.2
|
Drawdown
|
2.3
|
Amount
|
2.4
|
Availabilit
y
|
2.5
|
Termination
of Commitment
|
2.6
|
Application
of Proceeds
|
3 |
Interest
and Interest Periods
|
3.1
|
Normal
interest rate
|
3.2
|
Selection
of Interest Periods
|
3.3
|
Determination
of Interest Periods
|
3.3.1 |
the
first Interest Period in respect of a Tranche shall commence on the
Drawdown Date and each subsequent Interest Period in respect of a
Tranche
shall commence on the last day of the previous Interest Period in
respect
of such Tranche;
|
3.3.2 |
Interest
Periods in respect of different Tranches shall end on the same day;
|
3.3.3 |
if
any Interest Period would otherwise overrun a Repayment Date, then,
in the
case of the last Repayment Date, such Interest Period shall end on
such
Repayment Date, and in the case of any other Repayment Date or Repayment
Dates the Loan or, if the Loan is divided into Tranches, the aggregate
of
the Tranches, shall be divided into parts so that there is one part
(in
the case of Tranches to be calculated on pro rata basis between the
Tranches in the aggregate Dollar Amount of all such Tranches) in
the
amount of the repayment instalment due on each Repayment Date falling
during that Interest Period and having an Interest Period ending
on the
relevant Repayment Date and another part (in the case of Tranches
to be
calculated on a pro rata basis between the Tranches in the aggregate
Dollar Amount of all such Tranches) in the amount of the balance
of the
Loan having an Interest Period ascertained in accordance with clause
3.2
and the other provisions of this clause 3.3 and the expression “Interest
Period in respect of the Loan” when used in clause 4 and elsewhere in this
Agreement refers to the Interest Period in respect of the balance
of the
Loan; and
|
3.3.4 |
if
the Borrower fails to specify the duration of an Interest Period
in
accordance with the provisions of clause 3.2 and this clause 3.3
such
Interest Period shall have a duration of six (6) months or such other
period as shall comply with this clause
3.3.
|
3.4
|
Default
interest
|
3.5
|
Notification
of Interest Periods and interest
rate
|
3.6
|
Market
disruption;
non-availability
|
3.6.1 |
If
and whenever, at any time prior to the commencement of any Interest
Period, the Bank shall have determined (which determination shall,
in the
absence of manifest error, be
conclusive):
|
(a) |
that
adequate and fair means do not exist for ascertaining LIBOR or, as
the
case may be, EURIBOR during such Interest Period;
or
|
(b) |
that
deposits in Dollars are not available to the Bank in the London Interbank
Market in the ordinary course of business in sufficient amounts to
fund
the Loan for such Interest Period;
|
3.6.2 |
During
the period of ten (10) days after any Determination Notice has been
given
by the Bank under clause 3.6.1, the Bank shall certify an alternative
basis (the “
Substitute
Basis
”)
for maintaining the Loan. The Substitute Basis may (without limitation)
include alternative interest periods, alternative currencies or
alternative rates of interest but shall include a margin above the
cost of
funds including Additional Cost, if any, to the Bank equivalent to
the
Margin. Each Substitute Basis so certified shall be binding upon
the
Borrower and shall take effect in accordance with its terms from
the date
specified in the Determination Notice until such time as the Bank
notifies
the Borrower that none of the circumstances specified in clause 3.6.1
continues to
|
exist whereupon the normal interest rate fixing provisions of this Agreement shall apply. |
4 |
Currencies
|
4.1
|
Selection
of currencies
|
4.2
|
Limit
on currencies;
non-availability
|
4.2.1 |
The
Loan or any part thereof may not be drawn down in, and the Loan or
a
Tranche may not be, converted into or remain outstanding in an Optional
Currency if:
|
(a) |
in
consequence thereof there would be more than two (2) currencies
outstanding at any time; or
|
(b) |
the
amount to be converted is less than $1,000,000 or an integral multiple
of
$1,000,000; or
|
(c) |
the
Bank notifies the Borrower not later than 3 p.m. on the fourth Banking
Day
before the date on which the Loan or the relevant part thereof is
to be
drawn down or the beginning of the relevant Interest Period that
deposits
of such Optional Currency are not readily available to the Bank in
an
amount comparable with the Loan or the relevant part thereof;
or
|
(d) |
the
Bank determines (which determination shall be conclusive) at any
time
prior to 10 a.m. (local time in the place of payment) on the first
day of
the relevant Interest Period that by reason of any change in currency
availability, currency exchange rates or exchange controls it is
or will
be impracticable for the Loan or the relevant part thereof to be
drawn
down in, converted into or remain outstanding in that Optional Currency;
or
|
(e) |
a
Default has occurred and is continuing;
or
|
(f) |
a
Transaction is outstanding under the Master Swap
Agreement,
|
4.2.2 |
The
Borrower shall not be allowed to convert the Loan or any part thereof
on
more than four (4) occasions in any twelve month period. The first
twelve-month period shall commence on the Drawdown Date and each
subsequent twelve-month period shall commence on the expiry of the
previous such period.
|
4.3 |
Currency
amounts on drawdown
|
4.3.1 |
Drawdown
in Optional Currency
|
4.3.2 |
Drawdown
in Dollars
|
4.4
|
Currency
amount on conversion
|
4.5
|
Notional
obligations
|
4.6
|
Currency
Correction
|
4.7
|
Release
of moneys in Cash Collateral
Account
|
4.8
|
Incidental
costs and expenses
|
5 |
Repayment
and prepayment
|
5.1
|
Repayment
|
5.2
|
Voluntary
prepayment
|
5.2.1 |
without
premium or penalty, on any Interest Payment Date relating to the
part of
the Loan or as the case may be, a Tranche thereof being prepaid together
with any amounts payable under clause 12 and accrued interest to
the date
of prepayment and any other sums then payable under this Agreement
and/or
the Master Swap Agreement and/or the other Security Documents or
any of
them in respect of the Loan or a Tranche thereof calculated in accordance
with clause 5.7; and
|
5.2.2 |
at
any other time upon payment to the Bank of accrued interest to the
date of
prepayment and such sum as the Bank in its absolute discretion shall
determine to be the loss (excluding loss of Margin on the amount
prepaid
to the end of the then current Interest Period), cost and expense
incurred
by the Bank as a result of the prepayment not being made on an Interest
Payment Date for any part of the Loan being prepaid and any other
sums
then payable under this Agreement and/or the Master Swap Agreement
and/or
the other Security Documents or any of
them.
|
5.3
|
Master
Swap Agreement, Repayments and
Prepayments
|
5.3.1 |
Notwithstanding
any provision of the Master Swap Agreement to the contrary, in the
case of
a prepayment of all or part of the Loan (including, without limit,
upon a
Total Loss in accordance with clause 5.4 and under clause 9.2) then,
subject to clause 5.3.2, the Bank shall be entitled but not obliged
(and,
where relevant, may do without the consent of the Borrower, where
it would
otherwise be required whether under the Master Swap Agreement or
otherwise) to amend, re-book, supplement, cancel, close out, net
out,
terminate, liquidate, transfer or assign all or any part of the rights,
benefits and obligations created by any Transaction and/or the Master
Swap
Agreement and/or to obtain or re-establish any hedge or related trading
position in any manner and with any person the Bank in its absolute
discretion may determine and both the Bank’s and the Borrower’s continuing
obligations under any Transaction and/or Master Swap Agreement shall,
unless agreed otherwise by the Bank, be calculated so far as the
Bank
considers it practicable by reference to the amended repayment schedule
for the Loan taking into account the fact that less than the full
amount
of the Loan remains outstanding.
|
5.3.2 |
If
less than the full amount of the Loan remains outstanding, following
a
prepayment under this Agreement and the Bank in its absolute discretion
agrees, following a written request of the Borrower, that the Borrower
may
be permitted to maintain all or part of a Transaction in an amount
not
wholly matched with or linked to all or part of the Loan, the Borrower
shall within ten (10) days of being notified by the Bank of such
requirement, provide the Bank with, or procure the provision to the
Bank
of, such additional security as shall in the opinion of the Bank
be
adequate to secure the performance of such Transaction, which additional
security shall take such form, be constituted by such documentation
and be
entered into between such parties, as the Bank in its absolute discretion
may approve or require, and each document comprising such additional
security shall constitute a Credit Support
Document.
|
5.3.3 |
The
Borrower shall on the first written demand of the Bank indemnify
the Bank
in respect of all losses, costs and expenses (including, but not
limited
to, legal costs and expenses) incurred or sustained by the Bank as
a
consequence of or in relation to the effecting of any matter or
Transactions referred to in this clause
5.3.
|
5.3.4 |
Notwithstanding
any provision of the Master Swap Agreement to the contrary, if for
any
reason a Transaction has been entered into but the Loan is not drawn
down
under this Agreement then, subject to clause 5.3.5 the Bank shall
be
entitled but not obliged (and, where relevant, may do so without
the
consent of the Borrower where it would otherwise be required whether
under
the Master Swap Agreement or otherwise) to amend, re-book, supplement,
cancel, close out, net out, terminate, liquidate, transfer or assign
all
or any part of the rights, benefits and obligations created by such
Transaction and/or the Master Swap Agreement and/or to obtain or
re-establish any hedge or related trading position in any manner
and with
any person the Bank in its absolute discretion may
determine.
|
5.3.5 |
If
a Transaction has been entered into but the Loan is not drawn down
under
this Agreement and the Bank in its absolute discretion agrees, following
a
written request of the Borrower, that the Borrower may be permitted
to
maintain all or part of a Transaction, the Borrower shall within
ten (10)
days of being notified by the Bank of such requirement, provide the
Bank
with, or procure the provision to the Bank of, such additional security
as
shall in the opinion of the Bank be adequate to secure the performance
of
such Transaction, which additional security shall take such form,
be
constituted by such documentation and be entered into between such
parties, as the Bank in its absolute discretion may approve or require,
and each document comprising such additional security shall constitute
a
Credit Support Document for the purposes of the Master Swap Agreement
and/or otherwise.
|
5.3.6 |
Without
prejudice to or limitation of the obligations of the Borrower under
clause
5.3.3, in the event that the Bank exercises any of its rights under
clauses 5.3.1, 5.3.2, 5.3.3 or 5.3.4 and such exercise results in
all or
part of a
|
Transaction
being terminated such Transaction or the part thereof terminated
(which
shall for the purposes hereof be treated as a separate Transaction)
in
each case shall be treated under the Master Swap Agreement in the
same
manner as if it were a Terminated Transaction (as defined in Section
14 of
the Master Swap Agreement) pursuant to an Event of Default (as so
defined
in that Section 14) by the Borrower and, accordingly, the Bank shall
be
permitted to recover from the Borrower a payment for early termination
calculated in accordance with the provisions of section 6(e)(i) of
the
Master Swap Agreement in respect of such
Transaction.
|
5.4
|
Prepayment
on Total Loss
|
5.4.1 |
in
the case of an actual total loss of the Ship on the actual date and
at the
time the Ship was lost or, if such date is not known, on the date
on which
the Ship was last reported;
|
5.4.2 |
in
the case of a constructive total loss of the Ship, upon the date
and at
the time notice of abandonment of the Ship is given to the insurers
of the
Ship for the time being (provided a claim for total loss is admitted
by
such insurers) or, if such insurers do not forthwith admit such a
s claim,
at the date and at the time at which either a total loss is subsequently
admitted by the insurers or a total loss is subsequently adjudged
by a
competent court of law or arbitration tribunal to have
occurred;
|
5.4.3 |
in
the case of a compromised or arranged total loss, on the date upon
which a
binding agreement as to such compromised or arranged total loss has
been
entered into by the insurers of the
Ship;
|
5.4.4 |
in
the case of Compulsory Acquisition, on the date upon which the relevant
requisition of title or other compulsory acquisition occurs;
and
|
5.4.5 |
in
the case of hijacking, theft, condemnation, capture, seizure, arrest,
detention or confiscation of the Ship (other than where the same
amounts
to Compulsory Acquisition of the Ship) by any Government Entity,
or by
persons purporting to act on behalf of any Government Entity, which
deprives the Borrower of the use of the Ship for more than thirty
(30)
days, upon the
|
expiry of the period of thirty (30) days after the date upon which the relevant hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation occurred. |
5.5
|
Amounts
payable on prepayment
|
5.6
|
Notice
of prepayment; reduction of repayment instalments
|
5.7
|
Currency
amounts repayable
|
6 |
Commitment
commission, fees and
expenses
|
6.1
|
Fees
|
6.1.1 |
A
fee of Thirty thousand four hundred Dollars ($30,400) on the Drawdown
Date;
|
6.1.2 |
a
commitment commission computed from 1 February 2006 payable on the
earlier
of (i) the Drawdown Date; and (ii) the Termination Date at the rate
of
0.15% per annum on the daily undrawn amount of Commitment and payable
on
the date of, this Agreement and at three (3) monthly intervals (in
arrears) thereafter; and
|
6.1.3 |
The
fee referred to in clause 6.1.1 and the commitment commission referred
to
in clause 6.1.2 shall be payable in full by the Borrower to the Bank
whether or not any part of the Commitment is ever advanced and shall,
in
either case, be non-refundable.
|
6.2
|
Expenses
|
6.2.1 |
in
connection with the negotiation, preparation, execution and, where
relevant, registration of the Security Documents and of any amendment
or
extension of or the granting of any waiver or consent under, any
of the
Security Documents (including, for the avoidance of doubt, the Master
Swap
Agreement); and
|
6.2.2 |
in
contemplation of, or otherwise in connection with, the enforcement
of, or
preservation of any rights under, any of the Security Documents (including
for the avoidance of doubt the Master Swap Agreement), or otherwise
in
respect of the moneys owing under any of the Security Documents
(including, for the avoidance of doubt, expenses incurred in connection
with the Bank obtaining any further insurance opinion(s) in respect
of the
Insurances for the Ship as may be required by the Bank during the
Security
Period (as such term is defined in the Deed of Covenant)), together
with
interest at the rate referred to in clause 3.4 from the date on which
such
expenses were incurred to the date of payment (as well after as before
judgment).
|
6.3
|
Value
Added Tax
|
6.4
|
Stamp
and other duties
|
7 |
Payments
and taxes; accounts and
calculations
|
7.1
|
No
set-off or counterclaim
|
7.2
|
Payment
by the Bank
|
7.3
|
Non-Banking
Days
|
7.4
|
Calculations
|
7.5
|
Certificates
conclusive
|
7.6
|
Grossing-up
for Taxes
|
7.7
|
Loan
account
|
8 |
Representations
and warranties
|
8.1
|
Continuing
representations and
warranties
|
8.1.1 |
Due
incorporation
|
8.1.2 |
Corporate
power
|
8.1.3 |
Binding
obligations
|
8.1.4 |
No
conflict with other obligations
|
8.1.5 |
No
litigation
|
8.1.6 |
No
filings required
|
8.1.7 |
Choice
of law
|
8.1.8 |
No
immunity
|
8.1.9 |
Consents
obtained
|
8.2
|
Initial
representations and
warranties
|
8.2.1 |
Pari
passu
|
8.2.2 |
No
default under other Indebtedness
|
8.2.3 |
Information
|
8.2.4 |
No
withholding Taxes
|
8.2.5 |
No
Default
|
8.2.6 |
the
Ship
|
(a) |
in
the absolute ownership of the Borrower who will on and after the
Drawdown
Date be the sole, legal and beneficial owner of the
Ship;
|
(b) |
registered
in the name of the Borrower through the Registry as a ship under
the laws
and flag of the Flag State;
|
(c) |
operationally
seaworthy and in every way fit for service;
and
|
(d) |
classed
with the Classification free of all requirements and recommendations
of
the Classification Society;
|
8.2.7 |
Ship’s
employment
|
8.2.8 |
Freedom
from Encumbrances
|
8.2.9 |
Compliance
with Environmental Laws and
Approvals
|
(a) |
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have complied with
the
provisions of all Environmental
Laws;
|
(b) |
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have obtained all
Environmental Approvals and are in compliance with all such Environmental
Approvals; and
|
(c) |
neither
the Borrower nor to the best of the Borrower’s knowledge and belief
(having made due enquiry) any of its Environmental Affiliates has
received
notice of any Environmental Claim that the Borrower or any such
Environmental Affiliate is not in compliance with any Environmental
Law or
any Environmental Approval;
|
8.2.10 |
No
Environmental Claims
|
8.2.11 |
No
potential Environmental Claims
|
8.2.12 |
No
material adverse change
|
8.2.13 |
Copies
true and complete
|
8.3
|
Repetition
of representations and
warranties
|
9 |
Undertakings
|
9.1
|
General
|
9.1.1 |
Notice
of Default
|
9.1.2 |
Consents
and licences
|
9.1.3 |
Use
of proceeds
|
9.1.4 |
Pari
passu
|
9.1.5 |
Financial
statements
|
9.1.6 |
Delivery
of reports
|
9.1.7 |
Provision
of further information
|
9.1.8 |
Obligations
under Security Documents
|
9.1.9 |
Compliance
with Code
|
9.1.10 |
Withdrawal
of DOC and SMC
|
9.1.11 |
Issuance
of DOC and SMC
|
9.1.12 |
ISPS
Code compliance
|
(a) |
maintain
at all times a valid and current ISSC in respect of the
Ship;
|
(b) |
immediately
notify the Bank in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the ISSC in respect of
the
Ship; and
|
(c) |
procure
that the Ship will comply at all times with the ISPS Code;
and
|
9.1.13 |
Know
your customer information
|
9.2
|
Security
value maintenance
|
9.2.1 |
Security
shortfall
|
(a) |
prepay
such sum in Dollars as will result in the Security Requirement after
such
prepayment (taking into account any other repayment of the Loan made
between the date of the notice and the date of such prepayment) being
equal to the Security Value; or
|
(b) |
constitute
to the satisfaction of the Bank such further security for the Loan
as
shall be acceptable to the Bank having a value for security purposes
(as
determined by the Bank in its absolute discretion) at the date upon
which
such further security shall be constituted which, when added to the
Security Value, shall not be less than the Security Requirement as
at such
date; or
|
(c) |
pay
such additional amount to the credit of the Cash Collateral Account
as
will result in the Security Value after such payment being not less
than
the Security Requirement as at the date of such
payment.
|
9.2.2 |
Valuation
of Ship
|
9.2.3 |
Information
|
9.2.4 |
Costs
|
9.2.5 |
Valuation
of additional security
|
9.2.6 |
Documents
and evidence
|
9.2.7 |
Security
release
|
9.3
|
Negative
undertakings
|
9.3.1 |
Negative
pledge
|
9.3.2 |
No
merger
|
9.3.3 |
Disposals
|
9.3.4 |
Other
business
|
9.3.5 |
Acquisitions
|
9.3.6 |
Other
obligations
|
9.3.7 |
No
borrowing
|
9.3.8 |
Repayment
of borrowings
|
9.3.9 |
Guarantees
|
9.3.10 |
Loans
|
9.3.11 |
Sureties
|
9.3.12 |
Share
capital and distribution
|
9.3.13 |
Change
of Ownership
|
9.3.14 |
Subsidiaries
|
9.3.15 |
Manager
|
9.4
|
Cash
Collateral Account
Undertaking
|
10 |
Conditions
|
10.1
|
Documents
and evidence
|
10.1.1 |
the
Bank, or its duly authorised representative, shall have received,
not
later than two (2) Banking Days before the day on which the Drawdown
Notice for the Loan is given, the documents and evidence specified
in Part
1 of schedule 2 in form and substance satisfactory to the Bank;
and
|
10.1.2 |
the
Bank, or its duly authorised representative, shall have received,
on or
prior to the Drawdown Date, the documents and evidence specified
in Part 2
of schedule 2 in form and substance satisfactory to the
Bank.
|
10.2
|
General
conditions precedent
|
10.2.1 |
the
representations and warranties contained in clauses 8.1 and 8.2 are
true
and correct on and as of each such time as if each was made with
respect
to the facts and circumstances existing at such time;
and
|
10.2.2 |
no
Default shall have occurred and be continuing or would result from
the
making of the Loan.
|
10.3
|
Waiver
of conditions precedent
|
10.4
|
Further
conditions precedent
|
11 |
Events
of Default
|
11.1
|
Events
|
11.1.1 |
Non-payment
:
any Security Party fails to pay any sum payable by it under any of
the
Security Documents at the time, in the currency and in the manner
stipulated in the Security Documents (and so that, for this purpose,
sums
payable on demand shall be treated as having been paid at the stipulated
time if paid within three (3) Banking Days of demand);
or
|
11.1.2 |
Master
Swap Agreement
:
(i) an Event of Default or Potential Event of Default (in each case
as
defined in the Master Swap Agreement) has occurred and is continuing
under
the Master Swap Agreement or (ii) an Early Termination Date (as defined
in
the Master Swap Agreement) has occurred or been or become capable
of being
effectively designated under the Master Swap Agreement or (iii) a
person
entitled to do so gives notice of an Early Termination Date under
section
6(b)(iv) of the Master Swap Agreement or (iv) the Master Swap Agreement
is
terminated, cancelled, suspended, rescinded or revoked or otherwise
ceases
to remain in full force and effect for any reason;
or
|
11.1.3 |
Breach
of Insurance and certain other obligations
:
the Borrower fails to obtain and/or maintain the Insurances (as defined
in, and in accordance with the requirements of, the Security Documents)
or
if any insurer in respect of such Insurances cancels the Insurances
or
disclaims liability by reason, in either case, of mis-statement in
any
proposal for the Insurances or for any other failure or default on
the
part of the Borrower or any other person or the Borrower commits
any
breach of or omits to observe any of the obligations or undertakings
expressed to be assumed by it under clauses 9.2, 9.3 or 9.4;
or
|
11.1.4 |
Breach
of other obligations
:
any Security Party commits any breach of or omits to observe any
of its
obligations or undertakings expressed to be assumed by it under any
of the
Security Documents (other than those referred to in clauses 11.1.1,
11.1.2
and 11.1.3 above) and, in respect of any such breach or omission
which in
the opinion of the Bank is capable of remedy, such action as the
Bank may
require shall not have been taken within fourteen (14) days of the
Bank
notifying the relevant Security Party of such default and of such
required
action; or
|
11.1.5 |
Misrepresentation
:
any representation or warranty made or deemed to be made or repeated
by or
in respect of any Security Party in or pursuant to any of the Security
Documents or in any notice, certificate or statement referred to
in or
delivered under any of the Security Documents is or proves to have
been
incorrect or misleading in any material respect;
or
|
11.1.6 |
Cross-default
:
any Indebtedness of the Borrower is not paid when due or any Indebtedness
of the Borrower becomes (whether by declaration or automatically
in
accordance with the relevant agreement or instrument constituting
the
same) due and payable prior to the date when it would otherwise have
become due (unless as a result of the exercise by the Borrower of
a
voluntary right of prepayment), or any creditor of the Borrower becomes
entitled to declare any such Indebtedness due and payable or any
facility
or commitment available to the Borrower relating to Indebtedness
is
withdrawn, suspended or cancelled by reason of any default (however
described) of the person concerned unless the Borrower shall have
satisfied the Bank that such withdrawal, suspension or cancellation
will
not affect or prejudice in any way the Borrower’s ability to pay its debts
as they fall due and fund its commitments, or any guarantee given
by any
Security Party in respect of Indebtedness is not honoured when due
and
called upon; or
|
11.1.7 |
Legal
process
:
any judgment or order made against the Borrower is not stayed or
complied
with within seven (7) days or a creditor attaches or takes possession
of,
or a distress, execution, sequestration or other process is levied
or
enforced upon or sued out against, any of the undertakings, assets,
rights
or revenues of the Borrower and is not discharged within seven (7)
days;
or
|
11.1.8 |
Insolvency
:
the Borrower is unable or admits inability to pay its debts as they
fall
due; suspends making payments on any of its debts or announces an
|
intention to do so; becomes insolvent; has assets the value of which is less than the value of its liabilities (taking into account contingent and prospective liabilities; or suffers the declaration of a moratorium in respect of any of its Indebtedness; or |
11.1.9 |
Reduction
or loss of capital
:
a
meeting is convened by the Borrower for the purpose of passing any
resolution to purchase, reduce or redeem any of its shares;
or
|
11.1.10 |
Winding
up
:
any corporate action, legal proceedings or other procedure or step
is
taken for the purpose of winding up or an order is made or resolution
passed for the winding up of the Borrower or a notice is issued convening
a meeting for the purpose of passing any such resolution;
or
|
11.1.11 |
Administration
:
any petition is presented, notice is given or other step is taken
for the
purpose of the appointment of an administrator of the Borrower or
the Bank
believes that any such petition or other step is imminent or an
administration order is made in relation to the Borrower;
or
|
11.1.12 |
Appointment
of receivers and managers
:
any administrative or other receiver is appointed of the Borrower
or any
part of its assets and/or undertaking or any other steps are taken
to
enforce any Encumbrance over all or any part of the assets of the
Borrower, or
|
11.1.13 |
Compositions
:
any corporate action, legal proceedings or other procedures or steps
are
taken, or negotiations commenced, by the Borrower or by any of its
creditors with a view to the general readjustment or rescheduling
of all
or part of its indebtedness or to proposing any kind of composition,
compromise or arrangement involving such company and any of its creditors;
or
|
11.1.14 |
Analogous
proceedings
:
there occurs, in relation to the Borrower in any country or territory
in
which it carries on business or to the jurisdiction of whose courts
any
part of its assets is subject, any event which, in the reasonable
opinion
of the Bank, appears in that country or territory to correspond with,
or
have an effect equivalent or similar to, any of those mentioned in
clauses
11.1.7 to 11.1.13 (inclusive) or any Security Party otherwise becomes
subject, in any such country or territory, to the operation of any
law
relating to insolvency, bankruptcy or liquidation;
or
|
11.1.15 |
Cessation
of business
:
the Borrower suspends or ceases or threatens to suspend or cease
to carry
on its business; or
|
11.1.16 |
Seizure
:
all or a material part of the undertaking, assets, rights or revenues
of,
or shares or other ownership interests in the Borrower are seized,
nationalised, expropriated or compulsorily acquired by or under the
authority of any government; or
|
11.1.17 |
Invalidity
:
any of the Security Documents shall at any time and for any reason
become
invalid or unenforceable or otherwise cease to remain in full force
and
effect, or if the validity or enforceability of any of the Security
Documents shall at any time and for any reason be contested by any
Security Party which is a party thereto, or if any such Security
Party
shall deny that it has any, or any further, liability thereunder;
or
|
11.1.18 |
Unlawfulness
:
it becomes impossible or unlawful at any time for any Security Party,
to
fulfil any of the covenants and obligations expressed to be assumed
by it
in any of the Security Documents or for the Bank to exercise the
rights or
any of them vested in it under any of the Security Documents or otherwise;
or
|
11.1.19 |
Repudiation
:
any Security Party repudiates any of the Security Documents or does
or
causes or permits to be done any act or thing evidencing an intention
to
repudiate any of the Security Documents;
or
|
11.1.20 |
Encumbrances
enforceable
:
any Encumbrance (other than Permitted Liens) in respect of any of
the
property (or part thereof) which is the subject of any of the Security
Documents becomes enforceable; or
|
11.1.21 |
Material
adverse change
:
there occurs, in the opinion of the Bank, a material adverse change
in the
financial condition of the Borrower by reference to the financial
position
of the Borrower as described by the Borrower to the Bank in the
negotiation of this Agreement; or
|
11.1.22 |
Arrest
:
the Ship is arrested, confiscated, seized, taken in execution, impounded,
forfeited, detained in exercise or purported exercise of any possessory
lien or other claim or otherwise taken from the possession of the
Borrower
and the Borrower shall fail to procure the release of the Ship within
a
period of fourteen (14) days thereafter;
or
|
11.1.23 |
Registration
:
the registration of the Ship under the laws and flag of the Flag
State is
canceled or terminated without the prior written consent of the Bank;
or
|
11.1.24 |
Unrest
:
the Flag State becomes involved in hostilities or civil war or there
is a
seizure of power in the Flag State by unconstitutional means if,
in any
such case, such event could in the opinion of the Bank reasonably
be
expected to have a material adverse effect on the security constituted
by
any of the Security Documents; or
|
11.1.25 |
Environment
:
the Borrower and/or any of its Environmental Affiliates fails to
comply
with any Environmental Law or any Environmental Approval or the Ship
is
involved in any incident which gives rise or may give rise to an
Environmental Claim if, in any such case, such non-compliance or
incident
or the consequences thereof could, in the opinion of the Bank, reasonably
be expected to have a material adverse effect on the business, assets,
operations,
|
property or financial condition of the Borrower or any other Security Party or on the security constituted by any of the Security Documents; or |
11.1.26 |
P&I
:
the Borrower or any other person fails or omits to comply with any
requirements of the protection and indemnity association or other
insurer
with which the Ship is entered for insurance or insured against protection
and indemnity risks (including oil pollution risks) to the effect
that any
cover (including, without limitation, any cover in respect of liability
for Environmental Claims arising in jurisdictions where the Ship
operates
or trades) is or may be liable to cancellation, qualification or
exclusion
at any time; or
|
11.1.27 |
Ownership
:
there is any change in the legal ownership of the shares in the Borrower
from that existing at the date of this Agreement;
or
|
11.1.28 |
Material
events
:
any other event occurs or circumstance arises which, in the opinion
of the
Bank, is likely materially and adversely to affect either (i) the
ability
of any Security Party to perform all or any of its obligations under
or
otherwise to comply with the terms of any of the Security Documents
(including, for the avoidance of doubt, the Master Swap Agreement)
or (ii)
the security created by any of the Security
Documents.
|
11.2
|
Acceleration
|
11.2.1 |
the
obligation of the Bank to make the Commitment available shall be
terminated, whereupon the Commitment shall be reduced to zero forthwith;
and/or
|
11.2.2 |
the
Loan and all interest and commitment commission accrued and all other
sums
payable under the Security Documents have become due and payable,
whereupon the same shall, immediately or in accordance with the terms
of
such notice, become due and
payable.
|
11.3
|
Demand
basis
|
12 |
Indemnities
|
12.1
|
Miscellaneous
indemnities
|
12.1.1 |
any
default in payment by the Borrower of any sum under any of the Security
Documents when due;
|
12.1.2 |
the
occurrence of any other Event of
Default;
|
12.1.3 |
any
prepayment of the Loan or part thereof being made under clauses 5.2,
5.3,
9.2.1 or 13.1, any other repayment or prepayment of the Loan or part
thereof being made otherwise than on an Interest Payment Date relating
to
the part of the Loan prepaid or repaid;
or
|
12.1.4 |
the
Loan or part thereof not being made for any reason (excluding any
default
by the Bank) after the Drawdown Notice has been
given,
|
12.2
|
Currency
indemnity
|
12.3
|
Environmental
indemnity
|
13 |
Unlawfulness
and increased costs
|
13.1
|
Unlawfulness
|
13.2
|
Increased
costs
|
13.2.1 |
subject
the Bank to Taxes or change the basis of Taxation of the Bank with
respect
to any payment under any of the Security Documents (other than Taxes
or
Taxation on the overall net income, profits or gains of the Bank
imposed
in the jurisdiction in which its principal or lending office under
this
Agreement is located); and/or
|
13.2.2 |
increase
the cost to, or impose an additional cost on, the Bank or its holding
company in making or keeping the Commitment available or maintaining
or
funding all or part of the Loan;
and/or
|
13.2.3 |
reduce
the amount payable or the effective return to the Bank under any
of the
Security Documents; and/or
|
13.2.4 |
reduce
the Bank’s or its holding company’s rate of return on its overall capital
by reason of a change in the manner in which it is required to allocate
capital resources to the Bank’s obligations under any of the Security
Documents; and/or
|
13.2.5 |
require
the Bank or its holding company to make a payment or forego a return
on or
calculated by reference to any amount received or receivable by the
Bank
under any of the Security Documents;
and/or
|
13.2.6 |
require
the Bank or its holding company to incur or sustain a loss (including
a
loss of future potential profits) by reason of being obliged to deduct
all
or part of the Commitment or the Loan from its capital for regulatory
purposes,
|
(a) |
the
Bank shall notify the Borrower in writing of such event promptly
upon its
becoming aware of the same; and
|
(b) |
the
Borrower shall on demand pay to the Bank the amount which the Bank
specifies (in a certificate setting forth the basis of the computation
of
such amount but not including any matters which the Bank or its holding
company regards as confidential) is required to compensate the Bank
and/or
(as the case may be) its holding company for such liability to Taxes,
cost, reduction, payment, foregone return or
loss.
|
13.3
|
Exception
|
14
|
Security
and set-off
|
14.1
|
Application
of moneys
|
14.1.1 |
first
in or towards payment of all unpaid fees and expenses which may be
owing
to the Bank under any of the Security Documents and/or the Master
Swap
Agreement;
|
14.1.2 |
secondly
in or towards payment of any arrears of interest owing in respect
of the
Loan or any part thereof;
|
14.1.3 |
thirdly
in or towards repayment of the Loan (whether the same is due and
payable
or not);
|
14.1.4 |
fourthly
in or towards payment to the Bank for any loss suffered by reason
of any
such payment in respect of principal not being effected on an Interest
Payment Date relating to the part of the Loan
repaid;
|
14.1.5 |
fifthly,
in or towards payment to the Bank of any sum owing to the Bank under
the
Master Swap Agreement;
|
14.1.6 |
sixthly
in or towards payment to the Bank of any other sums owing to it under
any
of the other Security Documents;
and
|
14.1.7 |
seventhly
the surplus (if any) shall be paid to the Borrower or to whomsoever
else
may be entitled to receive such
surplus.
|
14.2
|
Set-off
|
14.2.1 |
The
Borrower authorises the Bank (without prejudice to any of the Bank’s
rights at law, in equity or otherwise), at any time and without notice
to
the Borrower, to apply any credit balance to which the Borrower is
then
entitled standing upon any account of the Borrower with any branch
of the
Bank in or towards satisfaction of any sum due and payable from the
Borrower to the Bank under any of the Security Documents. For this
purpose, the Bank is authorised to purchase with the moneys standing
to
the credit of such account such other currencies as may be necessary
to
effect such application.
|
14.2.2 |
Without
prejudice to its rights hereunder and/or under the Master Swap Agreement,
the Bank may at the same time as, or at any time after, any Default
under
this Agreement or the Borrower’s default under the Master Swap Agreement,
set-off any amount due now or in the future from the Borrower to
the Bank
under this Agreement against any amount due from the Bank to the
Borrower
under the Master Swap Agreement and apply the first amount in discharging
the second amount. The effect of any set-off under this clause 14.2.2
shall be effective to extinguish or, as the case may require, reduce
the
liabilities of the Bank under the Master Swap
Agreement.
|
14.2.3 |
The
Bank shall not be obliged to exercise any right given to it by this
clause
14.2. The Bank shall notify the Borrower forthwith upon the exercise
or
purported exercise of any right of set-off giving full details in
relation
thereto.
|
14.3
|
Further
assurance
|
14.4
|
Conflicts
|
15 |
Accounts
|
15.1
|
Safety
Account
|
15.2
|
Cash
Collateral Account:
withdrawals
|
15.3
|
Application
of accounts
|
15.4
|
Charging
of Cash Collateral Account
|
16 |
Assignment,
transfer and lending
office
|
16.1
|
Benefit
and burden
|
16.2
|
No
assignment by Borrower
|
16.3
|
Assignment
by Bank
|
16.4
|
Transfer
|
16.4.1 |
with
the prior written consent of the Borrower (such consent not to be
unreasonably withheld and the request for which shall be promptly
responded to), unless the Transferee shall be a Subsidiary or the
holding
company of the Bank (in which case no such consent shall be required,
the
Borrower consenting to any such transfer by its execution of this
Agreement); and
|
16.4.2 |
if
the Transferee, by delivery of such undertaking as the Bank may approve,
becomes bound by the terms of this Agreement and agrees to perform
all or,
as the case may be, part of the Bank’s obligations under this
Agreement.
|
16.5
|
Documenting
assignments and transfers
|
16.6
|
Lending
office
|
16.7
|
Disclosure
of Information
|
17 |
Notices
and other matters
|
17.1
|
Notices
|
17.1.1 |
be
in writing delivered personally or by first-class prepaid letter
(airmail
if available) or facsimile transmission or other means of
telecommunication in permanent written
form;
|
17.1.2 |
be
deemed to have been received, subject as otherwise provided in the
relevant Security Document, in the case of a letter, when delivered
personally or three (3) days after it has been put in to the post
and, in
the case of a facsimile transmission or other means of telecommunication
in permanent written form, at the time of despatch (provided that
if the
date of despatch is not a business day in the country of the addressee
or
if the time of despatch is after the close of business in the country
of
the addressee it shall be deemed to have been received at the opening
of
business on the next such business day);
and
|
17.1.3 |
be
sent:
|
(a) |
if
to the Borrower at:
|
(b) |
if
to the Bank at:
|
17.2
|
No
implied waivers, remedies
cumulative
|
17.3
|
English
language
|
18 |
Governing
law and jurisdiction
|
18.1
|
Law
|
18.2
|
Submission
to jurisdiction
|
18.3
|
Contracts
(Rights of Third Parties) Act
1999
|
To: |
The
Royal Bank of Scotland plc
|
Dollar
Amount
|
Currency
in which
Tranche
is to be
outstanding
|
Interest
Period
|
Please
credit the funds
to:
|
|||
The
Safety Account
|
(a)
|
no
event or circumstance has occurred and is continuing which constitutes
a
Default;
|
(b)
|
the
representations and warranties contained in clauses 8.1 and 8.2 of
the
Loan Agreement are true and correct at the date hereof as if made
with
respect to the facts and circumstances existing at such
date;
|
(c)
|
the
borrowing to be effected by the drawdown of the Loan will be within
our
corporate powers, has been validly authorised by appropriate corporate
action and will not cause any limit on our borrowings (whether imposed
by
statute, regulation, agreement or otherwise) to be exceeded;
and
|
(d)
|
there
has been no material adverse change in our financial position from
that
described by us to the Bank in the negotiation of the Loan
Agreement.
|
|
For
and on behalf of
|
MARINOUKI
SHIPPING CORPORATION
|
1 |
Ship
conditions
|
1.1
|
Registration
and Encumbrances
|
1.2
|
Classification
|
1.3
|
Insurance
|
2 |
Constitutional
documents
|
3 |
Corporate
authorisations
|
(i)
|
being
true and correct;
|
(ii)
|
being
duly passed at meetings of the directors of such Security Party and
of the
shareholders of such Security Party each duly convened and
held;
|
(iii)
|
not
having been amended, modified or revoked;
and
|
(iv)
|
being
in full force and effect,
|
4 |
Specimen
signatures
|
5 |
Certificate
of incumbency
|
6 |
Borrower’s
consents and approvals
|
7 |
Other
consents and approvals
|
8 |
Certified
Management Agreement
|
9 |
Insurance
opinion
|
1 |
Security
Documents, letters and other
documents
|
2 |
Mortgage
registration
|
3 |
Notices
of assignment
|
4 |
Cyprus
opinion
|
5 |
Liberian
legal opinion
|
6 |
Further
opinions
|
7 |
Borrower’s
process agent
|
8 |
Manager’s
process agent
|
9 |
Registration
forms
|
10 |
Manager’s
confirmation
|
11 |
SMC/DOC
|
12 |
ISPS
Code
|
12.1
|
evidence
satisfactory to the Bank that the Ship is subject to a ship security
plan
which complies with the ISPS Code;
and
|
12.2
|
a
copy certified (in a certificate dated no earlier than five (5) Banking
Days prior to the Drawdown Date) as a true and complete copy by an
officer
of the Borrower of the ISSC for the Ship and the continuous synopsis
record required by the ISPS Code in respect of the
Ship;
|
13 |
Mortgagee’s
Interest Insurance Premia
|
14 |
Fee
|
15 |
Due
Diligence
|
1
|
The
Additional Cost is an addition to the interest rate to compensate
the Bank
for the cost of compliance with (a) the requirements of the Bank
of
England and/or the Financial Services Authority (or, in either case,
any
other authority which replaces all or any of its functions) or (b)
the
requirements of the European Central
Bank.
|
2
|
On,
or as soon as possible after, the first day of each Interest Period,
the
Bank shall calculate, as a percentage rate, its Additional Cost in
accordance with the following paragraphs. The Additional Cost will
be
expressed as a percentage rate per annum and will be rounded up to
four
decimal places.
|
3
|
The
Additional Cost when the Bank lends from an office in any member
state of
the European Union that has adopted or adopts the Euro as its lawful
currency in accordance with legislation of the European Union relating
to
Economic and Monetary Union will be the percentage (expressed as
a per
annum rate) which is its reasonable determination of the cost of
complying
with the minimum reserve requirements of the European Central Bank
in
respect of loans made from that
office.
|
4
|
The
Additional Cost for the Bank lending from an office in the United
Kingdom
will be calculated as follows:
|
(a)
|
in
relation to a sterling Loan:
|
AB
+ C(B - D) +
E
x
0.01
|
per
cent per annum
|
|
100
- (A + C)
|
(b)
|
in
relation to a Loan in any currency other than
sterling:
|
E
x0.01
|
per
cent. per annum
|
|
300
|
A
|
is
the percentage of Eligible Liabilities (assuming these to be in excess
of
any stated minimum) which that Lender is from time to time required
to
maintain as an interest free cash ratio deposit with the Bank of
England
to comply with cash ratio
requirements.
|
B
|
is
the percentage rate of interest (excluding the Margin and the Additional
Cost and, if any part of the Loan has not been paid on its due date,
the
additional rate of interest specified in clause 3.4 payable for the
relevant Interest Period on the
Loan.
|
C
|
is
the percentage (if any) of Eligible Liabilities which that Lender
is
required from time to time to maintain as interest bearing Special
Deposits with the Bank of England.
|
D
|
is
the percentage rate per annum payable by the Bank of England to the
Agent
on interest bearing Special
Deposits.
|
E
|
is
designed to compensate the Bank for amounts payable under the Fees
Rules
and is calculated by the Bank as being the most recent rate of charge
payable by it to the Financial Services Authority under the Fees
Rules in
respect of the relevant financial year of the Financial Services
Authority
(calculated for this purpose by the Bank as being the average of
the Fee
Tariffs applicable to the Bank for that financial year) and expressed
in
pounds per £1,000,000 of the Tariff Base of the
Bank.
|
5
|
For
the purposes of this schedule:
|
(a)
|
“
Eligible
Liabilities
”
and “
Special
Deposits
”
have the meanings given to them from time to time under or pursuant
to the
Bank of England Act 1998 or (as may be appropriate) by the Bank of
England;
|
(b)
|
“
Fees
Rules
”
means the rules on periodic fees contained in the Supervision manual
of
the Financial Services Authority’s Handbook of rules and guidance or such
other law or regulation as may be in force from time to time in respect
of
the payment of fees for the acceptance of
deposits;
|
(c)
|
“
Fee
Tariffs
”
means the fee tariffs specified in the Fees Rules under the activity
group
A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee
required
pursuant to the Fees Rules but taking into account any applicable
discount
rate);
|
(d)
|
“
Tariff
Base
”
has the meaning given to it in, and will be calculated in accordance
with,
the Fees Rules; and
|
(e)
|
“
pounds
”
and “
£
”
means the lawful currency of the United
Kingdom.
|
6
|
In
application of the above formulae, A, B, C and D will be included
in the
formulae as figures and not as percentages (i.e. 5 per cent. will
be
included in the formula as 5 and not a 0.05). A negative result obtained
by subtracting D from B shall be taken as zero. The resulting figures
shall be rounded to four decimal
places.
|
7
|
Any
determination by the Bank in accordance with this schedule in relation
to
a formula, the Additional Cost or any amount payable to it shall,
in the
absence of manifest error, be conclusive and binding on the
Borrower.
|
8
|
The
Bank may from time to time, after consultation with the Borrowers,
determine and notify the Borrowers of any amendments which need to
be made
to this schedule to comply with any change in law, regulation or
any
requirements from time to time imposed by the Bank of England, the
Financial Services Authority or the European Central Bank (or, in
any
case, any other authority which replaces all or any of its functions)
and
any such determination shall, in the absence of manifest error, be
conclusive and binding on the
Borrowers.
|
Yours
faithfully
|
|
For
and on behalf of
|
MARINOUKI
SHIPPING CORPORATION
|
I.M.O.
No.
CALL
SIGN
|
Name
of Ship
|
Year
of Registry or Date
of
Provisional
Registry/Port
of Registry
|
||
9309497
C4GG2
|
Marina
|
2005,
Limassol, Cyprus
|
Length (Article 2(8)) | 221.07 | |||
Breadth (Regulation 2(3)) | 36.50 | |||
Moulded depth amidships to Upper Deck (Regulation 2(2)) | 19.90 |
Gross:
47,100
|
Net:
26,600
|
SIGNED,
SEALED AND DELIVERED as a DEED
by
as
the duly authorised attorney-in-fact
of
MARINOUKI
SHIPPING CORPORATION
in
the presence of:-
|
)
)
)
)
)
)
)
|
_______________
|
|
|
(Seal)
|
Registrar
of Cyprus Ships
|
SIGNED,
SEALED AND DELIVERED
by
as
the duly authorised Attorney of
pursuant
to a Power of Attorney
dated
in
the presence of:
|
)
)
)
)
)
)
|
|
|
Name:
|
|
Title:
|
|
Seat:
|
|
of
Consular Officer/Notary Public/Certifying
Officer
|
|
(Seal)
|
Registrar
of Cyprus Ships
|
THE
COMMON SEAL OF
was
hereunto affixed
in
the presence of:-
|
)
)
)
)
|
|
|
Name:
|
|
Title:
|
|
Seat:
|
|
of
Consular Officer/Notary Public/Certifying
Officer
|
Clause
|
Page
|
|
1
|
Definitions
|
1
|
2
|
Representations
and warranties
|
7
|
3
|
Mortgage
of the Ship
|
7
|
4
|
Covenant
to pay
|
7
|
|
||
5
|
Continuing
security and other matters
|
8
|
6
|
Covenants
|
9
|
7
|
Powers
of Mortgagee to protect security and remedy defaults
|
19
|
8
|
Powers
of Mortgagee on Event of Default
|
19
|
9
|
Application
of moneys
|
22
|
10
|
Remedies
cumulative and other provisions
|
22
|
11
|
Costs
and indemnity
|
23
|
12
|
Attorney
|
24
|
13
|
Further
assurance
|
25
|
14
|
Notices
|
25
|
15
|
Counterparts
|
25
|
16
|
Severability
of provisions
|
25
|
17
|
Law,
jurisdiction and language
|
25
|
(1)
|
MARINOUKI
SHIPPING CORPORATION
whose registered office is at 80 Broad Street, Monrovia, Republic
of
Liberia (the “
Owner
”);
and
|
(2)
|
THE
ROYAL BANK OF SCOTLAND plc
whose registered office is at 36 St. Andrew Square, Edinburgh EH2
2YB,
Scotland, acting for the purposes of this Deed through its branch
at The
Shipping Business Centre, 5-10 Great Tower Street, London, EC3P 3HX,
England (the “
Mortgagee
”).
|
(A)
|
the
Owner is the sole, absolute and unencumbered, legal and beneficial
owner
of one hundred one hundredth (100/100th) shares in the Ship described
in
clause 1.2;
|
(B)
|
by
a Loan Agreement dated 1 March 2006 and made between (1) the Owner
(therein referred to as the “
Borrower
”)
and (2) the Mortgagee (therein referred to as the “
Bank
”),
the Mortgagee agreed (inter alia) to advance by way of a multicurrency
loan to the Owner, upon the terms and conditions therein contained,
a sum
of up to Thirty million four hundred thousand Dollars ($30,400,000)
or the
Equivalent Amount in an Optional Currency or Optional
Currencies;
|
(C)
|
by
a Master Swap Agreement dated 1 March 2006 and made between (1) the
Owner
and (2) the Mortgagee, the Mortgagee agreed the terms and conditions
upon
which it would enter into an interest rate swap transaction or
transactions with the Owner in respect of the Loan (whether in whole
or in
part as the case may be from time to
time);
|
(D)
|
the
Owner has executed in favour of the Mortgagee a statutory mortgage
of even
date herewith in account current form constituting a first priority
Cyprus
mortgage of one hundred one hundredth (100/100th) shares in the said
Ship;
and
|
(E)
|
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the Deed
of
Covenant referred to in the Loan Agreement but shall nonetheless
continue
in full force and effect notwithstanding any discharge of the
Mortgage.
|
1 |
Definitions
|
1.1
|
Defined
expressions
|
1.2
|
Definitions
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including, without limitation, Taxes, repair costs,
|
registration fees and insurance premiums) suffered, incurred or paid by the Mortgagee or any Receiver in connection with the exercise of the powers referred to in or granted by this Deed or otherwise payable by the Owner in accordance with clause 11; and |
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee or any Receiver until the date of receipt or recovery
thereof (whether before or after judgment) at a rate per annum calculated
in accordance with clause 3.4 of the Loan Agreement (as conclusively
certified by the Mortgagee or such Receiver, as the case may
be);
|
(a)
|
the
Ship;
|
(b)
|
the
Insurances;
|
(c)
|
the
Earnings; and
|
(d)
|
any
Requisition Compensation;
|
(a)
|
the
actual, constructive, compromised or arranged total loss of the Ship;
or
|
(b)
|
the
Compulsory Acquisition of the Ship;
or
|
(c)
|
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Owner from such hijacking,
theft, condemnation, capture, seizure, arrest, detention or confiscation
within thirty (30) days after the occurrence thereof;
and
|
1.3
|
Insurance
terms
|
1.3.1 |
“
excess
risks
”
means the proportion (if any) of claims for general average, salvage
and
salvage charges and under the ordinary collision clause not recoverable
in
consequence of the value at which the Ship is assessed for the purpose
of
such claims exceeding her insured
value;
|
1.3.2 |
“
protection
and indemnity risks
”
means the usual risks (including oil pollution and freight, demurrage
and
defence cover) covered by a United Kingdom protection and indemnity
association or a protection and indemnity association which is managed
in
London (including, without limitation, 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 8 of the Institute Time Clauses (Hulls)
(1/11/95) or the Institute Amended Running Down Clause (1/11/95)
or any
equivalent provision); and
|
1.3.3 |
“
war
risks
”
includes those risks covered by the standard form of English marine
policy
with Institute War and Strikes Clauses (Time) (1/10/83) attached
or
similar cover.
|
1.4
|
Construction
of Mortgage terms
|
1.4.1 |
references
to “interest” shall be construed as references to interest covenanted to
be paid in accordance with clause 4.1.2 and any interest specified
in
paragraph (b) of the definition of “Expenses” in clause
1.2;
|
1.4.2 |
references
to “principal” shall be construed as references to all moneys (other than
interest) for the time being comprised in the Outstanding
Indebtedness;
|
1.4.3 |
the
expression “all sums for the time being owing to the Mortgagee” means the
whole of the Outstanding Indebtedness;
and
|
1.4.4 |
the
expression “Account Current” means an account or accounts which shall be
kept by the Owner with the Mortgagee and from which the Mortgagee
may
(without giving notice or making any demand) debit any part of the
Outstanding Indebtedness.
|
1.5
|
Headings
|
1.6
|
Construction
of certain terms
|
1.6.1 |
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Deed and references to this Deed include its
schedules;
|
1.6.2 |
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.6.3 |
words
importing the plural shall include the singular and vice
versa;
|
1.6.4 |
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.6.5 |
references
to a “
guarantee
”
shall include references to an indemnity or other assurance against
financial loss including, without limitation, an obligation to purchase
assets or services as a consequence of a default by any other person
to
pay any Indebtedness and “
guaranteed
”
shall be construed accordingly; and
|
1.6.6 |
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.7
|
Conflict
with Loan Agreement
|
2 |
Representations
and warranties
|
2.1
|
The
Owner hereby represents and warrants to the Mortgagee
that:
|
2.1.1 |
it
is the sole, absolute, legal and beneficial owner of the
Ship;
|
2.1.2 |
the
Ship is not subject to any charter which, if entered into after the
date
of this Deed, would have required the consent of the Mortgagee under
clause 6.1.15, and there is no existing or intended agreement or
arrangement whereby the Earnings may be shared with any person other
than
the Mortgagee as provided in the General
Assignment;
|
2.1.3 |
neither
the Mortgaged Property nor any part thereof is subject to any Encumbrance
save as constituted by the Mortgage and this Deed and the General
Assignment or otherwise permitted by the terms of this Deed;
and
|
2.1.4 |
it
has power and is entitled to register the Ship under the laws and
flag of
Cyprus.
|
3 |
Mortgage
of the Ship
|
4 |
Covenant
to pay
|
4.1
|
In
consideration of the advance by the Mortgagee to the Owner on or
before
the date hereof of the total principal sum of Thirty million four
hundred
thousand Dollars ($30,400,000) or the Equivalent Amount in an Optional
Currency or Optional Currencies (receipt of which sum the Owner hereby
acknowledges) in accordance with the provisions of the Loan Agreement,
the
Owner hereby covenants with the
Mortgagee:
|
4.1.1 |
to
repay the Loan by the instalments and on the dates referred to and
otherwise in the manner and upon the terms set out in the Loan
Agreement;
|
4.1.2 |
to
pay interest on the Loan, and on any overdue interest or other moneys
payable under the Loan Agreement, at the rate or rates from time
to time
|
applicable thereto in the manner and upon the terms set out in the Loan Agreement; |
4.1.3 |
to
pay all other moneys payable by the Owner under the Security Documents
or
any of them at the times and in the manner therein specified;
and
|
4.1.4 |
to
pay and discharge to the Mortgagee the Master Swap Agreement Liabilities
on their due date.
|
5 |
Continuing
security and other matters
|
5.1
|
Continuing
Security
|
5.1.1 |
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance by the Owner with all of the covenants, terms and conditions
contained in the Security Documents to which the Owner is or is to
be a
party, express or implied and the security so created shall not be
satisfied by any intermediate payment or satisfaction of any part
of the
amount hereby and thereby secured (or by any settlement of accounts
between the Owner or any other person who may be liable to the Mortgagee
in respect of the Outstanding Indebtedness or any part thereof and
the
Mortgagee);
|
5.1.2 |
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any other of the Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder; and
|
5.1.3 |
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
5.2
|
Rights
additional
|
5.3
|
No
enquiry
|
5.4
|
Obligations
of Owner and Mortgagee
|
5.5
|
Discharge
of Mortgage
|
6 |
Covenants
|
6.1
|
The
Owner hereby covenants with the Mortgagee and undertakes throughout
the
Security Period:
|
6.1.1 |
Insurance
|
(a) |
Insured
risks, amounts and terms
|
(i) |
against
fire and usual marine risks (including excess risks) and war risks,
on an
agreed value basis, in such amounts (but not in any event less than
whichever shall be the greater of the market value of the Ship for
the
time being and One hundred and ten per cent (110%) of the aggregate
of the
Loan and the Master Swap Agreement Liabilities) and upon such terms
as
shall from time to time be approved in writing by the Mortgagee;
and
|
(ii) |
against
protection and indemnity risks (including pollution risks for the
highest
amount in respect of which cover is or may become available for ships
of
the same type, size, age and flag as the Ship and a freight, demurrage
and
defence cover) for the
|
full value and tonnage of the Ship (as approved in writing by the Mortgagee) and upon such terms as shall from time to time be approved in writing by the Mortgagee; and |
(iii) |
in
respect of such other matters of whatsoever nature and howsoever
arising
in respect of which insurance would be maintained by a prudent owner
of
the Ship;
|
(b) |
Approved
brokers, insurers and associations
|
(c) |
Fleet
liens, set-off and cancellation
|
(d) |
Payment
of premiums and calls
|
(e) |
Renewal
|
(f) |
Guarantees
|
(g) |
Hull
policy documents, notices, loss payable clauses and brokers’
undertakings
|
(h) |
Associations’
loss payable clauses, undertakings and
certificates
|
(i) |
Extent
of cover and exclusions
|
(j) |
Correspondence
with brokers and associations
|
(k) |
Independent
report
|
(l) |
Collection
of claims
|
(m) |
Employment
of Ship
|
(n) |
Application
of recoveries
|
(o) |
Assignment
of Insurances
|
6.1.2 |
Ship’s
name and registration
|
6.1.3 |
Repair
|
6.1.4 |
Modification;
removal of parts; equipment owned by third
parties
|
(a) |
make
any modification to the Ship in consequence of which her structure,
type
or performance characteristics could or might be materially altered
or her
value materially reduced; or
|
(b) |
remove
any material part of the Ship or any equipment the value of which
is such
that its removal from the Ship would materially reduce the value
of the
Ship without replacing the same with equivalent parts or equipment
which
are owned by the Owner free from Encumbrances;
or
|
(c) |
install
on the Ship any equipment owned by a third party which cannot be
removed
without causing damage to the structure or fabric of the
Ship;
|
6.1.5 |
Maintenance
of class; compliance with
regulations
|
6.1.6 |
Surveys
|
6.1.7 |
Inspection
|
6.1.8 |
Prevention
of and release from arrest
|
6.1.9 |
Employment
|
6.1.10 |
Information
|
6.1.11 |
Notification
of certain events
|
(a) |
any
damage to the Ship requiring repairs the cost of which will or might
exceed the Casualty Amount;
|
(b) |
any
occurrence in consequence of which the Ship has or may become a Total
Loss;
|
(c) |
any
requisition of the Ship for hire;
|
(d) |
any
requirement or recommendation made by any insurer or the Classification
Society or by any competent authority which is not, or cannot be,
complied
with in accordance with its terms;
|
(e) |
any
arrest or detention of the Ship or any exercise or purported exercise
of a
lien or other claim on the Ship or the Earnings or Insurances or
any part
thereof;
|
(f) |
any
petition or notice of meeting to consider any resolution to wind
up the
Owner (or any event analogous thereto under the laws of the place
of its
incorporation);
|
(g) |
the
occurrence of any Default; or
|
(h) |
the
occurrence of any Environmental Claim against the Owner or the Ship
or any
incident, event or circumstances which may give rise to any such
Environmental Claim;
|
6.1.12 |
Payment
of outgoings and evidence of
payments
|
6.1.13 |
Encumbrances
|
6.1.14 |
Sale
or other disposal
|
6.1.15 |
Chartering
|
(a) |
on
demise charter for any period;
|
(b) |
by
any time or consecutive voyage charter for a term which exceeds or
which
by virtue of any optional extensions therein contained may exceed
thirteen
(13) months’ duration;
|
(c) |
on
terms whereby more than two (2) months’ hire (or the equivalent) is
payable in advance; and
|
(d) |
below
the market rate prevailing at the time when the Ship is fixed or
other
than on arms’ length terms;
|
6.1.16 |
Sharing
of Earnings
|
6.1.17 |
Payment
of Earnings
|
6.1.18 |
Repairers’
liens
|
6.1.19 |
Manager
|
6.1.20 |
Registration
of Mortgage
|
6.1.21 |
Notice
of Mortgage
|
6.1.22 |
Conveyance
on default
|
6.1.23 |
Anti-drug
abuse
|
6.1.24 |
Compliance
with Environmental Laws
|
7 |
Powers
of Mortgagee to protect security and remedy
defaults
|
7.1
|
Protective
action
|
7.2
|
Remedy
of defaults
|
7.2.1 |
if
the Owner fails to comply with any of the provisions of clause 6.1.1
the
Mortgagee shall be entitled (but not bound) to effect and thereafter
to
maintain all such insurances upon the Ship as in its discretion it
may
think fit in order to procure the compliance with such provisions
or
alternatively, to require the Ship (at the Owner’s risk) to remain in, or
to proceed to and remain in a port designated by the Mortgagee until
such
provisions are fully complied with;
|
7.2.2 |
if
the Owner fails to comply with any of the provisions of clauses 6.1.3,
6.1.5 or 6.1.6, the Mortgagee shall be entitled (but not bound) to
arrange
for the carrying out of such repairs, changes or surveys as it may
deem
expedient or necessary in order to procure the compliance with such
provisions; and
|
7.2.3 |
if
the Owner fails to comply with any of the provisions of clause 6.1.8
the
Mortgagee shall be entitled (but not bound) to pay and discharge
all such
debts, damages, liabilities and outgoings as are therein mentioned
and/or
to take any such measures as it may deem expedient or necessary for
the
purpose of securing the release of the Ship in order to procure the
compliance with such provisions,
|
8 |
Powers
of Mortgagee on Event of
Default
|
8.1
|
Powers
|
8.1.1 |
to
take possession of the Ship;
|
8.1.2 |
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
8.1.3 |
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of any other part of the Mortgaged Property, and to
take
over or institute (if necessary using the name of the Owner) all
such
proceedings in connection therewith as the Mortgagee in its absolute
discretion thinks fit, and, in the case of the Insurances, to permit
the
brokers through whom collection or recovery is effected to charge
the
usual brokerage therefore;
|
8.1.4 |
to
discharge, compound, release or compromise claims in respect of the
Ship
or any other part of the Mortgaged Property which have given or may
give
rise to any charge or lien or other claim on the Ship or any other
part of
the Mortgaged Property or which are or may be enforceable by proceedings
against the Ship or any other part of the Mortgaged
Property;
|
8.1.5 |
to
sell the Ship or any share or interest therein with or without prior
notice to the Owner, and with or without the benefit of any charterparty,
and free from any claim by the Owner (whether in admiralty, in equity,
at
law or by statute) by public auction or private contract, at such
place
and upon such terms as the Mortgagee in its absolute discretion may
determine, with power to postpone any such sale, or otherwise to
sell the
Ship pursuant to the Mortgagee’s statutory power of sale under section 35
of the Merchant Shipping (Restoration of Ships Sales and Mortgages)
Law of
1963 (as amended) and without being answerable for any loss occasioned
by
such sale or resulting from postponement thereof and with power,
where the
Mortgagee purchases the Ship, to make payment of the sale price by
making
an equivalent reduction in the amount of the Outstanding Indebtedness
in
the manner referred to in clause
9.1;
|
8.1.6 |
to
manage, insure, maintain and repair the Ship, and to employ, sail
or lay
up the Ship in such manner and for such period as the Mortgagee,
in its
absolute discretion, deems expedient accounting only for net profits
arising from any such employment;
and
|
8.1.7 |
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 8.1.
|
8.2
|
Receiver
|
8.2.1 |
Appointment
|
8.2.2 |
Remuneration
|
8.2.3 |
Liability
of mortgagee in possession
|
8.3
|
Dealings
with Mortgagee or Receiver
|
9 |
Application
of moneys
|
9.1
|
Application
|
9.2
|
Shortfalls
|
10 |
Remedies
cumulative and other
provisions
|
10.1
|
No
implied waivers; remedies
cumulative
|
10.2
|
Delegation
|
10.3
|
Incidental
powers
|
11 |
Costs
and indemnity
|
11.1
|
Costs
|
11.2
|
Mortgagee’s
and Receiver’s indemnity
|
12 |
Attorney
|
12.1
|
Power
|
12.2
|
Exercise
of power
|
12.3
|
Filings
|
13 |
Further
assurance
|
14 |
Notices
|
15 |
Counterparts
|
16 |
Severability
of provisions
|
17 |
Law,
jurisdiction and language
|
17.1
|
Law
|
17.2
|
Submission
to jurisdiction
|
SIGNED,
SEALED AND DELIVERED as a DEED
|
)
|
|
by
|
)
|
|
for
and on behalf of
|
)
|
__________________ |
MARINOUKI
SHIPPING CORPORATION
|
)
|
Attorney-in-Fact
|
in
the presence of:
|
)
|
Witness
|
Name:
|
Address:
|
Occupation:
|
SIGNED,
SEALED AND DELIVERED as a DEED
|
)
|
|
by
|
)
|
|
for
and on behalf of
|
)
|
__________________ |
THE
ROYAL BANK OF SCOTLAND plc
|
)
|
Attorney-in-Fact
|
in
the presence of:
|
)
|
Witness
|
Name:
|
Address:
|
Occupation:
|
Clause
|
Page
|
|
1
|
Definitions
|
1
|
2
|
Assignment
and application of funds
|
5
|
3
|
Continuing
security and other matters
|
8
|
4
|
Powers
of Mortgagee to protect security and remedy defaults
|
9
|
5
|
Powers
of Mortgagee on Event of Default
|
10
|
6
|
Attorney
|
10
|
7
|
Further
assurance
|
11
|
8
|
Costs
and indemnities
|
11
|
9
|
Remedies
cumulative and other provisions
|
12
|
10
|
Notices
|
13
|
11
|
Counterparts
|
13
|
12
|
Law
and jurisdiction
|
13
|
Schedule
1 Forms of Loss Payable Clauses
|
15
|
|
Schedule
2 Form of Notice of Assignment of Insurances
|
17
|
1 |
Definitions
|
1.1
|
Defined
expressions
|
1.2
|
Definitions
|
(a)
|
the
Earnings;
|
(b)
|
the
Insurances; and
|
(c)
|
any
Requisition Compensation;
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including without limitation Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee in connection with the exercise of the powers referred
to in
or granted by the Loan Agreement, the Mortgage, this Deed or any
other of
the Security Documents or other/vise payable by the Owner in accordance
with clause 11 of the Mortgage or clause 8;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee until the date of receipt or recovery thereof (whether
before or after judgment) at a rate per annum calculated in accordance
with clause 3.4 of the Loan Agreement (as conclusively certified
by the
Mortgagee);
|
1.3
|
Headings
|
1.4
|
Construction
of certain terms
|
1.4.1 |
references
to clauses and schedules are to be construed as references to clauses
of
and schedules to this Deed and references to this Deed include its
schedules;
|
1.4.2 |
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.4.3 |
words
importing the plural shall include the singular and vice
versa;
|
1.4.4 |
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.5 |
references
to a “
guarantee
”
include references to an indemnity or other assurance against financial
loss including, without limitation, an obligation to
|
purchase assets or services as a consequence of a default by any other person to pay any Indebtedness and “ guaranteed ” shall be construed accordingly; and |
1.4.6 |
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.5
|
Conflict
with Loan Agreement
|
2 |
Assignment
and application of funds
|
2.1
|
Assignment
|
2.1.1 |
Earnings
|
2.1.2 |
Insurances
|
(a) |
any
moneys payable under the Insurances, other than any moneys payable
under
any loss of earnings insurance, shall be payable in accordance with
the
terms of the relevant Loss Payable Clause and the Mortgagee will
not in
the meantime give any notification to the contrary to the insurers
as
contemplated by the Loss Payable
Clauses;
|
(b) |
any
insurance moneys received by the Mortgagee in respect of any major
casualty (as specified in the relevant Loss Payable Clause) shall,
unless
prior to receipt or whilst such moneys are in the hands of the
|
Mortgagee there shall have occurred a Default (whereupon such insurance monies shall be applied in accordance with clause 2.3 or clause 2.6 (as the case may be)), be paid over to the Owner upon the Owner furnishing evidence satisfactory to the Mortgagee that all loss and damage resulting from such casualty has been properly made good and repaired, and that all repair accounts and other liabilities whatsoever in connection with the casualty have been fully paid and discharged by the Owner, provided however that the insurers with whom the fire and usual marine risks insurances are effected may, in the case of a major casualty, and with the previous consent in writing of the Mortgagee, make payment on account of repairs in the course of being effected; and |
(c) |
any
moneys payable under any loss of earnings insurance shall be payable
in
accordance with the terms of the relevant Loss Payable Clause and
shall be
subject to such provisions of this clause 2 as shall apply to Earnings
and
the Mortgagee will not give any notification to the insurers as
contemplated in such Loss Payable Clause unless and until the Mortgagee
shall have become entitled under clause 2.1.1 to direct that the
Earnings
be paid to the Mortgagee.
|
2.2
|
Notice
|
2.3
|
Application
|
2.3.1 |
recovery
under the Insurances (other than under any loss of earnings insurance
and
any such sum or sums as may have been received by the Mortgagee in
accordance with the relevant Loss Payable Clause in respect of a
major
casualty as therein defined and paid over to the Owner as provided
in
clause 2.1.2(b) or which fall to be otherwise applied under clause
2.6);
and
|
2.3.2 |
Requisition
Compensation,
|
2.4
|
Shortfalls
|
2.5
|
Application
of Earnings received by
Mortgagee
|
2.5.1 |
if
received by the Mortgagee, or in the hands of the Mortgagee, prior
to the
occurrence of an Event of Default be retained by the Mortgagee and
shall
be paid over by the Mortgagee to the Owner at such times, in such
amounts
and for such purposes and/or shall be applied by the Mortgagee in
or
towards satisfaction of any sums from time to time accruing due and
payable by the Owner under the Security Documents or any of them
or by
virtue of payment demanded thereunder, in each case as the Mortgagee
may
in its absolute discretion determine;
and
|
2.5.2 |
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.5.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.6
|
Application
of Insurances received by
Mortgagee
|
2.6.1 |
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of a Default but prior to the occurrence of an Event of
Default, be retained by the Mortgagee and shall be paid over by the
Mortgagee to the Owner at such times, in such amounts and for such
purposes and/or shall be applied by the Mortgagee in or towards
satisfaction of any sums from time to time accruing due and payable
by the
Owner under the Security Documents or any of them or by virtue of
payment
demanded thereunder, in each case as the Mortgagee may in its absolute
discretion determine; and
|
2.6.2 |
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.6.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.7
|
Use
of Owner’s name
|
2.8
|
Reassignment
|
3 |
Continuing
security and other matters
|
3.1
|
Continuing
security
|
3.1.1 |
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance with all of the covenants, terms and conditions contained
in
the Security Documents, express or implied, and that the security
so
created shall not be satisfied by any intermediate payment or satisfaction
of any part of the amount hereby and thereby secured (or by any settlement
of accounts between the Owner or any other person who may be liable
to the
Mortgagee in respect of the Outstanding Indebtedness or any part
thereof
and the Mortgagee);
|
3.1.2 |
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any other of the Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
3.1.3 |
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
3.2
|
Rights
additional
|
3.3
|
No
enquiry
|
3.4
|
Obligations
of Owner and Mortgagee
|
3.5
|
Discharge
of Mortgage
|
4 |
Powers
of Mortgagee to protect security and remedy
defaults
|
4.1
|
Protective
action
|
4.2
|
Remedy
of defaults
|
5 |
Powers
of Mortgagee on Event of
Default
|
5.1
|
Powers
|
5.1.1 |
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
5.1.2 |
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of the Earnings or Requisition Compensation or any
part
thereof, and to take over or institute (if necessary using the name
of the
Owner) all such proceedings in connection therewith as the Mortgagee
in
its absolute discretion thinks fit, and, in the case of the Insurances,
to
permit any brokers through whom collection or recovery is effected
to
charge the usual brokerage
therefor;
|
5.1.3 |
to
discharge, compound, release or compromise claims in respect of the
Earnings, Insurances or Requisition Compensation or any part thereof
which
have given or may give rise to any charge or lien or other claim
on the
Earnings, Insurances or Requisition Compensation or any part thereof
or
which are or may be enforceable by proceedings against the Earnings,
Insurances or Requisition Compensation or any part thereof;
and
|
5.1.4 |
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 5.1.
|
6 |
Attorney
|
6.1
|
Appointment
|
6.2
|
Exercise
of power
|
6.3
|
Filings
|
7 |
Further
assurance
|
8 |
Costs
and indemnities
|
8.1
|
Costs
|
8.2
|
Mortgagee’s
indemnity
|
9 |
Remedies
cumulative and other
provisions
|
9.1
|
No
implied waivers; remedies
cumulative
|
9.2
|
Delegation
|
9.3
|
Incidental
powers
|
10 |
Notices
|
11 |
Counterparts
|
12 |
Law
and jurisdiction
|
12.1
|
Law
|
12.2
|
Submission
to jurisdiction
|
12.3
|
Contracts
(Rights of Third Parties) Act
1999
|
1 |
Hull
and machinery (marine and war
risks)
|
(a)
|
all
claims hereunder in respect of an actual or constructive or compromised
or
arranged total loss, and all claims in respect of a major casualty
(that
is to say any casualty the claim in respect of which exceeds $500,000
(or
the equivalent in any other currency) inclusive of any deductible)
shall
be paid in full to the Mortgagee or to its order;
and
|
(b)
|
all
other claims hereunder shall be paid in full to the Owner or to its
order,
unless and until the Mortgagee shall have notified the insurers hereunder
to the contrary, whereupon all such claims shall be paid to the Mortgagee
or to its order.
|
2 |
Protection
and indemnity risks
|
3 |
War
risks
|
4 |
Loss
of earnings
|
Signed
|
|
For
and on behalf of
|
|
MARINOUKI
SHIPPING CORPORATION
|
EXECUTED
as
a
DEED
|
)
|
|
by
|
)
|
|
for
and on behalf of
|
)
|
Attorney-in-Fact
|
MARINOUKI
SHIPPING CORPORATION
|
)
|
|
in
the presence of:
|
)
)
|
|
Witness
|
||
Name:
|
||
Address:
|
||
Occupation:
|
EXECUTED
as
a
DEED
|
)
|
|
by
|
)
|
|
for
and on behalf of
|
)
|
Attorney-in-Fact
|
THE
ROYAL BANK OF SCOTLAND plc
|
)
|
|
in
the presence of:
|
)
)
|
|
Witness
|
||
Name:
|
||
Address:
|
||
Occupation:
|
1 |
Loan
Agreement
|
2 |
Confirmation
of appointment
|
3 |
Representation
and warranty
|
3.1
|
We
hereby represent and warrant that the copy of the Management Agreement
set
out in Appendix 1 to this Letter is a true and complete copy of the
Management Agreement, that the Management Agreement constitutes valid
and
binding obligations of the Manager enforceable in accordance with
its
terms and that there have been no amendments or variations thereto
or
defaults thereunder by the Manager or, to the best of the Manager’s
knowledge and belief, the Borrower.
|
3.2
|
We
hereby confirm that the representations and warranties set out in
clauses
8.2.9, 8.2.10 and 8.2.11 of the Loan Agreement are true and correct
in all
respects.
|
4 |
Undertakings
|
4.1
|
the
Manager will not agree or purport to agree to any amendment or variation
of the Management Agreement without the prior written consent of
the
Bank;
|
4.2
|
the
Manager will procure that any sub-manager appointed by it pursuant
to the
provisions of the Management Agreement will, on or before the date
of such
appointment, enter into an undertaking in favour of the Bank in
substantially the same form (mutatis mutandis) as this
Letter;
|
4.3 |
the
Manager will not, without the prior written consent of the Bank,
take any
action or institute any proceedings or make or assert any claim
on or in
respect of the Ship or its policies and contracts of insurance
(which
expression includes all entries of the Ship in a protection and
indemnity
or war risks association) which are from time to time during
the Security
Period (as such term is defined in the General Assignment) in
place or
taken out or entered into by or for the benefit of the Borrower
(whether
in the sole name of the Borrower or in the joint names of the
Borrower and
the Bank or otherwise) in respect of the Ship and her Earnings
(as such
term is defined below) or otherwise howsoever in connection with
the Ship
and all benefits thereof (including claims of whatsoever nature
and return
of premiums) (together the “
Insurances
”)
or all moneys whatsoever from time to time due or payable to
the Borrower
during the Security Period (as such term is defined in the General
Assignment) arising out of the use or operation of the Ship including
(but
without limiting the generality of the foregoing) all freight,
hire and
passage moneys, income arising under pooling arrangements, 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 (the
“
Earnings
”)
or any other property or other assets of the Borrower which the
Bank has
previously advised the Manager are subject to any Encumbrance
or right of
set-off in favour
|
4.4
|
the
Manager does hereby subordinate any claim that it may have against
the
Borrower or otherwise in respect of the Ship and its Earnings, Insurances
and Requisition Compensation (as such term is defined in the General
Assignment) to the claims of the Bank under the Loan Agreement and
the
other Security Documents and undertakes to exercise no right to which
it
may be entitled in respect of the Borrower and/or the Ship and/or
its
Earnings and/or Insurances and/or Requisition Compensation in competition
with the Bank;
|
4.5
|
the
Manager will discontinue any such action or proceedings or claim
which may
have been taken, instituted or made or asserted, promptly upon notice
from
the Bank to do so;
|
4.6
|
the
Manager will promptly notify the Bank if at any time the amount owed
by
the Borrower to the Manager pursuant to the Management Agreement
(whether
in respect of the Manager’s remuneration or disbursements or otherwise)
exceeds [US$100,000] or the equivalent in other currencies;
and
|
4.7
|
the
Manager will provide the Bank with such information concerning the
Ship as
the Bank may from time to time reasonably
require.
|
5 |
Insurance
assignment
|
5.1
|
By
way of security for the aggregate of the Loan and interest accrued
and
accruing thereon, the Expenses (as such term is defined in the General
Assignment), the Master Swap Agreement Liabilities (as such term
is
defined in the General Assignment) and all other sums of money from
time
to time owing by the Borrower to the Bank, whether actually or
contingently, under the Security Documents, the Master Swap Agreement
or
any of them to which the Borrower is or is to be a party (the
“
Outstanding
Indebtedness
”)
the Manager with full title guarantee hereby irrevocably and
unconditionally assigns and agrees to assign to the Bank all of the
Manager’s rights, title and interest in and to and the benefit of the
Insurances.
|
5.2
|
The
Manager hereby undertakes to procure that a duly completed notice
in the
form set out in Appendix 2 to this Letter is given to all insurers
of the
Ship and to procure that such notice is promptly endorsed on all
policies
and entries in respect of the Insurances and agrees promptly to authorise
and/or instruct any broker, insurer or association with or through
whom
Insurances may be effected to endorse on any policy or entry or otherwise
to give effect to such loss payable clause as may be stipulated by
the
Bank.
|
5.3
|
The
Bank shall, at the Manager’s cost, re-assign to the Manager all the
Manager’s right, title and interest in the Insurances upon the Outstanding
Indebtedness being discharged in full to the satisfaction of the
Bank.
|
5.4
|
Any
moneys in respect of the Insurances which would (but for the assignment
contained in clause 5.1 above) be payable to the Manager shall be
applied
in accordance with clause 2.3 of the General Assignment and/or (as
the
case may be) clause 2.6 of the General
Assignment.
|
6 |
Law
and jurisdiction
|
6.1
|
The
agreement constituted by this Letter shall be governed by and construed
in
accordance with English law.
|
6.2
|
The
Manager agrees, for the benefit of the Bank, that any legal action
or
proceedings arising out of or in connection with this letter against
the
Manager or any of its assets may be brought in the English courts.
The
Manager irrevocably and unconditionally submits to the jurisdiction
of
such courts and whoever irrevocably designates, appoints and empowers
Cheeswrights at present of 10 Philpot Lane, London EC3M 8BR, England,
receive for it and on its behalf, service of process issued out of
the
English courts in any such legal action or proceedings. The submission
to
such jurisdiction shall not (and shall not be construed so as to)
limit
the rights of the Bank to take any proceedings against the Manager
in the
courts of any other competent jurisdiction nor shall the taking of
proceedings in any one or more jurisdictions preclude the taking
of
proceedings in any other jurisdiction, whether concurrently or
not.
|
6.3
|
No
term of this Letter is enforceable under the Contracts (Rights of
Third
Parties) Act 1999 by a person who is not a party to this Letter or
to whom
this Letter is not addressed.
|
Yours
faithfully
|
For
and on behalf of
|
SAFETY
MANAGEMENT OVERSEAS S.A.
|
SIGNED
|
for
and on behalf of
|
SAFETY
MANAGEMENT OVERSEAS S.A.
|
1. |
Interpretation
|
2. |
Obligations
|
3. |
Representations
|
4. |
Agreements
|
6. |
Early
Termination
|
7. |
Transfer
|
8. |
Contractual
Currency
|
9. |
Miscellaneous
|
10. |
Offices;
Multibranch Parties
|
11. |
Expenses
|
12. |
Notices
|
13. |
Governing
Law and Jurisdiction
|
14. |
Definitions
|
The
Royal Bank of Scotland plc
(Name
of Party)
|
Marinouki
Shipping Corporation
(Name
of Party)
|
|||
By:
|
By:
|
|||
Name:
|
Name:
|
|||
Title:
|
Title:
|
|||
Date:
|
Date:
|
(a)
|
“
Specified
Entity
”
means in relation to Party A for the purpose
of:-
|
Section
5(a)(v), (vi) and (vii)
|
)
Not
applicable
|
Section
5(b)(iv),
|
)
|
and
in relation to Party B for the purpose of:-
|
|
Section
5(a)(v),
|
)
|
Section
5(a)(vi),
|
)
Any
Affiliate of Party B
|
Section
5(a)(vii),
|
)
|
Section
5(b)(iv),
|
)
|
(b)
|
“
Specified
Transaction
”
will have the meaning specified in Section 14 of this
Agreement.
|
(c) |
The
“
Cross
Default
”
provisions of Section 5(a)(vi)
will
not apply to Party A.
|
(d)
|
The
“
Credit
Event Upon Merger
”
provisions of Section 5(b)(iv) will apply to Party A and will apply
to
Party B.
|
(e) |
The
“
Automatic
Early Termination
”
provision of Section 6(a) will not apply to Party A and will not
apply to
Party B.
|
(f) |
Payments
on Early Termination
.
For the purpose of Section 6(e) of this
Agreement:-
|
(i) |
Market
Quotation will apply.
|
(ii) |
The
Second Method will apply.
|
(g) |
“
Termination
Currency
”
means such currency of any Transaction as may be selected by the
party
which is not the Defaulting Party or the Affected Party, as the case
may
be, if such currency is freely available and convertible or, if there
are
two Affected Parties such currency as may be agreed between the parties
if
such currency is freely available and, otherwise, United States
Dollars.
|
(h) |
Additional
Termination Event
will apply.
|
(a)
|
“Any
circumstances arise which, in the opinion of Party A, give reasonable
grounds for belief that Party B or any Credit Support Provider of
Party B
may not, or may be unable to, perform its respective obligations
under
this Agreement or the Credit Support
Document.”
|
(b)
|
“Party
B or any Credit Support Provider of Party B fails to give adequate
assurances of its ability to perform its respective obligations under
this
Agreement or any Credit Support Document on or before the third Business
Day after a written request to do so has been given to Party B by
Party
A.”
|
(a) |
Payer
Representations
.
For the purpose of Section 3(e) of this Agreement, Party A and Party
B
will both make the following
representation:-
|
(i)
|
the
accuracy of any representations made by the other party pursuant
to
Section 3(f) of this Agreement;
|
(ii)
|
the
satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii)
of
this Agreement and the accuracy and effectiveness of any document
provided
by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this
Agreement; and
|
(iii)
|
the
satisfaction of the agreement of the other party contained in Section
4(d)
of this Agreement;
|
(b) |
Payee
Representations
.
For the purpose of Section 3(f) of this
Agreement:-
|
(a) |
Tax
forms, documents or certificates to be delivered:- Not
applicable
|
(b) |
Other
documents to be delivered where relevant
are:-
|
Party
required to deliver document |
Form/Document/
Certificate |
Date
by which to be
delivered |
Covered
by
Section 3(d) Representation |
|||
Party
A/
Party
B
|
Such
evidence of the due authorisation of the person(s) signing this Agreement
and each Confirmation on its behalf as either Party may reasonably
request
|
Date
of execution of this Agreement
|
Yes
|
Party
B
|
A
copy of the Memorandum and Articles of Association and Certificate
of
Incorporation (or other constitutive documents) of Party B
|
Date
of execution of this Agreement
|
Yes
|
|||
Party
B
|
A
copy of the resolution of the board of directors of Party B approving
this
Agreement and the Transactions contemplated hereby and authorising
a
specified person or persons to execute this Agreement and any Confirmation
on behalf of Party B
|
Date
of execution of this Agreement
|
Yes
|
|||
Party
B
|
Copies
of such statutory and/or regulatory consents, approvals and authorisations
as may be necessary for Party B to enter into this Agreement and
the
Transactions contemplated hereby
|
Date
of execution of this Agreement
|
Yes
|
|||
Party
B
|
Confirmation
in form and substance satisfactory to Party A that all conditions
precedent relating to the Loan Facility (as defined in Section 14
pursuant
to Part 5(e) of the Schedule to this Agreement) have been met in
full (as
set out in clause 10 of the Loan Facility)
|
Date
of execution of this Agreement
|
Yes
|
Party
B
|
The
Credit Support Documents referred to in Part 4(f) of the Schedule
to this
Agreement duly executed by the parties thereto
|
Date
of execution of this Agreement
|
Yes
|
|||
Party
B
|
Legal
opinion(s) in form and substance satisfactory to Party A from
solicitor(s)/law firm(s) approved by Party A
|
Date
of execution of this Agreement
|
Yes
|
|||
Party
B
|
A
copy of the written acceptance by Party B’s Process Agent (as defined in
Part 4(b) of the Schedule to this Agreement) of its appointment to
receive
for Party B and on its behalf service of process in any Proceedings
under
this Agreement
|
Date
of execution of this Agreement
|
Yes
|
|||
Party
B
|
The
annual financial statements of Party B
|
Upon
demand in respect of those which became publicly available prior
to the
date of this Agreement and, in respect of those statements, which
are not
publicly available as at the date hereof, as soon as possible and,
in any
event, within 120 days of the end of Party B’s financial year (or as soon
as practicable after becoming publicly available)
|
Yes
|
Party
B
|
A
copy of the Memorandum and Articles of Association and Certificate
of
Incorporation (or other constitutive documents) of each Credit Support
Provider of Party B
|
Date
of execution of this Agreement
|
Yes
|
|||
Party
B
|
A
copy of the resolution of the board of directors of each Credit Support
Provider of Party B approving the Credit Support Document(s) and
authorising a specified person or persons to execute the Credit Support
Document(s) on its behalf
|
Date
of execution of this Agreement
|
Yes
|
|||
Party
B
|
Copies
of such statutory and/or regulatory consents, approvals and authorisations
as may be necessary for each Credit Support Provider of Party B to
execute
the Credit Support Document(s)
|
Date
of execution of this Agreement
|
Yes
|
|||
Party
B
|
The
annual financial statements (where produced) of each Credit Support
Provider of Party B
|
Upon
demand in respect of those which became publicly available prior
to the
date of this Agreement and, in respect of those statements, which
are not
publicly available as at the date hereof, as soon as possible and,
in any
event, within 120 days of the end of each Credit Support Provider
of Party
B’s financial year (or as soon as practicable after becoming publicly
available)
|
Yes
|
(a) |
Addresses
for Notices
.
For the purpose of Section 12(a) of this
Agreement:-
|
Address:
|
c/o
RBS Financial Markets
|
280
Bishopsgate
|
|
London
EC2M 4RB
|
|
United
Kingdom
|
|
Attention:
|
Swaps
Administration
|
Fax:
|
+44
207 085 5050
|
Telephone:
|
+44
207 087 5000
|
Address:
|
c/o
RBS Financial Markets
|
135
Bishopsgate, London, EC2M 3UR
|
|
Attention:
|
Head
of Legal, Financial Markets
|
Telephone
No:
|
+44
207 085 8411
|
Marinouki
Shipping Corporation
|
|
Address:
|
32
Karamanli Avenue
|
16605
Voula
|
|
Athens,
Greece
|
|
Attention:
|
George
Papadopoulos
|
Facsimile
No.:
|
0030
210 895 6900
|
(b) |
Process
Agent
.
For the purpose of Section 13(c) of this
Agreement:-
|
(c) |
Offices
.
The provisions of Section 10(a) will not apply to this
Agreement.
|
(d) |
Multibranch
Party
.
For the purpose of Section 10(c) of this
Agreement:-
|
(e) |
Calculation
Agent
.
The Calculation Agent is Party A unless otherwise specified in
a
Confirmation in relation to the relevant
Transaction.
|
(f) |
Credit
Support Document
.
Details of any Credit Support
Document(s):-
|
(g) |
Credit
Support Provider
.
Credit Support Provider does not apply in relation to Party
A.
|
(h) |
Governing
Law
.
This Agreement will be governed by and construed in accordance with
English law.
|
(i) |
Netting
of Payments
.
Subparagraph (ii) of Section 2(c) of this Agreement will apply to
all
Transactions with effect from the date of this Agreement, except
as
mutually agreed by Party A and Party B and detailed in the relevant
Confirmation(s) evidencing a Transaction or group(s) of Transactions,
as
the case may be.
|
(j) |
“
Affiliate
”
will have the meaning specified in Section 14 of this
Agreement.
|
(a) |
Representations
.
Section 3(a) of this Agreement is hereby amended by, firstly, the
deletion
of the word “and” at the end of subsection (iv); secondly, the
substitution of a semi-colon for the full-stop at the end of subsection
(v); and, thirdly, the addition of the following
subsections:-
|
“(vi)
|
Capacity
.
It is acting as principal (and not as agent or any other capacity,
fiduciary or otherwise) and
|
(vii)
|
Physical
Delivery
.
In respect of any physically-settled Transactions, it will, at the
time of
delivery, be the legal and beneficial owner, free of liens and
encumbrances, of any securities or commodities, which it delivers
to the
other party.”
|
(b) |
Relationship
Between Parties
.
Each party will be deemed to represent to the other party on the
date on
which it enters into a Transaction that (absent a written agreement
between the parties that expressly imposes affirmative obligations
to the
contrary for that Transaction):-
|
(i)
|
Non-Reliance
.
It is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that
Transaction is appropriate or proper for it based upon its own judgement
and upon advice from such advisors as it has deemed necessary. It
is not
relying on any communication (written or oral) of the other party
as
investment advice or as a recommendation to enter into that Transaction;
it being understood that information and explanations related to
the terms
and conditions of a Transaction shall not be considered investment
advice
or a recommendation to enter into that Transaction. No communication
(written or oral) received from the other party shall be deemed to
be an
assurance or guarantee as to the expected results of that
Transaction.
|
(ii)
|
Assessment
and Understanding
.
It is capable of assessing the merits of and understanding (on its
own
behalf or through independent professional advice), and understands
and
accepts, the terms, conditions and risks of that Transaction. It
is also
capable of assuming, and assumes, the risks of that
Transaction.
|
(iii)
|
Status
of Parties
.
The other party is not acting as a fiduciary for or an adviser to
it in
respect of that Transaction.
|
(c) |
Set-off
.
The following provision is incorporated as Section 6(f) of this
Agreement:
|
“6(f) |
Any
amount (the “Early Termination Amount”) payable to one party (the Payee)
by the other party (the Payer) under Section 6(e), in circumstances
where
there is a Defaulting Party or one Affected Party, will, at the
option of
the party (“X”) other than the Defaulting Party or the Affected Party (and
without prior notice to the Defaulting Party or the Affected Party),
be
reduced by its set-off against any amount(s) (the “Other Agreement
Amount”) payable (whether at such time or in the future or upon the
occurrence of a contingency) by the Payee to the Payer (irrespective
of
the currency, place of payment or booking office of the obligation)
under
any other agreement(s) between the Payee and the Payer or instrument(s)
or
|
undertakings) issued or executed by one party to, or in favour of, the other party (and the Other Agreement Amount will be discharged promptly and in all respects to the extent it is so set-off). X will give notice to the other party of any set-off effected under this Section 6(f). |
(d) |
Recording
of Conversations
.
Each party to this Agreement acknowledges and agrees to the tape
recording
of conversations between the parties to this Agreement whether by
one or
other or both the parties.
|
(e) |
Loan
Facility
.
Section 14 of this Agreement is hereby amended by the incorporation
of the
following Definition:-
|
(f) |
Security
.
Party B irrevocably and unconditionally undertakes and confirms to
Party A
that the obligations to Party A by Party B pursuant to this Agreement
shall be secured by the Security Documents as defined in the Loan
Facility.
|
(g) |
Additional
Representations
.
Without prejudice to Part 5(a) of the Schedule to this Agreement,
in
addition to the Representations made by each party pursuant to Section
3
of this Agreement, Party B also makes to Party A the representations
and
warranties set out in clause 8 of the Loan Facility, which clause
shall be
incorporated, mutatis mutandis, into this Agreement as if set out
in this
Agreement in full and which representations and warranties will be
deemed
to be repeated by Party B on each Effective Date and each Scheduled
Payment Date in respect of a
Transaction.
|
(h) |
Default
under Loan Facility
.
In addition to the Events of Default set out in Section 5(a) of this
Agreement, in relation to Party B only, the occurrence or existence
of any
of the events or circumstances included as an “Event of Default” in clause
11 of the Loan Facility (whether or not the Loan Facility at the
time of
any such occurrence or existence is still in force and effect or
has been
terminated or amended or the indebtedness owed by Party B to Party
A under
the Loan Facility has been repaid in full) shall constitute an Event
of
Default under this Agreement and Party B shall be the Defaulting
Party,
such that the provisions of the aforementioned clause 11 of the Loan
Facility shall be incorporated, mutatis mutandis, into this Agreement
as
if set out in this Agreement in
full.
|
(i)
|
during
such time as any indebtedness owed by Party B to Party A under the
Loan
Facility remains outstanding, Party B undertakes with Party A to
comply
with the Undertakings (subject to all grace periods, conditions,
provisions for consents and/or waivers in respect of the Undertakings
provided for in the Loan Facility);
and
|
(ii)
|
at
any time after all such indebtedness under the Loan Facility has
been
repaid or prepaid in full, the Undertakings shall, mutatis mutandis,
take
effect as Undertakings of Party B directly in favour of Party A pursuant
to this Agreement.
|
(i) |
Interest
Periods under the Loan Facility
.
In the event that the parties enter into a Transaction for the
specific
purpose of hedging (either in whole or in part) Party B’s indebtedness to
Party A under the Loan Facility, it is hereby agreed that interest
periods
under the Loan Facility shall be of the same duration as Calculation
Periods in respect of the relevant Transaction, such that
interest
|
(j) |
Party
A and Party B agree that, in certain circumstances referred to in
the Loan
Facility including, without limit, clause 5.3, the obligations of
Party A
and Party B under this Agreement shall be recalculated in accordance
with
the provisions thereof.
|
(k) |
2000
ISDA Definitions
.
The 2000 Definitions published by ISDA (the “Definitions”) are
incorporated by reference herein.
|
(l) |
Contracts
(Rights of Third Parties) Act 1999
.
No term of this Agreement is enforceable by a person who is not a
party to
it.
|
Page
|
||
1
|
Definitions
|
1
|
2
|
Restrictions
|
3
|
3
|
First
fixed charge
|
3
|
4
|
Further
documentation etc.
|
4
|
5
|
Representations
|
5
|
6
|
Notices
|
5
|
Supplemental
|
5
|
|
8
|
Law
and jurisdiction
|
6
|
(1)
|
MARINOUKI
SHIPPING CORPORATION
a
corporation incorporated in the Republic of Liberia having its registered
office at 80 Broad Street, Monrovia, Liberia (the “
Owner
”);
and
|
(2)
|
THE
ROYAL BANK OF SCOTLAND plc
,
a
company incorporated in Scotland whose registered office is at 36
St.
Andrew Square, Edinburgh EH2 2YB, Scotland, acting for the purposes
of
this Deed through its branch at The Shipping Business Centre, 5-10
Great
Tower Street, London, EC3P 3HX, England (the “
Bank
”).
|
(A)
|
By
a loan agreement dated 1 March 2006 and made between (i) the Owner
as
borrower and (ii) the Bank as lender (the “
Loan
Agreement
”),
the Bank agreed to make available to the Owner upon the terms and
conditions therein described a multicurrency loan of up to Thirty
million
four hundred thousand Dollars ($30,400,000) or the Equivalent Amount
in an
Optional Currency or Optional
Currencies;
|
(B)
|
The
Owner has entered into or may enter into one or more Transactions
(as such
term is defined in the 1992 ISDA Master Agreement dated 1 March 2006
between the Owner and the Bank (the “
Master
Swap Agreement
”))
as evidenced by one or more Confirmations (as such term is defined
in the
Master Agreement) which are governed by the Master Swap Agreement;
and
|
(C)
|
It
is a condition precedent to the Bank advancing the loan under the
Loan
Agreement that the Owner as security for, inter alia, its obligations
under the Loan Agreement shall execute this
Deed.
|
1 |
Definitions
|
1.1
|
In
this Deed, unless the context otherwise requires, the following
expressions shall have the following
meanings:
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature suffered, incurred or paid by the Bank in connection
with
the exercise of the powers referred to in or granted by the Loan
Agreement, the Master Swap Agreement, this Deed or any of the other
Security Documents or otherwise payable by the Owner;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Bank until the date of receipt or recovery thereof (whether
before
or after judgment) at a rate per annum calculated in accordance with
clause 3.4 of the Loan Agreement (as conclusively certified by the
Bank);
|
1.2
|
For
the purposes of this Deed an amount shall be deemed to be outstanding
and
to be due and payable to the Bank if the Bank is then entitled to
demand
payment of that amount, notwithstanding that it has not yet served
a
demand.
|
1.3
|
Clause
1.1 (Purpose) and clause 1.2 (Definitions) of the Loan Agreement
shall
apply with any necessary modifications for the purposes of this
Deed.
|
2 |
Restrictions
|
2.1
|
In
this clause references to assignment includes the creation, or permitting
to arise, of any form of beneficial interest or Security Interest
and
every other kind of disposition.
|
2.2
|
An
act or transaction which is contrary to, or inconsistent with, this
clause
shall be void as regards the Bank.
|
3 |
First
fixed charge
|
3.1
|
The
Owner with full title guarantee, hereby charges and agrees to charge
and
releases and agrees to release to the Bank as a continuing security
for
payment of the Outstanding Indebtedness, by way of first fixed charge,
the
Secured Property.
|
3.2
|
Upon
the occurrence of a Default the charge shall become enforceable and
the
Bank shall be entitled then or at any later time or times to appropriate
all or any part of the Secured Property in or towards discharge of
the
then Outstanding Indebtedness or any part thereof, and may do so
notwithstanding that any maturity date attached to any part or parts
of
the Secured Property may not yet have
arrived.
|
3.3
|
A
certificate signed by a director or other senior officer of the Bank
and
which states that on a specified date and (if the certificate also
states
this) at a specified time the Bank exercised its rights under this
clause
to appropriate a specified amount of Secured Property in the discharge
of
a specified amount of the Outstanding Indebtedness shall be conclusive
evidence that:
|
3.3.1 |
the
Bank’s liabilities in respect of the specified amount of Secured Property;
and
|
3.3.2
|
the
specified amount of Outstanding
Indebtedness,
|
4 |
Further
documentation etc.
|
4.1
|
The
Owner shall execute forthwith any document which the Bank may specify
for
the purpose of:
|
4.1.1 |
supplementing
the rights which this Deed confers on the Bank in relation to the
Secured
Property; or
|
4.1.2 |
creating
a mortgage of the Secured Property to replace or supplement the charge
created in clause 3 above; or
|
4.1.3 |
registering
or otherwise perfecting this Deed or any mortgage created under clause
4.1.2 above; or
|
4.1.4 |
ensuring
or confirming the validity of anything done or to be done under this
Deed.
|
4.2
|
Any
such document shall be in the terms specified by the Bank and, in
the case
of a mortgage of the Secured Property, those terms may include a
provision
entitling the Bank, on or after a Default, to appropriate, or otherwise
deal with, the Secured Property for the purpose of discharging the
Outstanding Indebtedness.
|
4.3
|
The
Owner shall also forthwith do any act and execute any document (including
a document which amends or replaces this Deed) which the Bank specifies
for the purpose of enabling or assisting the Bank to comply, in relation
to the Secured Property and/or the Outstanding Indebtedness, with
any
requirement (legally binding or not) applicable to the Bank and,
in
particular, the requirements of any banking supervisory authority
with
regard to netting of cash
collateral.
|
4.4
|
For
the purpose of securing performance of the Owner’s obligations under
clauses 4.1 to 4.3, the Owner irrevocably appoints the Bank as its
attorney, on its behalf and in its name or otherwise to sign or execute
any document which, in the opinion of the Bank, the Owner is obliged,
or
could be required, to sign or execute under any of the said clauses,
which
the Bank considers necessary or convenient for or in connection with
any
exercise or intended exercise of any rights which the Bank has under
this
Deed or any other purpose connected with this
Deed.
|
4.5
|
The
Bank may appoint any person or persons as its substitute under that
power
of attorney referred to in clause 4.4 and may also delegate that
power of
attorney to any person or persons.
|
5 |
Representations
|
5.1
|
The
Owner represents and warrants to the Bank as
follows:
|
5.1.1 |
the
Owner is the sole legal and beneficial owner of the Secured Property
and
has good marketable title to it;
|
5.1.2 |
no
third party has or will have any interest, right or claim of any
kind in
relation to any of the Secured
Property;
|
5.1.3 |
the
Owner has the corporate power, and has taken all necessary corporate
action to authorise the execution of this Deed, the Loan Agreement
and the
Master Swap Agreement; and
|
5.1.4 |
nothing
in this Deed will or might result in the Owner contravening any law
or
regulation which is now in force or which has been published but
not yet
brought into force or any contractual or other obligation which the
Owner
now has to a third party.
|
6 |
Notices
|
6.1
|
Clause
17 (Notices and other matters) of the Loan Agreement will apply to
this
Deed mutatis mutandis as if references to the Loan Agreement were
references to this Deed save that references therein to the “Borrower”
shall be construed as references to the
Owner.
|
7 |
Supplemental
|
7.1 |
This
Deed, including the charge created by clause 3, shall remain in force
as a
continuing security until the Security Period has
ended.
|
7.2
|
The
rights of the Bank under this Deed will not be discharged or prejudiced
by:
|
7.2.1 |
any
kind of amendment or supplement to the other Security
Documents;
|
7.2.2 |
any
arrangement or concession, including a rescheduling, which the Bank
may
make in relation to any of the Loan Agreement, the Master Swap Agreement
and the other Security Documents, or any action by the Bank and/or
the
Owner and/or any other party thereto which is contrary to the terms
of the
Loan Agreement, the Master Swap Agreement and the other Security
Documents;
|
7.2.3 |
any
release or discharge, whether granted by the Bank or effected by
the
operation of any law, of all or any of the obligations of the Owner
and/or
any other party thereto under any of the Loan Agreement, the Master
Swap
Agreement and the other Security
Documents;
|
7.2.4 |
any
change in the ownership and/or control of the Owner and/or any other
party
thereto and/or merger, demerger or reorganisation involving the Owner
and/or any other party thereto;
|
7.2.5 |
any
event or matter which is similar to, or connected with, any of the
foregoing;
|
7.3
|
Nothing
in this Deed excludes or restricts any right of counterclaim, set-off,
right to net payments, or any other right or remedy which the Bank
would
have had other than under the general law, the Loan Agreement, the
Master
Swap Agreement and the other Security
Documents.
|
8 |
Law
and jurisdiction
|
8.1
|
Law
|
8.2
|
Submission
to jurisdiction
|
8.3
|
Contracts
(Rights of Third Parties) Act
1999
|
SIGNED
|
)
|
|
by
George Papadopoulas
|
)
|
/s/
George Papadopoulos
|
for
and on behalf of
|
)
|
Attorney-in-fact
|
MARINOUKI
SHIPPING CORPORATION
|
)
|
|
SIGNED
|
||
by
Ekaterini Damianidou
|
/s/
Ekaterini Damianidou
|
|
for
and on behalf of
|
Attorney-in-fact
|
|
THE
ROYAL BANK OF SCOTLAND plc
|
EXHIBIT 10.11
10 March 2008 | Global Banking & Markets | |
Shipping Business Centre | ||
Marinouki Shipping Corp. | 5-10 Great Tower Street | |
c/o Safety Steamship Overseas SA | London EC3P 3HX | |
32 Avenue Karamanli, | Telephone. +44 (0)20 7833 2121 | |
PO Box 70837, | Facsimile: +44 (0)20 7085 7134 | |
GR-16605 Voula, | www.rbs.com/gbm | |
Athens, Greece |
Attn: Mr Konstantinos Adamopoulos
Dear Sirs,
Re: Loan Agreement dated 1 March 2006 between
Marinouki Shipping Corp.
(as Borrower) and The Royal Bank of Scotland plc (as
Lender)
We refer to the loan made available to you pursuant to the above Loan Agreement and confirm that we are prepared to vary the terms and conditions of the loan as follows:-
Words and expressions used in the Loan Agreement shall have the same meaning when used herein.
1. | LOAN AMOUNT |
US$32,620,000 (United States
Dollars Thirty Two Million Six Hundred And Twenty Thousand) representing
an increase of US$4.000,000 (the Increase) on the existing
Loan of US$28,620,000.
|
|
2. | REPAYMENT |
The Loan shall be repayable by 20 consecutive semi-annual instalments, as follows: first two instalments to be equal to US$545,000 each, followed by six instalments of US$767,000 each and the remaining
twelve instalments to be equal to US$877,000 each. The first such instalment will be payable on 5 September 2008. while a balloon instalment of US$16,404,000 to be payable together with the final instalment.
|
|
For avoidance of any doubt, any out of the money position between the current facility balance in Japanese Yen and the amended facility limit proposed herein is to be payable on the date of acceptance of
this letter.
|
|
2
3
7. | ACCEPTANCE |
If the terms of this offer are acceptable, please sign the acceptance on the enclosed copy of this letter and return it to the Bank by 12 March 2008. In the event that your acceptance is not received by us by such date,
this offer shall be automatically cancelled and no longer available for acceptance.
|
Yours faithfully
For THE ROYAL BANK OF SCOTLAND plc
We hereby unconditionally and irrevocably accept the terms and conditions set out above.
EXHIBIT 10.12
|
|||
To: | Marinouki Shipping Corporation | Global Banking & Markets | |
c/o Safety Management Overseas SA | Shipping Business Centre | ||
32 Karamanli Avenue | 5-10 Great Tower Street | ||
166 05 Voula | London EC3P 3HX | ||
Greece | Telephone: +44 (0)20 7085 5000 | ||
Facsimile: +44 (0)20 7085 7134 | |||
www.rbs.com/gbm |
24 April 2008
Dear Sirs
Supplemental Letter
1 |
We refer to the loan agreement dated 1 March 2006 (the Loan Agreement ) made between (1) Marinouki Shipping Corporation as borrower (the Borrower ) and (2) The Royal Bank of Scotland plc as lender (the Bank ), pursuant to which the Bank agreed ( inter alia ) to make available to the Borrower a multicurrency loan of Thirty Million Four Hundred Thousand Dollars ($30,400,000) upon the terms and conditions contained therein. |
2 |
Words and expressions defined in the Loan Agreement shall, unless the context otherwise requires, have the same meaning where used in this Letter. |
3 |
As of 19 March 2008 (the Crystalisation Date ) the Equivalent Amount in Dollars of the Loan then outstanding (less any amount standing to the credit of the Cash Collateral Account) exceeded by Four Million Dollars ($4,000,000) (the Excess Amount ) the Dollar Amount of the Loan. |
4 |
The Bank and the Borrower hereby agree that, with effect from the Crystalisation Date, the Bank hereby increases the Commitment by the amount of $4,000,000 and such amount is hereby deemed drawn down under the Loan Agreement, so that such Excess Amount be deemed to constitute part of the Loan. |
5 |
The Bank and the Borrower hereby further agree that the Borrower shall repay the outstanding amount of the Loan as of the date of this Letter (being the amount of $32,620,000, comprising (a) the balance of $28,620,000 prior to the increase of the Commitment referred to above and (b) the additional amount of $4,000,000 which is deemed drawn down under clause 6 above) by twenty (20) consecutive repayment instalments, one such instalment to be repaid on each of the Repayment Dates falling after the date of this Letter. Subject to the provisions of the Loan Agreement, the amount of each of the first and second such instalments shall be $545,000 or the equivalent amount in an Optional Currency calculated in accordance with clause 5.7, the amount of each of the third to the eighth such instalments (inclusive) shall be $767,000 or the equivalent amount in an Optional Currency calculated in accordance with clause 5.7, the amount of each of the ninth to the nineteenth such instalments (inclusive) shall be $877,000 or the equivalent amount in an Optional Currency calculated in accordance with clause 5.7 and the amount of the last such instalment shall be $17,281,000 or the equivalent amount in an Optional Currency calculated in accordance with clause 5.7 (comprising a repayment instalment of $877,000 and a balloon payment of $16,404,000 (or their equivalent amounts in an Optional Currency calculated in accordance with clause 5.7)). |
6 |
The Bank and the Borrower agree that clause 5 of this Letter shall replace clause 5.1 of the Loan Agreement. |
Page 1 of 3
7 |
In consideration of the Banks agreement contained in this Letter, the Borrower agrees to pay to the Bank a fee of $4,000, on the date of execution of this Letter by the Borrower and the Manager. |
8 |
The Bank and the Borrower agree that the arrangements and agreements set out in this Letter shall become effective immediately upon (a) execution by the Borrower and the Manager of this Letter signifying their agreement to its terms and (b) delivery by the Borrower to the Bank of such corporate authorisations of the Borrower in respect of this Letter as may be required by the Bank and its legal advisors in their discretion. |
9 |
The Borrower agrees with the Bank that it will deliver to the Bank the documents referred to in paragraph 8(b) above by not later than 30 April 2008 (or such later date as the Bank may in its sole discretion agree), and if the Borrower fails to do so by such time, such failure shall constitute an Event of Default under the Loan Agreement. |
10 |
Save as amended by this Letter, the provisions of the Loan Agreement shall continue in full force and effect and the Loan Agreement and this Letter shall be read and construed as one instrument. |
11 |
Each of the other Security Documents and the obligations of the Security Parties thereunder shall remain and continue in full force and effect notwithstanding the amendments to the Loan Agreement contained in this Letter. |
12 |
References to the Agreement or the Loan Agreement in any of the Security Documents shall henceforth be references to the Loan Agreement as amended by this Letter and as from time to time hereafter amended and shall also be deemed to include this Letter and the obligations of the Security Parties hereunder. |
13 |
This Letter is governed by, and shall be construed in accordance with, the laws of England and any dispute hereunder shall be resolved in the same courts as provided for in clause 18.2 of the Loan Agreement. |
Yours faithfully
EXECUTED as a DEED | ) | |||
by NIKOLAOS A. PAVLIDIS | ) | |||
for and on behalf of | ) | |||
THE ROYAL BANK OF SCOTLAND PLC | ) | /s/ Nikolas A. Pavlidis | ||
as Bank | ) | |||
In the presence of: | ) | |||
/s/ Christos N. Gourtsoviannis | ||||
Witness | ||||
Name: CHRISTOS N. GOURTSOVIANNIS | ||||
Address: | ||||
Occupation: SHIP FINANCE MANAGER |
We acknowledge receipt of this letter and agree in full to the terms and conditions set out above and the amendments of the Loan Agreement contained therein.
Page 2 of 3
EXECUTED as a DEED | ) | |||
by GEORGE PAPADOPOULOS | ) | |||
for and on behalf of | ) | |||
MARINOUKI SHIPPING CORPORATION | ) | /s/ George A. Papadopoulos | ||
In the presence of: | ) | Attorney-in-fact | ||
/s/ Panagoita Liakakou | ||||
Witness | ||||
Name: PANAGIOTA LIAKAKOU | ||||
Address: ATH. DIAKOY 26, ARGIROUPOLIS 164 51 | ||||
Occupation: | ||||
EXECUTED as a DEED | ) | |||
by GEORGE PAPADOPOULOS | ) | |||
for and on behalf of | ) | |||
SAFETY MANAGEMENT OVERSEAS S.A. | ) | /s/ George A. Papadopoulos | ||
In the presence of: | ) | Attorney-in-fact | ||
/s/ Panagoita Liakakou | ||||
Witness | ||||
Name: PANAGIOTA LIAKAKOU | ||||
Address: ATH. DIAKOY 26, ARGIROUPOLIS 164 51 | ||||
Occupation: |
Page 3 of 3
EXHIBIT 10.13
Global Banking & Markets
Shipping Business Centre 5-10 Great Tower Street London EC3P 3HX |
|
|
|
Telephone: +44 (0)20 7085 5000
Facsimile: +44 (0)20 7085 7134 |
|
|
|
www.rbs.com/gbm |
14 May 2008
Marinouki Shipping Corporation
c/o Safety Management Overseas SA
32 Avenue Karamanli
166 73 Voula
PO Box 70677-106-6
Athens
GREECE
Attn. Mr Konstantinos Adamopoulos
Dear Sirs
Loan Agreement dated 1 March 2006 (the Loan Agreement) between The Royal Bank of Scotland plc (the Bank) and Marinouki Shipping Corporation (the Borrower)
We refer to the above Loan Agreement and to the restrictions placed on the Borrower regarding Change of Ownership as per clause 9.3.13. At the request of the Borrower, we have pleasure in confirming that the Bank is prepared to agree to the proposed transfer of ownership of the Borrower to Safe Bulkers Inc., a newly formed company to be listed on the NYSE and which will initially offer 20% of its shares to the public by virtue of an IPO. The remaining 80% of the shares will remain initially within the existing beneficial ownership and control of the Hadjioannou family as advised to the Bank.
Agreement is subject to the following amendments to the terms of the loan, which are to be documented by a supplemental agreement (also incorporating the amendments set out in
The Royal Bank of Scotland plc
Registered in Scotland No 90312 Registered Office: 38 St Andrew Square Edinburgh EH2 2YB A member of the London Stock Exchange and authorised and regulated by the Financial Services Authority |
2
the supplemental side letter, dated 24 April 2008) and such other supporting documentation as the Banks lawyers may require within 30 days of the successful placement of the IPO, the costs of which are to be borne by the Borrower:
3
Signing: | The Supplemental Loan Agreement and other supplemental documentation to be executed on or before 15 June 2008, failing which this offer will lapse notwithstanding its acceptance. |
This letter contains an outline of certain terms and conditions (it does not constitute a legally binding commitment on the Bank) which will, inter alia, be embodied in the Supplemental Loan Agreement and security documentation, such legal agreement and security documentation shall be governed by English law (except to the extent any security otherwise requires). The Documentation shall supersede this letter and all prior discussions and negotiations in relation to the loan facility.
The Bank shall be entitled to obtain such legal opinions from such jurisdictions as it may require and from lawyers appointed by it and the Borrower shall provide such corporate and other documentation as may be required by the Bank or its lawyers.
All other terms and conditions of the Loan Agreement shall remain unchanged and in full force and effect.
This offer remains subject to there being no facts, events or circumstances, now existing or hereafter arising, which come to our attention and which, in our good faith determination, materially adversely affect the Borrowers or any of the Security Parties business, assets, financial condition, operations or prospects, in which event the Bank reserves the right to terminate this offer.
Yours faithfully | ||
For THE ROYAL BANK OF SCOTLAND plc | ||
/s/ Stephen Moorby | /s/ Nicholas Pavlidis | |
STEPHEN MOORBY | NICHOLAS PAVLIDIS | |
SENIOR DIRECTOR, SHIP FINANCE | SENIOR DIRECTOR, SHIP FINANCE | |
Accepted on behalf of | ||
Marinouki Shipping Corporation | ||
/s/ Konstantinos Adamopoulos | ||
Konstantinos Adamopoulos | ||
14/5/08 |
Dated: 29
th
May, 2006
|
CLAUSE
|
HEADINGS
|
PAGE
|
||
1.
|
PURPOSE
AND LOAN AMOUNT
|
1
|
||
2.
|
CURRENCY
DENOMINATION OF THE LOAN
|
1
|
||
|
||||
3.
|
DRAWDOWN
|
4
|
||
4.
|
TERM
OF THE LOAN
|
5
|
||
5.
|
INTEREST
AND INTEREST PERIODS
|
5
|
||
6.
|
REPAYMENT
- PREPAYMENT
|
8
|
||
7.
|
FEES-
COMMITMENT COMMISSION
|
11
|
||
8.
|
PAYMENTS
|
11
|
||
9.
|
COSTS,
EXPENSES AND DAMAGES
|
12
|
||
10.
|
SECURITIES
|
14
|
||
11.
|
INSURANCES
|
15
|
||
12.
|
AVAILABILITY
|
16
|
||
13.
|
EVENTS
OF DEFAULT
|
17
|
||
14.
|
REPRESENTATIONS
AND WARRANTIES - COVENANTS
|
18
|
||
15.
|
JUDGEMENT
CURRENCY
|
21
|
||
16.
|
WAIVERS
|
22
|
||
17.
|
INVALIDITY-INCREASED
COST
|
22
|
||
18.
|
SURVIVAL
|
23
|
||
19.
|
FURTHER
ASSURANCE
|
23
|
||
20.
|
NOTICES
|
24
|
||
21.
|
ASSIGNMENT
|
24
|
||
|
||||
22.
|
MISCELLANEOUS
|
24
|
||
23.
|
APPLICABLE
LAW
|
25
|
||
24.
|
CHANGE
OF LAW
|
25
|
||
25.
|
EXECUTION
|
26
|
SCHEDULE |
1. |
NOTICE
OF DRAWING
|
(1)
|
STALOUDI
SHIPPING CORPORATION,
a
company organised and existing under the laws of the Republic of
Liberia
having its registered office at 80 Broad Street, Monrovia, Liberia
(hereinafter the
“Borrower”
which expression shall include its permitted successors and assigns);
and
|
(2)
|
DEUTSCHE
SCHIFFSBANK AKTIENGESELLSCHAFT,
Bremen and Hamburg, acting through its office in Bremen, Domshof 17,
28195 Bremen, Federal Republic of Germany, (hereinafter called the
“Bank”
which expression shall include its successors and permitted
assigns).
|
1.
|
PURPOSE
AND LOAN AMOUNT
|
(a)
|
Tranche
A in the amount of up to Twenty five million five hundred thousand
Dollars
($25,500,000) or the equivalent thereof in an Alternative Currency
(hereinafter called
“Tranche A”
,
which expression shall also mean the balance thereof at any time
outstanding hereunder and in the currency it is then denominated);
and
|
(b)
|
Tranche
B in the amount of up to Four million five hundred thousand Dollars
($4,500,000) (hereinafter called
“Tranche B”
,
which expression shall also mean the balance thereof at any time
outstanding hereunder, and together with Tranche A, the
“Tranches”
).
|
2.
|
CURRENCY
DENOMINATION OF THE
LOAN
|
2.1
|
Subject
to the conditions and provisions of this Agreement, the whole amount
of
the Loan shall be advanced in Dollars or at the Borrower’s written request
Tranche A shall be advanced in another Alternative Currency as
provided in Clause 2.3 and Tranche B shall be advanced in
Dollars.
|
2.2
|
In
this Agreement the following terms shall have the meanings given
to them
below:
|
2.3
|
Tranche A
(or such part thereof as the Borrower and the Bank shall agree) shall
be
advanced or converted into an Alternative Currency available to the
Bank
in the London Interbank Eurocurrency Market or, as the case may be
within
the zone of the European Economic and Monetary
Union.
|
2.4
|
The
advancing or maintaining of Tranche A (or a part thereof) in an
Alternative Currency is subject to the fact that the then applicable
currency regulations do not, in the reasonable opinion of the Bank,
adversely affect the position of the Bank in relation
thereto.
|
2.5
|
If
an Alternative Currency is not available (in the opinion of the Bank)
to
the Bank Tranche A (or the relevant part thereof) shall be
denominated in Euro.
|
2.6
|
Provided
that the Borrower is not in default hereunder or under the Security
Documents and that the Bank has received from the Borrower a duly
signed
Conversion Notice not less than three (3) Banking Days prior to the
Drawdown Date or the end of the first and each following Interest
Period
for value on the first day of the next following Interest Period,
the Bank
shall convert Tranche A (or such part thereof as the Borrower and the
Bank shall agree) into an Alternative
Currency.
|
2.7
|
Tranche A
shall not be divided into more than two Alternative Currencies (including
Dollar) at any time and any notice specifying otherwise shall be
invalid.
|
2.8
|
In
the event that Tranche A (or a part thereof) is denominated in a
currency other than Dollars and the Bank should determine on the
last day
of each Interest Period and if such Interest Period is longer than
three
(3) months, at the end of each three-month interval(s) during such
Interest Period (the
“Adjustment
Date(s)”
)
that Tranche A when converted (notionally) into Dollars at the spot
Rate of Exchange is greater than 110% of the Original Dollar Amount
on
such day, the Borrower shall provide to the Bank such additional
securities as shall be acceptable to the Bank (and which shall equal
in
value the Excess Amount, and for the purposes of this
Clause
“Excess
Amount”
shall mean that part of Tranche A, when Tranche A is converted
(notionally) into Dollars at the Spot Rate of Exchange on the relevant
day, by which exceeds the 105% of the Original Dollar Amount) and
shall
sign and execute such documents in respect thereof as it will be
required
under the applicable law(s) PROVIDED ALWAYS that if at any subsequent
Adjustment Date Tranche A when converted (notionally) into Dollars
falls below 105% of the Original Dollar Amount, the Bank shall at
the
request of the Borrower release such additional securities granted
to the
Bank hereunder.
|
2.9
|
The
Borrower shall be obliged to make all payments in respect of principal
of
each Tranche and interest thereon and other payments (or prepayments)
under this Agreement in respect of or by reference to the relevant
Tranche
(or such part thereof) in the relevant Loan
Currency.
|
3.
|
DRAWDOWN
|
3.1
|
The
Borrower may drawdown the full amount of the Loan on the Drawdown
Date and
in the currency(ies) specified in the Notice of Drawing referred
to in
Clause 3.2, such date being not later than 15
th
May,
2006 (the
“Termination
Date”
)
or such later date as the Bank in its sole discretion may agree in
writing. Any portion of the Loan not drawn by the Termination Date
shall
be cancelled and shall thereafter not be available to the Borrower,
unless
the parties hereto agree otherwise.
|
3.2
|
The
Borrower may make a request for the advance of the Loan by sending
to the
Bank a duly completed Notice of Drawing substantially in the form
of
Schedule 1 hereto (which shall be revocable up until the fourth
Banking day, prior to the specified Drawdown Date - whereafter it
will be
irrevocable) to be received by the Bank not later than 12:00 a.m.
(Hamburg/Bremen time) three (3) Banking Days prior to the Drawdown
Date.
|
4.
|
TERM
OF THE LOAN
|
4.1
|
The
Loan is to be made available to the Borrower for a period commencing
on
the Drawdown Date and ending, subject to the terms and conditions
of this
Agreement, ten (10) years
thereafter.
|
4.2
|
The
period commencing on the date hereof and terminating upon all the
moneys
payable or to become payable at any time pursuant to this Agreement
and/or
the Security Documents shall have been paid and discharged in full
is
herein called the
“Security
Period
”.
|
5.
|
INTEREST
AND INTEREST PERIODS
|
5.1
|
The
Borrower shall pay interest on the Loan (or such relevant part) in
respect
of each Interest Period relating thereto (hereinafter the
“Interest”
)
on the last day of such Interest Period at the rate per annum determined
by the Bank to be the aggregate (hereinafter the
“Basic
Rate
”)
of:
|
(a)
|
in
the case the Loan or any part thereof is denominated in Dollars or
an
Alternative Currency: (i) the Margin and (ii) Libor;
and
|
(b)
|
in
the case Tranche A or any part thereof is denominated in
Euro: (i) the Margin and
Euribor.
|
5.2
|
In
this Agreement:
|
(a)
|
“Interest
Period”
shall mean each period for the calculation of Interest in respect
of the
Loan (or such part thereof) ascertained in accordance with Clause 5.3
and 5.4;
|
(b)
|
“Margin”
shall mean zero point fifty five per centum (0.55%) per
annum;
|
(c)
|
“Libor”
shall mean the rate of interest applicable to the Loan (or the relevant
part thereof) for each Interest Period relative thereto and being
the rate
per annum determined by the Bank to be equal (rounded upwards, if
necessary, to the nearest one sixty-fourth of one per centum (1/64%))
to
the offered rate for deposits in Dollars or, as the case may be,
the
relevant for a term co-extensive with such Interest Period as set
forth on
the Reuters Page FRBD at approximately 11:00 a.m. London time on the
second Banking Day prior to the commencement of such Interest Period;
provided
always
that if such offer rate is not available, for whatsoever reason,
on the
Reuters Page FRBD at approximately 11:00 a.m. London time then Libor
for such Interest Period shall mean the rate per annum determined
by the
Bank to be the arithmetic mean (rounded upwards, if necessary, to
the
nearest one sixty-fourth of one per centum (1/64%)) of the rates
communicated by the Reference Banks to the Bank as the rates at which
each
such Reference Bank would offer a deposit in Dollars or, as the case
may
be, the relevant Alternative Currency for a period equal to such
Interest
Period in an amount equivalent to or comparable with the amount of
the
Loan or the relevant part (thereof) to prime banks in the London
Interbank
Market at approximately 11:00 a.m. London time on the second Banking
Day prior
|
to
the commencement of such Interest Period;
provided
always
,
that if any of the Reference Banks fails so to communicate a rate,
Libor
shall be determined by reference to the rate or rates offered by
the
remaining Reference Bank or Reference
Banks;
|
(d)
|
“Euribor”
means, in relation to a particular period and to amounts denominated
in
Euro:
|
(i)
|
the
rate for deposits in Euro equivalent to or comparable to the amount
of
Tranche A (or the relevant part thereof) for a period equivalent to
such period at or about 11:00 a.m. (Brussels time) on the second
Banking Day before the first day of such period as displayed on Reuters
page 284
Euribor
(or such other page as may replace such page 284 E
uribor
)
on such system or on any other system of the information vendor for
the
time being; and
|
(ii)
|
if
on such date no such rate is so displayed, Euribor for a period equivalent
to such period shall be the arithmetic mean (rounded upwards, if
necessary, to one sixty-fourth of one per centum (1/64%)) of the
rates
quoted to the Bank by each of the Reference Banks at the request
of the
Bank as such Reference Bank’s offered rate per annum to prime banks within
the zone of the European Economic and Monetary Union for deposits
in Euro
for an amount approximately equivalent to or comparable with the
amount to
which Euribor is to be determined at 11:00 a.m. (Brussels time) on
the second Banking Day prior to the beginning of such period for
delivery
on the first day of that period and for the number of days comprised
therein; and
|
(e)
|
“Reference
Banks”
shall mean Deutsche Schiffsbank Aktiengesellschaft, The Royal Bank
of
Scotland, Plc. and Barclays Bank
Plc.
|
5.3
|
The
Borrower may by written notice to the Bank not later than 11:00 a.m.
(Hamburg time) three (3) Banking Days prior to the Drawdown Date and
thereafter on the second Banking Day prior to the commencement of
each
Interest Period select at its option in relation to the Loan (but
not in
relation to a part thereof) whether the length of the ensuing Interest
Period shall be of one (1), three (3), six (6) or twelve (12) months
or request an Interest Period of a different duration to which the
Bank,
in this case at its option, may
agree.
|
5.4
|
The
first Interest Period in respect of the Loan shall commence on the
Drawdown Date and subsequent Interest Periods shall commence forthwith
upon the expiry of the previous Interest Period. Interest shall be
calculated on the Loan as from the commencing date of each Interest
Period
to the last day of such Interest Period and shall be paid on the
last day
of such Interest
|
Period
or, in the case of Interest Periods of more than six (6) months, by
instalments, the first such instalment being payable six (6) months
from the commencement of the Interest Period and the subsequent
instalments at intervals of six (6) months thereafter or, if shorter,
the period from the date of the preceding instalment until the last
day of
the relevant Interest Period.
|
5.5
|
In
the event that a Repayment Instalment or Instalments (as such terms
are
defined hereinafter) fall due on a day of an Interest Period other
than
the last day of such an Interest Period, the Interest to be paid
by the
Borrower in relation to such an Interest Period shall be the aggregate
of
(i) the interest accruing on the Repayment Instalment or Instalments
from the beginning of such Interest Period to the date when each
such
Repayment Instalment was made and (ii) the Interest accruing on the
balance of the Loan (namely the amount of the Loan outstanding after
the
Repayment Instalment or Instalments have been made) from the date
when the
last such Repayment Instalment was made during the Interest Period
in
question to the last day of such an Interest
Period.
|
5.6
|
In
the event that the Borrower fails to pay on its due date any amount
payable under this Agreement (other than of disbursements and expenses
referred to in Clause 9.5) the Borrower shall pay interest
(hereinafter
“Default
Interest”
)
on such sum, on demand, from the due date thereof up to the date
of actual
payment, at a rate (hereinafter
“Default
Rate”
)
determined by the Bank to be the aggregate of (i) one per centum
(1%) p.a. and (ii) the funding cost of the Bank. If for the
reason specified in Clause 5.7(b) the Bank is unable to determine a
rate in accordance with the provisions of this Clause 5.6, the
Default Interest on any sum not paid on its due date for payment
shall be
calculated at a rate determined to be one and one half per centum
per
annum (1-1/2%) above the aggregate of (i) the Margin and
(ii) the cost of funds to the
Bank.
|
5.7
|
If
two Banking Days, prior to the commencement of an Interest Period,
including the initial Interest Period, the Bank shall reasonably
determine
(such reasonable determination to be conclusive and binding upon
the
Borrower) that:
|
(a)
|
the
relevant Loan Currency will not be available to the Bank in such
amounts
as are required for the funding of the Loan or the relevant part
thereof
for such Interest Period, or
|
(b)
|
by
reason of changes affecting the London Interbank Eurocurrency Market
or,
as the case may be within the zone of the European Economic and Monetary
Union adequate and fair means do not exist for ascertaining Libor,
or
Euribor, or
|
(c)
|
the
applicable currency regulations do forbid, aggravate or restrict
the
granting or maintaining of the Loan or the relevant part thereof
in the
relevant Loan Currency, or
|
(d)
|
the
rate at which deposits in the relevant Loan Currency are offered
by the
Reference Banks to prime banks in London doesn’t accurately reflect the
cost of the Bank of making or maintaining the Loan or the relevant
part
thereof during such Interest
Period,
|
5.8
|
Interest
and Default Interest shall be calculated on the basis of exact number
of
days elapsed and a year of 360 days unless Tranche A is
denominated in Pounds Sterling being the lawful currency of the United
Kingdom for the time being in which case Interest and Default Interest
shall be calculated on the basis of exact number of days elapsed
and a
year of 365 days.
|
6.
|
REPAYMENT
- PREPAYMENT
|
6.1
|
The
Loan shall be repaid as follows: (i) Tranche A by (i) twenty
(20) consecutive semi-annual Repayment Instalments, commencing with
the first Repayment Instalment on the date falling six (6) months
from the Drawdown Date; each of such Repayment Instalments shall
be in the
amount of $637,500 (six hundred thirty seven thousand five hundred)
or its
equivalent in the Alternative Currency in which Tranche A is at the
relevant time denominated, (ii) by an additional payment of
$12,750,000 (twelve million seven hundred fifty thousand) or its
equivalent in the Alternative Currency in which Tranche A is at the
relevant time denominated (the
“Tranche A
Balloon Instalment”
)
which shall be payable together with the last Repayment Instalment
one
hundred and twenty (120) months from the Drawdown Date (the
“Final
Maturity Date”
)
and (b) Tranche B by (i) twenty (20) consecutive
semi-annual Repayment Instalments, commencing with the first Repayment
Instalment on the date falling six (6) months from the Drawdown Date;
each of such Repayment Instalments shall be in the amount of $112,500
(one
hundred twelve thousand five hundred), (ii) an additional payment of
$2,250,000 (two million two hundred fifty thousand) (the
“Tranche B
Balloon Instalment”
and together with the Tranche A Balloon Instalment, the
“Balloon
Instalments”
)
which shall be payable together with the last Repayment Instalment
one
hundred and twenty (120) months from the Drawdown
Date.
|
(i)
|
For
the purpose of calculating the amount of each Repayment Instalment
of
Tranche A (or the relevant part thereof) in case of conversion of
|
Tranche
A (or the relevant part thereof) from one currency into another currency,
the following provisions shall
apply:
|
aa)
|
in
case the whole (but not part only) of Tranche A is at any time converted
into one currency, the amount to be repaid on each Repayment Date
subsequent to such conversion shall be equivalent to the percentage
(which, in this Clause 6.1, is referred to as the
“Relevant
Repayment Percentage”
)
of the amount of Tranche A (outstanding prior to the payment of the
relevant Repayment Instalment) set out in column 3 of the table below
opposite to such Repayment Instalment (or such other percentages
or
amounts respectively as the Borrower may reasonably request and the
Bank
in its absolute discretion may from time to time agree) converted
at the
Rate of Exchange applied on the conversion of Tranche A in such
currency; and
|
bb)
|
in
case Tranche A is at any time denominated in two currencies, the
amount to be repaid on each Repayment Date subsequent to the relevant
conversion in respect of each part of Tranche A, as a proportion of
the Relevant Repayment Percentage of Tranche A, shall be the same as
the proportion of Tranche A which such part represents converted at
the Rate of Exchange applied on the conversion of such part of
Tranche A in the relevant
currency:
|
(1)
Repayment
Instalment
Number
|
(2)
Number
of
months
from the
Drawdown
Date
|
(3)
Relevant
Repayment
Percentage
(%) of the
amount
of Tranche A
(prior
to repayment
due
on such date)
|
(4)
Estimated
Original
Dollar
Amount
(after
repayment
due
on such date)
|
|||
1
|
6
|
2,5000
|
24,862,500
|
|||
2
|
12
|
2,5641
|
24,225,000
|
|||
3
|
18
|
2,6316
|
23,587,500
|
|||
4
|
24
|
2,7027
|
22,950,000
|
|||
5
|
30
|
2,7778
|
22,312,500
|
|||
6
|
36
|
2,8571
|
21,675,000
|
|||
7
|
42
|
2,9412
|
21,037,500
|
|||
8
|
48
|
3,0303
|
20,400,000
|
|||
9
|
54
|
3,1250
|
19,762,500
|
|||
10
|
60
|
3,2258
|
19,125,000
|
|||
11
|
66
|
3,3333
|
18,487,500
|
|||
12
|
72
|
3,4483
|
17,850,000
|
|||
13
|
78
|
3,5714
|
17,212,500
|
|||
14
|
84
|
3,7037
|
16,575,000
|
|||
15
|
90
|
3,8462
|
15,937,500
|
|||
16
|
96
|
4,0000
|
15,300,000
|
|||
17
|
102
|
4,1667
|
14,662,500
|
|||
18
|
108
|
4,3478
|
14,025,000
|
|||
19
|
114
|
4,5455
|
13,387,500
|
|||
20
|
120
|
100,0000
|
Ø
|
(i)
|
that
in case the amount of the Loan drawn by the Borrower is less than
$30,000,000 then the amount of each of the Repayment Instalments
and the
Balloon Instalments shall be reduced pro-rata;
and
|
(ii)
|
on
the Final Maturity Date the Borrower shall pay to the Bank any and
all
amounts then outstanding or payable under this Agreement and the
Security
Documents including, but without limitation, any exposure from currency
fluctuations pursuant to
Clause 2.
|
6.2
|
The
Borrower may prepay without premium or penalty the whole or any part
of
the Loan on the last day of any Interest Period relating thereto,
provided
that:
|
(a)
|
the
Bank shall have received from the Borrower not less than 10 Banking
Days
prior written notice of its intention to make such
prepayment;
|
(b)
|
the
amount of any such partial prepayment shall be equal to the amount
of a
Repayment Instalment or the equivalent thereof in the relevant Loan
Currency or a higher integral multiple
thereof;
|
(c)
|
no
amount prepaid can be re-borrowed;
|
(d)
|
each
prepayment shall be made together with accrued interest on the amount
prepaid and all other sums payable thereon under the terms of this
Agreement and if such prepayment is not made on the last day of an
Interest Period relating to the amount prepaid together with any
loss the
Bank has suffered as a result of such a prepayment being made on
a date
other than the last day of an Interest Period and, for the purpose
of this
Clause, shall mean the difference between the applicable Libor or
(as the
case may be) Euribor rate for the relevant Interest Period and the
interest rate the Bank may obtain by depositing the amount so prepaid;
and
|
(e)
|
the
amount of any such partial prepayment shall be applied against the
Repayment Instalments outstanding at the time of such prepayment
in direct
order of maturity.
|
6.3
|
In
case the Vessel becomes a Total Loss or suffers damage or is involved
in
an incident which may, in the reasonable opinion of the Bank, result
in
the Vessel being subsequently determined to be a Total Loss (i) prior
to the Drawdown Date, this Agreement shall be cancelled or (ii) in
case the Loan has been already advanced, the Borrower shall prepay
the
Loan, without penalty, premium or prepayment fee, within one hundred
and
twenty (120) days of such Total Loss or, as the case may be, after
the
date on which the incident which may, in the reasonable opinion of
the
Bank, result in the Vessel being subsequently determined to be a
Total
Loss occurred or, if earlier, on the date upon which the insurance
proceeds in respect of such Total Loss are or Requisition Compensation
is
received by the Borrower (or the Bank pursuant to the Security
|
Documents),
together with accrued interest to the date of prepayment and all
other
sums including, without limitation, any amounts payable by the Borrower
to
the Bank under this Agreement and the Security Documents. For the
purpose
of this Agreement a Total Loss shall be deemed to have
occurred:
|
(a)
|
in
the case of an actual total loss of the Vessel, on the actual date
and at
the time the Vessel was lost or, if such date is not known, on the
date
the Vessel was last reported;
|
(b)
|
in
the case of constructive total loss of the Vessel, on the actual
date and
at the time notice of abandonment of the Vessel is given to the insurers
of the Vessel for the time being, (provided a claim for total loss
is
admitted by such insurers) or, if such insurers do not admit such
a claim,
at the date and at the time at which a total loss is subsequently
and
finally adjudged by a competent court of law to have
occurred;
|
(c)
|
in
the case of a compromised or arranged total loss, on the date upon
which a
binding agreement as to such compromised or arranged total loss has
been
entered into by the insurers of the
Vessel;
|
(d)
|
in
the case of requisition of title or other compulsory acquisition,
on the
date upon which the relevant requisition of title or other compulsory
acquisition occurs (hereinafter
“Compulsory
Acquisition”
);
and
|
(e)
|
in
the case of hijacking, theft, condemnation, confiscation capture,
detention or seizure of the Vessel (other than where the same amounts
to
compulsory acquisition of the Vessel) by any government entity, which
deprives the Borrower of the use of the Vessel, on the expiry of
the
period of sixty (60) days following the date upon which the relevant
hijacking, theft, condemnation confiscation, capture, detention or
seizure
occurred.
|
7.
|
FEES-
COMMITMENT COMMISSION
|
7.1
|
The
Bank will charge to the Borrower an arrangement fee of $55,000 (Dollars
fifty five thousand) which is due and payable on the Drawdown
Date.
|
8.
|
PAYMENTS
|
8.1
|
Unless
otherwise agreed by the Bank all moneys owed by the Borrower hereunder
are
payable in the currency in which they have become due and are payable
free
and clear of any deductions of whatsoever nature to such account
and with
such bank as the Bank shall notify to the Borrower from time to
time.
|
8.2
|
The
Borrower shall continue to be under its payment obligation pursuant
hereto
until the relevant amount due has been credited to the account notified
by
the Bank to the Borrower in accordance with
Clause 8.1.
|
8.3
|
In
case a payment date is not a Banking Day at the place where such
payment
is to be made then the payment shall be made on the first following
Banking Day unless the first following Banking Day falls in the next
succeeding calendar month in which case the payment shall be made
on the
preceding Banking Day.
|
8.4
|
All
moneys received by the Bank under or pursuant to this Agreement and/or
any
of the Security Documents shall be applied by the Bank in the following
manner:
|
(a)
|
firstly:
in or towards payment of all unpaid fees and expenses which may be
owing
to the Bank under this Agreement or any of the Security
Documents;
|
(b)
|
secondly:
in or towards payment of any arrears of interest owing in respect
of the
Loan or any part thereof;
|
(c)
|
thirdly:
in or towards repayment of the
Loan;
|
(d)
|
fourthly:
in or towards payment to the Bank of any loss suffered by reason
of any
such payment in respect of principal not being effected on the last
day of
the Interest Period relating to the part of the Loan
repaid;
|
(e)
|
fifthly:
in or towards payment to the Bank of any other sums owing to it under
any
of the Security Documents; and
|
(f)
|
sixthly:
the surplus (if any) shall be paid to the Borrower or to whomsoever
else
may be entitled to receive such
surplus.
|
9.
|
COSTS,
EXPENSES AND DAMAGES
|
9.1
|
Subject
to the provisions of this Agreement, the Borrower undertakes to pay
to the
Bank on demand:
|
(a)
|
all
reasonable expenses (including legal, printing and out-of-pocket
expenses)
incurred by the Bank in connection with the negotiation, preparation,
execution and, where relevant registration of this Agreement and
any of
the Security Documents (as hereinafter defined);
and
|
(b)
|
all
reasonable expenses (including legal and out-of-pocket expenses)
incurred
by the Bank in contemplation of, or preservation of any rights under,
this
Agreement and/or any of the Security Documents (as hereinafter defined),
or otherwise in respect of the moneys owing under this Agreement
and/or
any of the Security Documents (as hereinafter
defined);
|
9.2
|
The
Borrower shall bear all state and local taxes and dues which are
levied
outside the Federal Republic of Germany on the capital, the repayments,
the interest and other payments, today or in future related to this
Loan.
This provision concerns all taxes and dues of any kind, whether of
direct
or indirect personal or real character (as e.g. withholding tax,
income
tax, capital tax, trade tax and turnover tax), whether they are levied
on
any payment made by the Borrower to the Bank under and in accordance
with
the terms of this Agreement and/or any of the Security Documents
(as
hereinafter defined) or on the property mortgaged to the Bank by
the
Borrower for reason of any legal or real events (herein collectively
referred to as
“taxes”
).
This provision must be understood in its
|
broadest
sense so as to entitle the Bank which fixes the rate of interest
without
regard to any non-German taxes, to pass on to the Borrower any taxes
accruing outside the Federal Republic of Germany. Such taxes and
dues will
be charged to the Borrower also if for reason of any legal or
authoritative regulations they are to be collected from the Bank.
Such
taxes and dues collected from the Bank must be reimbursed by the
Borrower
within thirty (30) days after it is informed to this effect. Any
failure of the Borrower to remit to the Bank full payments required
hereunder for any reason whatsoever shall constitute a default for
non-payment as defined under
Clause 13.
|
9.3
|
Within
thirty days of each payment by the Borrower hereunder of tax or in
respect
of taxes, the Borrower shall deliver to the Bank evidence satisfactory
to
the Bank (including all relevant tax receipts) that such tax has
been duly
remitted to the appropriate
authority.
|
9.4
|
If
the Bank should become liable to any tax (other than on overall income
or
aggregate property) or be subject to any reserve requirement against
any
assets of, deposits with or loans by the Bank or special deposit
requirement the result of which will be to increase the cost to the
Bank
of making or maintaining the Loan or to reduce the amounts of moneys
otherwise receivable by the Bank hereunder in either case by an amount
the
Bank shall deem material, then the Borrower will pay to the Bank
on demand
such additional interest on the Loan as will compensate the Bank
for such
additional cost or such reduction (as the case may
be).
|
9.5
|
All
amounts so disbursed or expended by the Bank shall bear interest
at 1%
p.a. over the Bank’s funding cost from the 31
st
day after receipt of the relevant invoice by the Borrower until the
time
of refunding or repayment thereof.
|
9.6
|
In
case interest for the Loan has been fixed and the Borrower does not
take
the Loan or any part thereof or does not meet with the agreed conditions
precedent set out in Clause 12 or the Bank for one of the reasons
mentioned under Clause 13 refuses disbursement of the Loan or the
Bank prematurely demands repayment of the Loan or any part thereof
in
accordance with the terms of this Agreement, the Bank is entitled
either
to insist on performance or to withdraw from this Agreement and to
claim
damages for non-performance.
|
9.7
|
The
Borrower shall on demand (and it is hereby expressly undertaken by
the
Borrower to) indemnify the Bank, without prejudice to any of the
other
rights of the Bank under any of the Security Documents, against any
expense or loss, which the Bank shall prove as sustained or incurred
as a
consequence of:
|
(i)
|
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
|
(ii)
|
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 Bank) to hedge
any
exposure arising under this Agreement or that part which the Bank
determines is fairly attributable to this
|
Agreement
of the amount of the liabilities, expenses or losses (including losses
of
prospective profits) incurred by it in terminating, or otherwise
in
connection with, a number of transactions of which this Agreement
is
one.
|
10.
|
SECURITIES
|
10.1
|
To
secure all its obligations under this Agreement, the Borrower shall
execute and deliver and/or shall procure the execution and delivery
to the
Bank (as the case may be) of the following Security Documents (as
hereinafter defined) and notices all to be substantially in the form
of
the relevant Schedules attached
hereto:
|
(a)
|
Mortgage
|
(b)
|
Assignment
of Vessel’s Insurances, Earnings and Requisition
Compensation
|
(c)
|
Manager’s
Undertaking
|
(d)
|
Account
Pledge Agreement
|
10.2
|
The
Mortgage, the Assignment, the Account Pledge Agreement and the Manager’s
Undertaking and as the context may require this Agreement and any
other
documents which may now or hereafter be executed as security for
the
repayment of the Loan, interest thereon and Default Interest and
any other
moneys payable hereunder and under the Security Documents are herein
collectively referred to as
“the
Security Documents”
.
|
10.3
|
The
Borrower hereby undertakes that if the aggregate of (i) the market
value of the Vessel as established by an expert valuer mutually accepted
to the Bank and the Borrower at the end of June and December of each
year
during the Security Period (provided that any such valuation is considered
necessary by the Bank) and (ii) the market value of any additional
security for the time being actually provided to the Bank pursuant
to
Clauses 2.8 and 10.3 (excluding the Pledged Deposit) falls below One
hundred and twenty percent (120%) of the Loan it will within fifteen
days
of being notified by the Bank to the Borrower of such shortfall
either:
|
(a)
|
provide
the Bank with additional pledged cash deposits in favour of the Bank
in an
amount equal to such shortfall in an account and manner to be determined
by the Bank; or
|
(b)
|
prepay
(subject to, and in accordance with Clause 6) such part of the Loan
as will ensure that the aggregate of (i) the market value (determined
as aforesaid) of the Vessel and (ii) the market value of any such
additional security is after such prepayment at least One hundred
and
twenty percent (120%) of the Loan.
|
11.
|
INSURANCES
|
11.1
|
The
Borrower must at its cost and expense, and in accordance with the
provisions of this Agreement and of the Mortgage, effect prior to
Drawdown
Date and maintain during the whole Security Period the insurances
(herein
“Insurances”
)
in respect of the Vessel on terms and conditions and with brokers
and
insurers acceptable to the Bank covering her market value but in
any event
in an amount not less than 115% of the Loan
against:
|
·
|
hull
and machinery marine and other associated risks in the London/New
York and
European Markets;
|
·
|
war
risks with the Hellenic Mutual War Risks
Association;
|
·
|
protection
and indemnity (including the usual oil pollution as provided in
Clause 5.1(b) of the Deed of Covenant referred to in
Clause 10.1(a)) risks with a protection and indemnity association
which is a member of the International Group of P&I
Clubs;
|
·
|
(when
applicable) lay-up insurance
|
·
|
and
otherwise as set forth in more detail in the
Mortgage.
|
11.2
|
At
the expense of the Borrower, the Bank will take out during the Security
Period a mortgagee’s interest insurance on the London Market and on
conditions
|
acceptable
to the Bank in an amount equal to 110% of the amount of the Loan,
provided
however
,
that the cost of such insurance shall not exceed the cost which the
Borrower would have incurred, had the Borrower taken such insurance
on the
same conditions of cover through its own London broker, and
provided
further
,
that if the Bank decides to effect such insurance on other conditions
(German wording) the Bank shall pay the difference (if any) of the
cost of
such insurance cover and the London market
cover.
|
11.3
|
If
the Vessel navigates in an “additional Premium Area” as declared from time
to time by the Hellenic Mutual War Risks Association or by insurance
underwriters, the Borrower will (a) take out appropriate insurance
cover and (b) notify the Bank. Failure of the Borrower to notify the
Bank will not constitute an Event of
Default.
|
12.
|
AVAILABILITY
|
12.1
|
The
Loan will be made available as soon as the Borrower has complied
with the
following conditions:
|
(a)
|
the
Borrower shall have accepted the terms hereof, such acceptance to
be
evidenced by the execution of this Agreement by a duly authorised
officer
or attorney on the Borrower’s
behalf;
|
(b)
|
the
Bank shall have obtained sufficient proof that the Borrower is duly
constituted and is legally existing and in good standing pursuant
to the
laws of the place of its
incorporation;
|
(c)
|
the
Bank shall have received (i) a copy, certified by the Secretary or
the Assistant Secretary or a Director of the Borrower to be a true
and
complete copy, of resolutions of the Board of Directors of the Borrower
authorising execution of this Agreement and the Security Documents
to
which it is or is to be a party as well as all other relevant documents
and (ii) the original of any Power of Attorney issued by the Borrower
pursuant to the aforesaid
resolutions;
|
(d)
|
the
Bank shall have received evidence satisfactory to it that the Vessel
is
duly registered and documented in the name of the Borrower under
Cyprus
flag free and clear of any encumbrances, liens and debts of any kind
or
nature whatsoever with the exception of the Mortgage and the
Assignment;
|
(e)
|
the
agreed Security Documents and notices referred to hereinabove have
been
duly executed by authorised signatories, registered in accordance
with the
relevant laws of the place of registration and delivered to the Bank’s
lawyers;
|
(f)
|
the
Bank shall have received evidence satisfactory to it, that the Insurances
in respect of the Vessel have been effected in accordance with the
provisions of this Agreement and the Mortgage and are in effect and
that
the interest of the Bank in respect of such Insurances has been duly
noted;
|
(g)
|
the
Bank shall have obtained copies of all class certificates in respect
of
the Vessel;
|
(h)
|
the
Bank or its lawyer shall have received evidence that all relevant
governmental or quasi governmental approvals, consents or licenses
as
referred to herein or otherwise required in respect of the Loan and
its
repayment to the Bank have been obtained and are in full force and
effect;
|
(i)
|
the
Bank shall have received all such further documents including legal
opinions as the Bank may deem reasonably
necessary;
|
(j)
|
the
Bank shall have received a copy (duly certified to be a true and
complete)
of the management agreement (herein the
“Management
Agreement”
)
in respect of the Vessel entered into between the Borrower and the
Manager; and
|
(k)
|
the
written confirmation (in terms satisfactory to the Bank) that the
person
named in Clause 23.1 has accepted its appointment by the Borrower and
the Manager as their agent for the acceptance of service of legal
process
in respect of any proceedings hereunder and under the Security
Documents.
|
13.
|
EVENTS
OF DEFAULT
|
13.1
|
The
Bank may by notice given to the Borrower declare that all amounts
outstanding under this Agreement shall become immediately due and
payable
and any obligation of the Bank to make further advances shall cease
automatically without any further act on the part of the Bank, if
one or
more of the following events (herein
“Event(s)
of Default”
)
shall occur:
|
(a)
|
if
the Borrower fails to pay when is due any instalment of principal
or
interest or other sums payable hereunder;
or
|
(b)
|
if
the Borrower materially defaults in the performance or observance
of any
other obligation, covenant, agreement, term, undertaking, condition
or
provision contained in this Agreement and the Security Documents
and such
default is not remedied within fourteen (14) days after it was
brought to the Borrower’s attention;
or
|
(c)
|
if
any representation or warranty made in this Agreement or in any of
the
Security Documents or in any certificate, statement or other document
delivered in connection with the execution and delivery hereof or
thereof
shall prove to have been incorrect in any material respect when made;
or
|
(d)
|
if
the Borrower becomes insolvent or bankrupt or becomes unable to pay
its
debts as they mature or makes any composition with or assignment
for the
benefit of its creditors or applies for or consents to or sustains
the
appointment of an insolvency trustee or receiver in respect of its
assets
or a substantial part thereof or ceases or threatens to cease to
carry on
business; or
|
(e)
|
if
the Loan or any part thereof has not been utilised for its intended
purpose; or
|
(f)
|
if
the Vessel without prior written approval of the Bank is sold or
otherwise
disposed with or abandoned (with the exception of a Total Loss),
during
the Security Period; or
|
(g)
|
if
any other loan granted to the Borrower is in default;
or
|
(h)
|
if
the Borrower fails to execute and deliver any amendment to the Mortgage
or
any other Security Document to which is or is to be a party or other
instrument reasonably judged necessary or expedient by the Bank to
effectuate the intent of this Agreement to the satisfaction of the
Bank;
or
|
(i)
|
if
it becomes unlawful for the Borrower to pay its debts under the relevant
Security Documents; or
|
(j)
|
if
the Mortgage does not receive the agreed priority or if its legal
validity
or priority is contested and defeated;
or
|
(k)
|
if
the Borrower’s assets pass to any person or company by way of universal
succession without the prior written approval of the Bank;
or
|
(l)
|
if
the class of the Vessel is suspended;
or
|
(m)
|
if
the Borrower has not proved to the Bank within two weeks after being
requested that maritime liens or rights of detention in respect of
the
Vessel or that all claims ranking in priority of a mortgage under
any
applicable law have been duly discharged and satisfied, unless such
liens,
rights of detention or claims are defended against in Court or sufficient
security has been provided by the Borrower to the relevant third
parties
in respect of such liens, detention, rights and/or claims;
or
|
(n)
|
if
without the prior written consent of the Bank, there is a change
in the
beneficial ownership, control of the Borrower and the Vessel or a
change
of the Manager,
|
14.
|
REPRESENTATIONS
AND WARRANTIES -
COVENANTS
|
14.1
|
The
Borrower hereby represents and warrants
that:
|
(a)
|
the
execution and delivery by the Borrower and by any other party (other
than
the Bank) of this Agreement and the Security Documents to which each
is or
is to be a party is within the respective party’s corporate authority, has
been duly authorised by proper corporate action and does not and
will not
contravene any provision of any applicable law or of the respective
party’s statutes or of any agreement binding upon
it;
|
(b)
|
the
Borrower has obtained all approvals and consents from all relevant
governmental and quasi-governmental authorities necessary under any
applicable law for the execution and delivery by it of this Agreement,
the
Security Documents to which is or is to be a party and of any document
or
instrument delivered or to be delivered pursuant hereto and thereto
and
for the performance by it of any and all of its obligations hereunder
and
thereunder;
|
(c)
|
to
the knowledge of the Borrower’s directors, there are no actions, suits or
proceedings pending or threatened to be taken against, or affecting
the
Borrower or its property before any court or tribunal or before any
governmental or quasi-governmental authority nor is the Borrower
in
default with respect to any order, writ, injunction, claim or demand
of
any court or any governmental or quasi-governmental authority, which
may,
in both the abovementioned cases, substantially affect its solvency
or its
ability to pay its debt or perform its obligations or affect a substantial
part of its property;
|
(d)
|
this
Agreement, the consummation of the transactions herein contemplated
and
the fulfilment of the terms hereof and the compliance by the Borrower
with
all of the terms and conditions of this Agreement and the Security
Documents to which is or is to be a party and all documents and
instruments referred to herein and/or delivered pursuant hereto or
thereto
will not result in any breach by it of the terms, conditions or provisions
of, or constitute a default under its corporate papers, any indenture,
a
bank loan or credit agreement or instrument by which the Borrower
is bound
and will not result in the creation of any lien, charge or encumbrance
(other than the Mortgage and the Assignment) upon any of its property
or
assets;
|
(e)
|
the
Borrower is duly incorporated and legally existing and in good standing
under the law of the place of its
incorporation;
|
(f)
|
the
Borrower will not engage itself in any further business resulting
in any
obligation whatsoever other than those incurred in the ordinary course
of
its business or in connection with the operation of the
Vessel;
|
(g)
|
any
proceedings taken in relation to this Agreement and the Security
Documents, the choice of the laws as outlined in Clause 24 and any
judgment obtained in relation to this Agreement will be recognised
and
enforced;
|
(h)
|
to
the extent that it may in any relevant jurisdiction claim for itself
or
its assets immunity from suit, execution, attachment (whether in
aid of
execution, before judgment or otherwise) or other legal process and
to the
extent that in any such jurisdiction there may be attributed to itself
or
its assets such immunity (whether or not claimed) the Borrower hereby
irrevocably agrees not to claim and hereby irrevocably waives such
immunity to the full extent permitted by the laws of such
jurisdiction;
|
(i)
|
except
with the prior consent of the Bank, the Borrower will, neither by
single
transaction nor by a series of transactions whether related or not
|
and
whether voluntarily or involuntarily, entered into, sell, transfer,
lease
or otherwise dispose of all or of a substantial part of its
assets;
|
(j)
|
except
with the prior consent of the Bank, the Borrower will not enter into
any
amalgamation, merger or consolidation with any other party or do
or
consent to be done anything analogous to the
foregoing;
|
(k)
|
the
Borrower by entering this Agreement and the other Security Documents
is
acting on its own behalf and for its own account;
and
|
(l)
|
it
has complied with all legal, quasi-legal or other requirements (including
compliance with the provisions of the ISM Code) relative to or imposed
upon its business and/or the
Vessel.
|
14.2
|
The
above representations and warranties shall be deemed repeated as
of each
date throughout the Security
Period.
|
14.3
|
The
Borrower hereby covenants and undertakes with the Bank to immediately
notify the Bank if:
|
(a)
|
the
Borrower’s entire business is substantially reduced, the operation of the
Vessel is suspended or laid-up for more than two months or a change
in the
Vessel’s management occurs;
|
(b)
|
the
Vessel is deleted from her present ships’ register or loses the right to
fly the flag of her home country;
|
(c)
|
the
Vessel is arrested or put to public auction or the Borrower otherwise
wholly or partly loses its power of disposal of the
Vessel;
|
(d)
|
the
Vessel becomes involved in maritime or other court proceedings or
is being
encumbered with a mortgage by court
order;
|
(e)
|
the
Vessel sustains an average damage or has been salvaged from distress
at
sea or has made use of third party
assistance;
|
(f)
|
maritime
liens, a right of retention or claims due under ship mortgages are
put
forward against the Vessel;
|
(g)
|
the
Vessel has become a Total Loss (as defined in the Mortgage), has
been
abandoned or becomes unworthy for repair;
and
|
(h)
|
the
Vessel has lost her assigned
classification.
|
14.4
|
The
Borrower hereby undertakes with the Bank that as and from the date
of this
Agreement and throughout the Security Period, without the prior written
consent of the Bank (not to be unreasonably withheld) the
Borrower:
|
(a)
|
shall
not incur or agree to incur any indebtedness or material liability
(whether by way of loan, credit facilities or otherwise) nor shall
it make
any commitments other than those occurring in the ordinary course
of the
trading or the management of the
Vessel;
|
(b)
|
subject
to Clause 13.1(m), shall not issue or agree to issue or procure the
issue of any guarantee in favour of any person or legal entities
other
than in connection with the ordinary trading and operation of the
Vessel;
|
(c)
|
shall
not mortgage, charge or otherwise encumber the Vessel, her Insurances
or
her Earnings or any of its other assets or rights other than in favour
of
the Bank;
|
(d)
|
shall
not issue any further shares in its
capital;
|
(e)
|
shall
not make any payment of principal or interest to any of its shareholders
in respect of any loans or loan capital made available to it by such
shareholders;
|
(f)
|
so
long as an Event of Default has occurred and is continuing, shall
not
declare or pay any dividends upon any of its outstanding shares or
stock
or otherwise dispose of any assets to any of its shareholders in
cash or
in any other manner;
|
(g)
|
shall
not pay out of its funds to any company or person except in connection
with the administration of the Borrower, the management and the operation
and/or repair of the Vessel or the servicing of the Loan or as otherwise
permitted by or pursuant to this Agreement and the relevant Security
Document to which it is a party;
|
(h)
|
shall
not permit any change in the ownership of its share capital (or any
part
hereof) and/or any change in the ownership or the management of the
Vessel; and
|
(i)
|
shall
not appoint as manager of the Vessel any person other than the Manager
and
then upon such terms and conditions as the Bank shall in its discretion
approve.
|
14.5
|
The
Borrower may procure the Pledged Account to be opened by the Pledgor
and
the Pledged Deposit be maintained therein throughout the Security
Period.
The amount of the Pledged Deposit for the time being standing to
the
credit of the Pledged Account shall bear interest at the LIBOR for
deposits in Dollars for periods equal to the Interest Periods fixed
for
the Loan and in an amount comparable with the amount of the Pledged
Deposit; such interest to be credited to the Pledged Account at the
expiry
of each such period.
|
15.
|
JUDGEMENT
CURRENCY
|
15.1
|
If
for obtaining judgment in any court it is necessary or advisable
for the
Bank to convert any amount owed pursuant hereto into another currency
then
such conversion shall be deemed to be made at the rate of exchange
prevailing the day before the Bank’s action is brought into court with
prime banks in the country of such
court.
|
15.2
|
If
in such case due to alterations of the exchange rate the amount finally
received by the Bank shall be insufficient to cover the amount owed,
then
the Borrower
|
shall
pay to the Bank the amount required to compensate for such remaining
debt.
|
16.
|
WAIVERS
|
16.1
|
No
failure or delay on the part of the Bank to exercise any power or
right
hereunder shall operate as a waiver thereof, nor shall any single
or
partial exercise by the Bank of any such power or right preclude
any other
or further exercises thereof or the exercise of any other right.
The
remedies provided herein are cumulative and not exclusive of any
remedies
provided by law.
|
17.
|
INVALIDITY-INCREASED
COST
|
17.1
|
In
the event that this Agreement, the Security Documents or any of the
documents or instruments which may from time to time be delivered
hereunder or thereunder or any provision thereof shall be deemed
invalidated by present or future law of any nation or by decision
of any
court this shall not effect the validity and/or enforceability of
all or
any other part(s) hereof or thereof and in such case the parties
shall
execute and deliver such other and further agreements and/or any
other
documents and/or instruments and do such things as the Bank in its
sole
reasonable discretion may deem to be necessary to carry out the intent
of
this Agreement.
|
17.2
|
If
the result of (a) any change in, or in the interpretation or
application of, or the introduction of, any law or any regulation,
directive, request or requirement (whether or not having the force
of law,
but, if not having the force of law, with which the Bank or, as the
case
may be, its holding company habitually complies) by any governmental
authority in any country the laws or regulations of which are applicable
on the Bank or (b) compliance by the Bank with any request from any
applicable fiscal or monetary authority (whether or not having the
force
of law, but, if not having the force of law, with which the Bank
or, as
the case may be, its holding company habitually complies), including
(without limitation) those relating to Taxation, stock or capital
adequacy, any type of liquidity, reserve assets, cash ratio deposits
and
special deposits or other banking or monetary controls or requirements
which affects the manner in which the Bank allocates capital resources
to
its obligations hereunder, is to:
|
(a)
|
the
cost to the Bank of making the Loan or any part thereof or maintaining
or
funding the Loan is increased or an additional cost on the Bank is
imposed; and/or
|
(b)
|
subject
the Bank to taxes or change the basis of taxation (other than taxes
or
taxation on the overall net income of the Bank) in respect of any
payments
to the Bank under this Agreement or any of the other Security Documents
is
changed; and/or
|
(c)
|
the
amount payable or the effective return to the Bank under any of the
Security Documents is reduced;
and/or
|
(d)
|
the
Bank’s rate of return on its overall capital by reason of a change in
the
manner in which it is required to allocate capital resources to the
Bank’s
obligations under any of the Security Document is reduced;
and/or
|
(e)
|
require
the Bank to make a payment or forgo a return on or calculated by
references to any amount received or receivable by it under any of
the
Security Documents is required;
and/or
|
(f)
|
require
the Bank to incur or sustain a loss (including a loss of future potential
profits) by reason of being obliged to deduct all or part of the
Loan from
its capital for regulatory
purposes,
|
17.3
|
The
Bank will promptly notify the Borrower of any intention to claim
indemnification pursuant to Clause 17.2 and such notification will be
a conclusive and full evidence binding on the Borrower as to the
amount of
any increased cost or reduction and the method of calculating the
same. A
claim under Clause 17.2 may be made at any time and must be
discharged by the Borrower within seven (7) days of demand. It shall
not be a defence to a claim by the Bank under this Clause 17.2 that
any increased cost or reduction could have been avoided by the Bank.
Any
amount due from the Borrower under this Clause 17.3 shall be due as a
separate debt and shall not be affected by judgement being obtained
for
any other sums due under or in respect of this
Agreement.
|
17.4
|
If
any additional amounts are required to be paid by the Borrower to
the Bank
by virtue of Clause 17.2, the Borrower shall be entitled, on giving
the Bank not less than five (5) days prior notice in writing, to
prepay the Loan and accrued
interest
|
18.
|
SURVIVAL
|
18.1
|
All
of the covenants, representations and warranties made herein, in
the
Security Documents or in any of the documents or instruments executed
and/or delivered pursuant hereto shall survive the making of the
Loan and
shall be binding upon the Borrower until all obligations of the Borrower
arising pursuant to the terms hereof and thereof have been paid and
performed in full.
|
19.
|
FURTHER
ASSURANCE
|
19.1
|
The
Bank reserves the right to obtain legal opinions from its counsel
in any
relevant country (always at the expense of the Borrower) as to the
validity and enforceability of this Agreement, the Security Documents
and
all documents and instruments delivered pursuant thereto and the
Borrower
agrees and undertakes to take all such steps and actions including,
but
not limited to, any alterations to this Agreement, and any of the
Security
Documents or any other documents or instruments relating thereto
as may be
deemed necessary by such opinion or
opinions.
|
20.
|
NOTICES
|
20.1
|
All
statements, requests, consents and other notices (hereinafter called
“Notices”
)
hereunder shall be in writing (letter or fax) in English
language;
|
20.2
|
Notices
addressed to either of the parties hereto shall be deemed to be received
by the relevant party when received, however, in the case of a letter
seven days after despatch and in the case of a facsimile with a
confirmation report, on the same day, provided always that in the
case of
a facsimile, same was sent on a Banking Day during office
hours.
|
20.3
|
If
the date of despatch was not a Banking Day or the time of despatch
was not
during office hours such facsimile shall be deemed to have been received
at the opening of business on the next Banking
Day.
|
20.4
|
Notices
to the Borrower shall be addressed
to:
|
20.5
|
Notices
to the Bank shall be addressed to:
|
21.
|
ASSIGNMENT
|
21.1
|
The
Borrower may not assign all or any part of its rights or obligations
hereunder without the prior written consent of the Bank. The Bank
is
entitled to assign all or any part of its rights hereunder, provided
that
the Bank shall have received the prior written consent of the Borrower
for
any such assignment,
provided
always,
that (i) the Borrower shall not be responsible for any costs or
expenses arising in connection with the Bank effecting any such assignment
and (ii) any assignee of the Bank shall only be entitled to the
benefit of the provisions of Clauses 9.2 or 9.4 to the same extent
that the Bank would have been had no such assignment been
made.
|
22.
|
MISCELLANEOUS
|
22.1
|
The
Borrower during the lifetime of the Loan shall submit to the Bank
at its
own expense without being requested an income and expenditure statement
in
respect of the operation of the Vessel immediately after its completion
and, if such statement has not been completed within six (6) months
after the end of the relevant financial year to submit a provisional
income and expenditure statement.
|
22.2
|
The
Borrower have to procure translation made by a sworn or certified
translator of all documents which are not available in English or
German
language.
|
22.3
|
The
terms and conditions of the Security Documents shall apply and are
deemed
to be an integral part of this Agreement, however, in case of conflict
this Agreement shall prevail.
|
22.4
|
The
Bank shall maintain in accordance with its usual practice a loan
account
evidencing the amounts from time to time borrowed by the Borrower,
owing
to the Bank (in the relevant Loan Currency), and paid to the Bank
(whether
in respect of principal, interest or otherwise) hereunder and under
the
Security Documents.
|
23.
|
APPLICABLE
LAW
|
23.1
|
The
terms and conditions set out in this Agreement shall, unless otherwise
specifically provided, be governed by and construed in accordance
with the
laws of the Federal Republic of Germany and the Borrower hereby submits
to
the jurisdiction of the Courts of the City of Hamburg. However, the
Bank
reserves the right to choose as place of jurisdiction any place where
the
Borrower has any asset or any place of business of the Borrower.
The
Borrower agrees that any writ, notice of judgment or other legal
process
or document in connection with such proceedings may be served on
the
Borrower by delivering the same to any person at the Borrower’s registered
office or principal place of business or (without prejudice to any
other
method of service under applicable law) to Messrs. Safety Management
Overseas S.A., (Attention: Mr. G. Papadopoulos) presently located at
Alassia Building, Defteras Merarchias 13, 18535 Piraeus, Greece,
who are
hereby appointed as the agent of the Borrower for service of legal
process
in respect of any such proceedings and such service shall be deemed
good
service on the Borrower.
|
24.
|
CHANGE
OF LAW
|
24.1
|
If
the introduction of or any change in any applicable law, treaty or
regulation or in the interpretation thereof by any authority charged
with
the administration thereof shall make it unlawful for the Bank to
maintain, fund or perform its obligations under this Agreement then
the
Bank shall forthwith give notice thereof to the Borrower whereupon
the
Bank will be discharged from its obligations under this Agreement
and the
Borrower shall, on demand by the Bank, prepay the Loan, if permitted
by
applicable law, (i) at the end of the then current Interest Period or
(ii) on the next day on which a payment under this Agreement is due,
whatever is the earlier, together with accrued interest thereon and
any
other unpaid amounts due to the Bank
hereunder.
|
25.
|
EXECUTION
|
STALOUDI
SHIPPING
CORPORATION
|
DEUTSCHE
SCHIFFSBANK
AKTIENGESELLSCHAFT
|
|||
By: |
/s/
George Papadopoulos
|
By: |
/s/
Aristeidis D. Vourdas
|
|
George
Papadopoulos
Attorney-in-Fact
|
Aristeidis D.
Vourdas
Attorney-in-Fact
|
To:
|
DEUTSCHE
SCHIFFSBANK AKTIENGESELLSCHAFT
|
(a)
|
no
event or circumstance has occurred and is continuing which constitutes
an
Event of Default;
|
(b)
|
the
representations and warranties contained in Clause 14 of the Loan
Agreement and the representations and warranties contained in each
of the
other Security Documents are true and correct at the date hereof
as if
made with respect to the facts and circumstances existing at such
date;
|
(c)
|
the
borrowing to be effected by the drawing of the Loan will be within
our
corporate powers, has been validly authorised by appropriate corporate
action and will not cause any limit on our borrowings (whether imposed
by
statute, regulation, agreement or otherwise) to be exceeded;
and
|
(d)
|
to
the best of our knowledge and belief there has been no material adverse
change in our financial position or in the consolidated financial
position
of ourselves and the other Security Parties from that described by
us to
the Bank in the negotiation of the Loan
Agreement.
|
SIGNED
by
Mr.
George Papadopoulos
for
and on behalf of
the
Borrower
Staloudi
Shipping Corporation
of
Liberia, in the presence of:
|
)
)
)
)
)
)
|
_____________________________
Attorney-in-Fact
|
TELEFAX
Staloudi
Shipping Corporation
c/o
Safety Management Overseas S.A., Voula
Attn.:
Mr. George Papadopoulos
|
Hans-Jürgen
Schulte / st
International
Loans
Direct
Line +49 421 3609-255
Telefax
+49
421 3609-329
hans-juergen.schulte@schiffsbank.com
|
Fax
0030 210 895 6900
|
|
3
rd
December 2007
|
|
Page(s):
1 (incl. address page)
|
Tranche
A
|
USD
26,265,828.47
|
Tranche
B
|
USD
4,162,500.00
|
Tranche
A
|
Tranche
B
|
Total
Loan
|
||||||||
USD
|
USD
|
USD
|
||||||||
Balance
outstanding
|
26,265,828.47
|
4,162,500
|
30,428,328.47
|
|||||||
Intalment
4
th
–20
th
|
687,500.00
|
112,500
|
800,000.00
|
|||||||
Ballon
|
14,578,328.47
|
2,250,000
|
16,828,328.47
|
Domshof
17
D-28195
Bremen
P.O.
Box 106269
D-28062
Bremen
|
Telephone
+49 421 3609-0
Telefax
+49 421 3609-326
Telex
24 48 70
SWIFT
DESBDE22
|
Head
Offices
Bremen
and Hamburg
Commercial
Register
Local
Court Bremen HRB 4062
Local
Court Hamburg HRB 42653
VAT
Reg. No. DB153094769
|
Chairman
of the Supervisory Board
Nicholas
Teller
Board
of Managing Directors
Jürgen
Bentiaga
W.
Ellerback Ulrich
Tobias
Müller
|
EXHIBIT 10.16
To: | Staloudi Shipping Corporation | |
32 Karamanli Avenue
|
||
166 05 Voula | ||
Greece |
May 2008
Dear Sirs
Supplemental Letter
1 |
We refer to the loan agreement dated 29 May 2006 (the Loan Agreement ) made between (1) Staloudi Shipping Corporation as borrower (the Borrower ) and (2) Deutsche Schiffsbank as lender (the Bank ), pursuant to which the Bank agreed ( inter alia ) to make available (and has made available) to the Borrower a multicurrency loan of Thirty six million Dollars ($30,000,000) upon the terms and conditions contained therein. |
|
2 |
Words and expressions defined in the Loan Agreement shall, unless the context otherwise requires, have the same meaning where used in this Letter. |
|
3 |
The Bank hereby confirms its consent to the entry by the Borrower and the Manager into a new management agreement in respect of the Ship, pursuant to the terms described in the Borrowers letter of 6 February 2008 addressed to the Bank and subsequent discussions. The Bank, the Borrower and the Manager hereby agree and acknowledge that references in the Managers Undertaking and the other Security Documents to the Management Agreement shall be deemed to be references to such new management agreement referred to above, in substitution of the Management Agreement currently referred to therein. |
|
4 |
At the Borrowers request, the Bank and the Borrower hereby agree that the Loan Agreement shall, with effect on and from the Effective Date (as defined below), be (and it is hereby) amended in accordance with the following provisions (and the Loan Agreement (as so amended) will continue to be binding upon each of the parties thereto upon such terms as so amended): |
|
(a) |
By inserting the following new definition of HoldCo in the correct alphabetical order in clause 2.2 |
|
HoldCo means Safe Bulkers, Inc. of the Marshall Islands and it includes its successors in title;; |
||
(b) |
by deleting the definition of Management Agreement in clause 12.1 (j) and by inserting the following new definition of Management |
|
1
Agreement in the correct alphabetical order in clause 2.2: | |||
Management Agreement means, together, the agreement dated 2008 entered into between HoldCo and the Manager and the agreement dated 2008 entered into between the Borrower and the Manager, providing (inter alia) for the Manager to manage the Ship, as amended and supplemented from time to time;; | |||
(c) |
by deleting clause 13.1 (n) in its entirety and by inserting in its place the following new clause 13.1. (n): |
||
(n) |
if without the prior written consent of the Bank the Borrower ceases to be owned by the Holdco and the Vessel ceases to be managed by the Manager, |
||
(d) |
By inserting the following new clause 14.6 |
||
The Borrower will send to the Bank: |
|||
(a) |
as soon as possible, but in no event later than 180 days after the end of each financial year, its unaudited financial statements for that financial year; |
||
(b) |
as soon as possible, but in no event later than 180 days after the end of each financial year the consolidated audited financial statements of HoldCo for that financial year; |
||
(c) |
from time to time, and on demand, such additional financial or other information relating to the Borrower / HoldCo and/or the Ship as may reasonably be requested by the Lender. |
||
5 |
The Bank and the Borrower hereby agree that the agreement of the Bank contained in paragraph 3 above and the amendments to the Loan Agreement set out in paragraph 4 above shall become effective on the date (the Effective Date ) when the Borrower and the Manager have executed this Letter; provided that following the Effective Date, the Borrower shall promptly deliver to the Bank such documents and evidence of the type referred to in the Agreement as reasonably required by the Bank, in respect of this Letter, and the transactions contemplated herein and therein. |
6 |
The Bank and the Borrower shall promptly execute such further documentation and take all such other actions as may be reasonably required to reflect the Banks consent, evidenced by this letter, to the various changes of ownership involved in the Reorganization and the Offering (as such capitalized terms are defined in the Borrowers letter to the Bank of 6 February, 2008), as well as any exchange of, |
2
and corporate actions in connection with the exchange of, bearer shares for registered shares. |
|
7 |
Save as amended by this Letter, the provisions of the Loan Agreement shall continue in full force and effect and the Loan Agreement and this Letter shall be read and construed as one instrument. |
8 |
Each of the other Security Documents and the obligations of the Security Parties thereunder shall remain and continue in full force and effect notwithstanding the amendments to the Loan Agreement contained in this Letter. |
9 |
References to the Agreement or the Loan Agreement in any of the Security Documents shall henceforth be references to the Loan Agreement as amended by this Letter and as from time to time hereafter amended and shall also be deemed to include this Letter and the obligations of the Security Parties hereunder. |
10 |
This Letter is governed by, and shall be construed in accordance with, the laws of the Federal Republic of Germany and any dispute hereunder shall be resolved in the same courts as provided for in clause 23 of the Loan Agreement. |
Deutsche Schiffsbank | ||
Aktiengesellschaft | ||
We acknowledge receipt of this letter and agree in full to the terms and conditions set out above and the amendments of the Loan Agreement contained therein.
EXECUTED | ) | ||
by | ) | ||
for and on behalf of | ) | ||
STALOUDI SHIPPING CORPORATION | ) | Attorney-in-fact | |
In the presence of: | ) |
Witness
Name: Address: Occupation: |
3
EXECUTED | ) | ||
by | ) | ||
for and on behalf of | ) | ||
SAFETY MANAGEMENT OVERSEAS S.A. | ) | Attorney-in-fact | |
In the presence of: | ) |
Witness
Name: Address: Occupation: |
4
Page
|
||
1
|
Purpose
and definitions
|
1
|
2
|
The
Commitment and the Loan
|
9
|
3
|
Interest
and Interest Periods
|
10
|
4
|
Currencies
|
12
|
5
|
Repayment
and prepayment
|
14
|
6
|
Commitment
commission, fees and expenses
|
17
|
7
|
Payments
and taxes; accounts and calculations
|
18
|
8
|
Representations
and warranties
|
19
|
9
|
Undertakings
|
23
|
10
|
Conditions
|
28
|
11
|
Events
of Default
|
29
|
12
|
Indemnities
|
32
|
13
|
Unlawfulness
and increased costs
|
33
|
14
|
Security
and set-off
|
34
|
15
|
Accounts
|
35
|
16
|
Assignment,
transfer and lending office
|
36
|
17
|
Notices
and other matters
|
36
|
18
|
Governing
law and jurisdiction
|
37
|
Schedule
1 Form of Drawdown Notice
|
39
|
|
Schedule
2 Documents and evidence required as conditions precedent
|
40
|
|
Schedule
3 Form of Mortgage
|
44
|
|
Schedule
4 Form of Deed of Covenant
|
45
|
|
Schedule
5 Form of General Assignment
|
46
|
|
Schedule
6 Form of Manager’s Undertaking
|
47
|
|
Schedule
7 Form of Master Swap Agreement
|
48
|
|
49
|
||
Schedule
9 Calculation of Additional Cost
|
50
|
1 |
Purpose
and definitions
|
1.1 |
Purpose
|
1.2 |
Definitions
|
(a) |
for
interest rate fixing purposes:
|
(i)
|
in
relation to a rate fixing in respect of euro, a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer
system (TARGET) is operating; or
|
(ii)
|
in
relation to a rate fixing in respect of any other Optional Currency
or
Dollars, a day on which banks are open for business in the principal
financial centre in, respectively, the jurisdiction of the relevant
Optional Currency or, in the case of Dollars, New York City;
and
|
(b) |
for
all other purposes (including, but not limited to, payments and receiving
notices):
|
(i)
|
on
which banks are open for business in London, Munich and Athens;
and
|
(ii)
|
in
relation to payments in euros, a day on which banks are open for
business
in such other principal financial centre or centres of relevant
Participating Member States as the Bank may nominate;
or
|
(iii)
|
in
relation to payments in any other Optional Currency or Dollars, a
day on
which banks are open for business in the principal financial centre
in,
respectively, the jurisdiction of the relevant Optional Currency
or, in
the case of Dollars, New York City;
|
(a) |
the
rate of interest for such period which appears on the Reuters page
Euribor
01 (or such other page on the Reuters screen as may customarily be
used
from time to time to display EURIBOR rates) at or about 11:00 a.m.
(Brussels time) on the Quotation Date for such period;
or
|
(b) |
if
the relevant rate of EURIBOR cannot be determined in accordance with
paragraph (a) above, the rate (rounded upwards if necessary to the
nearest
one sixteenth of one per cent) the Bank offers for deposits in an
amount
approximately equal to the amount in relation to which EURIBOR is
to be
determined for a period equivalent to such period to prime banks
in the
London Interbank Market at or about 11:00 a.m. (London time) on the
Quotation Date for such period;
|
(a) |
for
the period commencing on the Drawdown Date and ending on the Third
Anniversary, equal to one hundred and ten per cent (110%) of the
amount
which is the aggregate of (i) the Loan (or the Equivalent Amount
in
Dollars when the Loan or part thereof is denominated in an Optional
Currency) and (ii) the cost (if any) (as certified by the Bank whose
certificate shall, in the absence of manifest error, be conclusive
and
binding on the Borrower and the Bank) of terminating any Transaction
entered into pursuant to the Master Swap Agreement;
and
|
(b) |
for
the period commencing on the date falling immediately after the Third
Anniversary and ending on the last day of the Security Period (as
defined
in the Deed of Covenant), equal to one hundred and twenty per cent
(120%)
of the amount which is the aggregate of (i) the Loan (or the Equivalent
Amount in Dollars when the Loan or part thereof is denominated in
an
Optional Currency) and (ii) the cost (if any) (as certified by the
Bank
whose certificate shall, in the absence of manifest error, be conclusive
and binding on the Borrower and the Bank) of terminating any Transaction
entered into pursuant to the Master Swap
Agreement;
|
(a) |
the
actual, constructive, compromised or arranged total loss of the Ship;
or
|
(b) |
the
Compulsory Acquisition of the Ship;
or
|
(c) |
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Borrower from such
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation within thirty (30) days after the occurrence
thereof;
|
1.3 |
Headings
|
1.4 |
Construction
of certain terms
|
1.4.1
|
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Agreement and references to this Agreement
include
its schedules;
|
1.4.2
|
references
to (or to any specified provision of) this Agreement or any other
document
shall be construed as references to this Agreement, that provision
or that
document as in force for the time being and as amended in accordance
with
terms thereof, or, as the case may be, with the agreement of the
relevant
parties;
|
1.4.3
|
references
to a “regulation” include any present or future regulation, rule,
directive, requirement, request or guideline (whether or not having
the
force of law) of any agency, authority, central bank or government
department or any self-regulatory or other national or supra-national
authority;
|
1.4.4
|
words
importing the plural shall include the singular and vice
versa;
|
1.4.5
|
references
to a time of day are to London
time;
|
1.4.6
|
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.7
|
references
to a “guarantee” include references to an indemnity or other assurance
against financial loss including, without limitation, an obligation
to
purchase assets or services as a consequence of a default by any
other
person to pay any Indebtedness and “guaranteed” shall be construed
accordingly; and
|
1.4.8
|
references
to any enactment shall be deemed to include references to such enactment
as re-enacted, amended or extended.
|
2 |
The
Commitment and the Loan
|
2.1 |
Agreement
to lend
|
2.2 |
Drawdown
|
2.3 |
Amount
|
2.4 |
Availability
|
2.5 |
Termination
of Commitment
|
2.6 |
Application
of Proceeds
|
3 |
Interest
and Interest Periods
|
3.1 |
Normal
interest rate
|
3.2 |
Selection
of Interest Periods
|
3.3 |
Determination
of Interest Periods
|
3.3.1
|
the
first Interest Period in respect of an Advance shall commence on
the
Drawdown Date and each subsequent Interest Period in respect of such
Advance shall commence on the last day of the previous Interest Period
in
respect of such Advance;
|
3.3.2
|
if
any Interest Period would otherwise overrun a Repayment Date, then,
in the
case of the last Repayment Date, such Interest Period shall end on
such
Repayment Date, and in the case of any other Repayment Date or Repayment
Dates, the Advance or, if more than one, the aggregate of the Advances
shall be divided into parts so that there is one part (in the case
of more
than one Advance to be calculated on pro-rata basis between the Advances
in the aggregate Dollar Amount of all such Advances) in the amount
of the
repayment instalment due on each Repayment Date falling during that
Interest Period and having an Interest Period ending on the relevant
Repayment Date and another part (in the case of more than one Advance
to
be calculated on a pro-rata basis between the Advances in the aggregate
Dollar Amount of all such Advances) in the amount of the balance
of the
Loan having an Interest Period ascertained in accordance with clause
3.2
and the other provisions of this clause 3.3 and the expression “Interest
Period in respect of the Loan” when used in clause 4 and elsewhere in this
Agreement refers to the Interest Period in respect of the balance
of the
Loan;
|
3.3.3
|
if
the Borrower fails to specify the duration of an Interest Period
in
accordance with the provisions of clause 3.2 and this clause 3.3
such
Interest Period shall have a duration of six (6) months or such other
period as shall comply with this clause
3.3.
|
3.4 |
Default
interest
|
3.5 |
Notification
of Interest Periods and interest
rate
|
3.6 |
Market
disruption;
non-availability
|
3.6.1
|
If
and whenever, at any time prior to the commencement of any Interest
Period, the Bank shall have determined (which determination shall,
in the
absence of manifest error, be
conclusive):
|
(a) |
that
adequate and fair means do not exist for ascertaining LIBOR or, as
the
case may be, EURIBOR during such Interest Period;
or
|
(b) |
that
deposits in Dollars are not available to the Bank in the London Interbank
Market in the ordinary course of business in sufficient amounts to
fund
the Loan for such Interest Period;
|
3.6.2
|
During
the period of ten (10) days after any Determination Notice has been
given
by the Bank under clause 3.6.1, the Bank shall certify an alternative
basis (the “
Substitute
Basis
”)
for maintaining the Loan. The Substitute Basis may (without limitation)
include alternative interest periods, alternative currencies or
alternative rates of interest but shall include a margin above the
cost of
funds (including Additional Cost), if any, to the Bank equivalent
to the
Margin. Each Substitute Basis so certified shall be binding upon
the
Borrower and shall take effect in accordance with its terms from
the date
specified in the Determination Notice until such time as the Bank
notifies
the Borrower that none of the circumstances specified in clause 3.6.1
continues to exist whereupon the normal interest rate fixing provisions
of
this Agreement shall apply.
|
4 |
Currencies
|
4.1 |
Selection
of currencies
|
4.2 |
Limit
on currencies;
non-availability
|
4.2.1
|
The
Loan or any part thereof may not be drawn down in and may not be
converted
into or remain outstanding in an Optional Currency
if:
|
(a) |
in
consequence thereof there would be more than three (3) Advances
outstanding at any time; or
|
(b) |
in
consequence thereof there would be more than two (2) Optional Currencies
outstanding at any time; or
|
(c) |
in
consequence thereof an Advance shall be denominated in more than
one
currency; or
|
(d) |
the
amount to be converted is less than $1,000,000 or an integral multiple
of
$1,000,000; or
|
(e) |
the
Bank notifies the Borrower not later than 3 p.m. on the fourth Banking
Day
before the date on which the Loan or the relevant part thereof is
to be
drawn down or the beginning of the relevant Interest Period, that
deposits
of such Optional Currency are not readily available to the Bank in
an
amount comparable with the Loan or the relevant part thereof;
or
|
(f) |
the
Bank determines (which determination shall be conclusive) at any
time
prior to 10 a.m. (local time in the place of payment) on the first
day of
the relevant Interest Period that
by
|
reason
of any change in currency availability, currency exchange rates or
exchange controls it is or will be impracticable for the Loan or
the
relevant part thereof to be drawn down in, converted into or remain
outstanding in that Optional Currency;
or
|
(g) |
a
Default has occurred and is continuing;
or
|
(h) |
a
Transaction is outstanding under the Master Swap Agreement,
|
4.3 |
Currency
amounts on drawdown
|
4.3.1
|
Drawdown
in Optional Currency
|
4.3.2
|
Drawdown
in Dollars
|
4.4 |
Currency
amount on conversion
|
4.5 |
Notional
obligations
|
4.6 |
Currency
Correction
|
4.7 |
Release
of moneys in Multicurrency Cash Collateral
Account
|
4.8 |
Incidental
costs and expenses
|
5 |
Repayment
and prepayment
|
5.1 |
Repayment
|
5.1.1
|
Subject
to the terms of this Agreement, the Borrower shall repay the Loan
by
twenty four consecutive instalments, one such instalment to be repaid
on
each of the Repayment Dates Subject to the provisions of this Agreement,
the amount of each such instalment other than the last instalment
shall be
One million Dollars ($1,000,000) or the equivalent amount in an Optional
Currency calculated in accordance with clause 5.7 and the amount
of the
last instalment shall be Thirteen million Dollars ($13,000,000)
(comprising a balloon repayment of Twelve million Dollars ($12,000,000)
and a repayment instalment of One million Dollars ($1,000,000)) or
the
equivalent amount in an Optional Currency calculated in accordance
with
clause 5.7
PROVIDED
ALWAYS THAT
should the Loan be, for any reason (including enforcement), fully
repaid
or prepaid, notwithstanding anything to the contrary in this Agreement
and
in particular the repayment profile provided in this clause 5.1.1
and the
provisions of clauses 5.2 and 5.7, the Borrower shall pay to the
Bank such
an amount and in such currency or, as the case may be, currencies
as is
necessary to ensure that the Bank receives an amount equal to the
Loan in
the currencies outstanding immediately prior to the Loan being repaid
or
prepaid in full and the above repayment profile shall be disregarded
for
the purposes of such repayment or prepayment. If the Commitment is
not
drawn in full, the amount of each repayment instalment shall be reduced
proportionately.
|
5.1.2
|
The
Borrower shall, at any time after the Third Anniversary have the
right
(subject to paragraphs (a) to (d) below) to request the Bank to defer
the
payment of up to two non-consecutive repayment instalments payable
pursuant to clause 5.1.1 (other than the final instalment) in
whole:
|
(a) |
such
option shall be exercisable by a written notice to the Bank from
the
Borrower which specifies the instalment to be deferred and which
is
received by the Bank at least fifteen (15) days before the Repayment
Date
upon which the relevant instalment falls
due;
|
(b) |
each
such notice shall be irrevocable once
given;
|
(c) |
upon
each occasion that an instalment is deferred pursuant to this proviso,
the
amount of the balloon repayment shall be increased by the amount
of the
relevant instalment deferred; and
|
(d) |
such
option may only be exercised if (i) the written notice to the Bank
has
been received within the time period specified in paragraph (a) above
and
(ii) at the time the relevant notice is received by the Bank no Default
has occurred.
|
5.2 |
Voluntary
prepayment
|
5.3 |
Master
Swap Agreement, Repayments and
Prepayments
|
5.3.1
|
Notwithstanding
any provision of the Master Swap Agreement to the contrary, in the
case of
a prepayment of all or part of the Loan (including, without limit,
upon a
Total Loss in accordance with clause 5.4 and under clause 9.2) then,
subject to clause 5.3.2, the Bank shall be entitled but not obliged
(and,
where relevant, may do without the consent of the Borrower, where
it would
otherwise be required whether under the Master Swap Agreement or
otherwise) to amend, re-book, supplement, cancel, close out, net
out,
terminate, liquidate, transfer or assign all or any part of the rights,
benefits and obligations created by any Transaction and/or the Master
Swap
Agreement and/or to obtain or re-establish any hedge or related trading
position in any manner and with any person the Bank in its absolute
discretion may determine and both the Bank’s and the Borrower’s continuing
obligations under any Transaction and/or Master Swap Agreement shall,
unless agreed otherwise by the Bank, be calculated so far as the
Bank
considers it practicable by reference to the amended repayment schedule
for the Loan taking into account the fact that less than the full
amount
of the Loan remains outstanding.
|
5.3.2
|
If
less than the full amount of the Loan remains outstanding, following
a
prepayment under this Agreement and the Bank in its absolute discretion
agrees, following a written request of the Borrower, that the Borrower
may
be permitted to maintain all or part of a Transaction in an amount
not
wholly matched with or linked to all or part of the Loan, the Borrower
shall within ten (10) days of being notified by the Bank of such
requirement, provide the Bank with, or procure the provision to the
Bank
of, such additional security as shall in the opinion of the Bank
be
adequate to secure the performance of such Transaction, which additional
security shall take such form, be constituted by such documentation
and be
entered into between such parties, as the Bank in its absolute discretion
may approve or require, and each document comprising such additional
security shall constitute a Credit Support
Document.
|
5.3.3
|
The
Borrower shall on the first written demand of the Bank indemnify
the Bank
in respect of all losses, costs and expenses (including, but not
limited
to, legal costs and expenses) incurred or sustained by the Bank as
a
consequence of or in relation to the effecting of any matter or
Transactions referred to in this clause
5.3.
|
5.3.4
|
Notwithstanding
any provision of the Master Swap Agreement to the contrary, if for
any
reason a Transaction has been entered into but the Loan is not drawn
down
under this Agreement then, subject to clause 5.3.5 the Bank shall
be
entitled but not obliged (and, where relevant, may do so without
the
consent of the Borrower where it would otherwise be required whether
under
the Master Swap Agreement or otherwise) to amend, re-book, supplement,
cancel, close out, net out, terminate, liquidate, transfer or assign
all
or any part of the rights, benefits and obligations created by such
Transaction and/or the Master Swap Agreement and/or to obtain or
re-establish any hedge or related trading position in any manner
and with
any person the Bank in its absolute discretion may
determine.
|
5.3.5
|
If
a Transaction has been entered into but the Loan is not drawn down
under
this Agreement and the Bank in its absolute discretion agrees, following
a
written request of the Borrower, that the Borrower may be permitted
to
maintain all or part of a Transaction, the Borrower shall within
ten (10)
days of being notified by the Bank of such requirement, provide the
Bank
with, or procure the provision to the Bank of, such additional security
as
shall in the opinion of the Bank be adequate to secure the performance
of
such Transaction, which additional security shall take such form,
be
constituted by such documentation and be entered into between such
parties, as the Bank in its absolute discretion may approve or require,
and each document comprising such
additional
|
security shall constitute a Credit Support Document for the purposes of the Master Swap Agreement and/or otherwise. |
5.3.6
|
Without
prejudice to or limitation of the obligations of the Borrower under
clause
5.3.3, in the event that the Bank exercises any of its rights under
clauses 5.3.1, 5.3.2, 5.3.3 or 5.3.4 and such exercise results in
all or
part of a Transaction being terminated such Transaction or the part
thereof terminated (which shall for the purposes hereof be treated
as a
separate Transaction) in each case shall be treated under the Master
Swap
Agreement in the same manner as if it were a Terminated Transaction
(as
defined in Section 14 of the Master Swap Agreement) pursuant to an
Event
of Default (as so defined in that Section 14) by the Borrower and,
accordingly, the Bank shall be permitted to recover from the Borrower
a
payment for early termination calculated in accordance with the provisions
of section 6(e)(i) of the Master Swap Agreement in respect of such
Transaction.
|
5.4 |
Prepayment
on Total Loss
|
5.4.1
|
in
the case of an actual total loss of the Ship on the actual date and
at the
time the Ship was lost or, if such date is not known, on the date
on which
the Ship was last reported;
|
5.4.2
|
in
the case of a constructive total loss of the Ship, upon the date
and at
the time notice of abandonment of the Ship is given to the insurers
of the
Ship for the time being (provided a claim for total loss is admitted
by
such insurers) or, if such insurers do not forthwith admit such a
claim,
at the date and at the time at which either a total loss is subsequently
admitted by the insurers or a total loss is subsequently adjudged
by a
competent court of law or arbitration tribunal to have
occurred;
|
5.4.3
|
in
the case of a compromised or arranged total loss, on the date upon
which a
binding agreement as to such compromised or arranged total loss has
been
entered into by the insurers of the
Ship;
|
5.4.4
|
in
the case of Compulsory Acquisition, on the date upon which the relevant
requisition of title or other compulsory acquisition occurs;
and
|
5.4.5
|
in
the case of hijacking, theft, condemnation, capture, seizure, arrest,
detention or confiscation of the Ship (other than where the same
amounts
to Compulsory Acquisition of the Ship) by any Government Entity,
or by
persons purporting to act on behalf of any Government Entity, which
deprives the Borrower of the use of the Ship for more than thirty
(30)
days, upon the expiry of the period of thirty (30) days after the
date
upon which the relevant hijacking, theft, condemnation, capture,
seizure,
arrest, detention or confiscation
occurred.
|
5.5 |
Amounts
payable on prepayment
|
5.6 |
Notice
of prepayment; reduction of repayment
instalments
|
5.7 |
Currency
amounts repayable
|
5.8 |
Cash
Collateral Deposit
Prepayment
|
6 |
Commitment
commission, fees and
expenses
|
6.1 |
Fees
|
6.1.1
|
a
total fee of Thirty six thousand Dollars ($36,000) on the date of
this
Agreement;
|
6.1.2
|
a
commitment commission computed (a) from 13 December 2004 until 16
November
2006 at the rate of 0.15% per annum on the amount of $27,000,000
and (b)
from 17 November 2006 until the earlier of (i) the Drawdown Date
and (ii)
the Termination Date at the rate of 0.15% per annum on the daily
undrawn
amount of the Commitment and in each case payable quarterly;
and
|
6.1.3
|
the
fee referred to in clause 6.1.1 and the commitment commission referred
to
in clause shall be payable by the Borrower to the Bank, whether or
not any
part of the Commitment is ever advanced and shall, in either case,
be
non-refundable.
|
6.2 |
Expenses
|
6.2.1
|
in
connection with the negotiation, preparation, execution and, where
relevant, registration of the Security Documents and of any amendment
or
extension of or the granting of any waiver or consent under, any
of the
Security Documents (including, for the avoidance of doubt, the Master
Swap
Agreement); and
|
6.2.2
|
in
contemplation of, or otherwise in connection with, the enforcement
of, or
preservation of any rights under, any of the Security Documents
(including, for the avoidance of doubt, the Master Swap Agreement),
or
otherwise in respect of the moneys owing under any of the
Security
|
6.3 |
Value
Added Tax
|
6.4 |
Stamp
and other duties
|
7 |
Payments
and taxes; accounts and
calculations
|
7.1 |
No
set-off or counterclaim
|
7.2 |
Payment
by the Bank
|
7.3 |
Non-Banking
Days
|
7.4 |
Calculations
|
7.5 |
Certificates
conclusive
|
7.6 |
Grossing-up
for Taxes
|
7.7 |
Loan
account
|
8 |
Representations
and warranties
|
8.1 |
Continuing
representations and
warranties
|
8.1.1
|
Due
incorporation
|
8.1.2
|
Corporate
power
|
8.1.3
|
Binding
obligations
|
8.1.4
|
No
conflict with other obligations
|
8.1.5
|
No
litigation
|
8.1.6
|
No
filings required
|
8.1.7
|
Choice
of law
|
8.1.8
|
No
immunity
|
8.1.9
|
Consents
obtained
|
8.2 |
Initial
representations and
warranties
|
8.2.1
|
Pari
passu
|
8.2.2
|
No
default under other Indebtedness
|
8.2.3
|
Information
|
8.2.4
|
No
withholding Taxes
|
8.2.5
|
No
Default
|
8.2.6
|
the
Ship
|
(a) |
in
the absolute ownership of the Borrower who will on and after the
Drawdown
Date be the sole, legal and beneficial owner of the
Ship;
|
(b) |
registered
in the name of the Borrower through the Registry as a ship under
the laws
and flag of the Flag State;
|
(c) |
operationally
seaworthy and in every way fit for service;
and
|
(d) |
classed
with the Classification free of all requirements and recommendations
of
the Classification Society;
|
8.2.7
|
Ship’s
employment
|
8.2.8
|
Freedom
from Encumbrances
|
8.2.9
|
Compliance
with Environmental Laws and
Approvals
|
(a) |
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have complied with
the
provisions of all Environmental
Laws;
|
(b) |
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have obtained all
Environmental Approvals and are in compliance with all such Environmental
Approvals; and
|
(c) |
neither
the Borrower nor to the best of the Borrower’s knowledge and belief
(having made due enquiry) any of its Environmental Affiliates has
received
notice of any Environmental Claim that the Borrower or any such
Environmental Affiliate is not in compliance with any Environmental
Law or
any Environmental Approval;
|
8.2.10
|
No
Environmental Claims
|
8.2.11
|
No
potential Environmental Claims
|
8.2.12
|
No
material adverse change
|
8.2.13
|
ISPS
Code
|
8.2.14
|
Copies
true and complete
|
8.3 |
Repetition
of representations and
warranties
|
9 |
Undertakings
|
9.1 |
General
|
9.1.1
|
Notice
of Default
|
9.1.2
|
Consents
and licences
|
9.1.3
|
Use
of proceeds
|
9.1.4
|
Pari
passu
|
9.1.5
|
Financial
statements
|
9.1.6
|
Delivery
of reports
|
9.1.7
|
Provision
of further information
|
9.1.8
|
Obligations
under Security Documents
|
9.1.9
|
Compliance
with Code
|
9.1.10
|
Withdrawal
of DOC and SMC
|
9.1.11
|
Issuance
of DOC and SMC
|
9.1.12
|
ISPS
Code compliance
|
(a) |
maintain
at all times a valid and current ISSC in respect of the
Ship;
|
(b) |
immediately
notify the Bank in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the ISSC in respect of
the
Ship; and
|
(c) |
procure
that the Ship will comply at all times with the ISPS
Code;
|
9.1.13
|
Employment
|
(a) |
advise
the Bank of any contract of employment for the Ship which is of a
duration
of more than twelve (12) months;
|
(b) |
deliver
to the Bank a copy of any Charter entered
into;
|
(c) |
(1)
execute a Charter Assignment in respect of any Charter and (2) execute
any
notice of assignment required in connection therewith and promptly
procure
the acknowledgement of any such notice of assignment by the relevant
Charterer;
|
(d) |
pay
all legal and other costs incurred by the Bank in connection with
any such
Charter Assignment;
|
9.1.14
|
Banking
operations
|
9.1.15
|
Know
your customer information
|
9.2 |
Security
value maintenance
|
9.2.1
|
Security
shortfall
|
(a) |
prepay
such sum in Dollars as will result in the Security Requirement after
such
prepayment (taking into account any other repayment of the Loan made
between the date of the notice and the date of such prepayment) being
equal to the Security Value; or
|
(b) |
constitute
to the satisfaction of the Bank such further security for the Loan
as
shall be acceptable to the Bank having a value for security purposes
(as
determined by the Bank in its absolute discretion) at the date upon
which
such further security shall be constituted which, when added to the
Security Value, shall not be less than the Security Requirement as
at such
date.
|
9.2.2
|
Valuation
of Ship
|
9.2.3
|
Information
|
9.2.4
|
Costs
|
9.2.5
|
Valuation
of additional security
|
9.2.6
|
Documents
and evidence
|
9.2.7
|
Security
release
|
(a) |
at
any time during the period commencing on the date of this Agreement
and
ending on the Third Anniversary, exceeds one hundred and ten per
cent
(110%) of the aggregate of (i) the Loan (or the Equivalent Amount
in
Dollars when the Loan or part thereof is denominated in one or more
Optional Currencies) and (ii) the cost (if any) (as certified by
the Bank
whose certificate shall in the absence of manifest error, be binding
on
the Borrower) of terminating any Transaction entered into pursuant
to the
Master Agreement; and
|
(b) |
at
any time after the Third Anniversary, exceeds one hundred and twenty
per
cent (120%) of the aggregate of (i) the Loan (or the Equivalent Amount
in
Dollars when the Loan or part thereof is denominated in one or more
Optional Currencies) and (ii) the cost (if any) (as certified by
the Bank
whose certificate shall in the absence of manifest error, be binding
on
the Borrower) of terminating any Transaction entered into pursuant
to the
Master Agreement,
|
(c) |
and
the Borrower shall previously have provided further security to the
Bank
pursuant to clause 9.2.1(b) then the Bank shall, as soon as reasonably
practicable after receiving a written request from the Borrower to
do so
and subject to being indemnified to its satisfaction against the
cost of
doing so, release any such further security specified by the Borrower
provided that the Bank is satisfied that, immediately following such
release, the Security Value will be equal to or in excess of the
Security
Requirement.
|
9.3 |
Negative
undertakings
|
9.3.1
|
Negative
pledge
|
9.3.2
|
No
merger
|
9.3.3
|
Disposals
|
9.3.4
|
Other
business
|
9.3.5
|
Acquisitions
|
9.3.6
|
Other
obligations
|
9.3.7
|
No
borrowing
|
9.3.8
|
Repayment
of borrowings
|
9.3.9
|
Guarantees
|
9.3.10
|
Loans
|
9.3.11
|
Sureties
|
9.3.12
|
Share
capital and distribution
|
9.3.13
|
Shareholding
and structure
|
9.3.14
|
Subsidiaries
|
9.3.15
|
Manager
|
9.3.16
|
Constitutional
documents
|
9.4 |
Cash
Collateral Account Balance
|
10 |
Conditions
|
10.1 |
Documents
and evidence
|
10.1.1
|
the
Bank, or its duly authorised representative, shall have received,
not
later than two (2) Banking Days before the day on which the Drawdown
Notice is given, the documents and evidence specified in Part 1 of
schedule 2 in form and substance satisfactory to the Bank;
and
|
10.1.2
|
the
Bank, or its duly authorised representative, shall have received,
on or
prior to the Drawdown Date, the documents and evidence specified
in Part 2
of schedule 2 in form and substance satisfactory to the
Bank.
|
10.2 |
General
conditions precedent
|
10.2.1
|
the
representations and warranties contained in clauses 8.1 and 8.2 are
true
and correct on and as of each such time as if each was made with
respect
to the facts and circumstances existing at such time;
and
|
10.2.2
|
no
Default shall have occurred and be continuing or would result from
the
making of the Loan.
|
10.3 |
Waiver
of conditions precedent
|
10.4 |
Further
conditions precedent
|
11 |
Events
of Default
|
11.1 |
Events
|
11.1.1
|
Non-payment
:
any Security Party fails to pay any sum payable by it under any of
the
Security Documents at the time, in the currency and in the manner
stipulated in the Security Documents (and so that, for this purpose,
sums
payable on demand shall be treated as having been paid at the stipulated
time if paid within three (3) Banking Days of demand);
or
|
11.1.2
|
Master
Swap Agreement
:
(i) an Event of Default or Potential Event of Default (in each case
as defined in the Master Swap Agreement) has occurred and is continuing
under the Master Swap Agreement or (ii) an Early Termination Date
(as
defined in the Master Swap Agreement) has occurred or been or become
capable of being effectively designated under the Master Swap Agreement
or
(iii) a person entitled to do so gives notice of an Early Termination
Date
under section 6(b)(iv) of the Master Swap Agreement or (iv) the Master
Swap Agreement is terminated, cancelled, suspended, rescinded or
revoked
or otherwise ceases to remain in full force and effect for any reason;
or
|
11.1.3
|
Breach
of Insurance and certain other obligations
:
the Borrower fails to obtain and/or maintain the Insurances (as defined
in, and in accordance with the requirements of, the Security Documents)
or
if any insurer in respect of such Insurances cancels the Insurances
or
disclaims liability by reason, in either case, of mis-statement in
any
proposal for the Insurances or for any other failure or default on
the
part of the Borrower or any other person or the Borrower commits
any
breach of or omits to observe any of the obligations or undertakings
expressed to be assumed by it under clauses 9.2, 9.3 or 9.4;
or
|
11.1.4
|
Breach
of other obligations
:
any Security Party commits any breach of or omits to observe any
of its
obligations or undertakings expressed to be assumed by it under any
of the
Security Documents (other than those referred to in clauses 11.1.1,
11.1.2
and 11.1.3 above) and, in respect of any such breach or omission
which in
the opinion of the Bank is capable of remedy, such action as the
Bank may
require shall not have been taken within fourteen (14) days of the
Bank
notifying the relevant Security Party of such default and of such
required
action; or
|
11.1.5
|
Misrepresentation
:
any representation or warranty made or deemed to be made or repeated
by or
in respect of any Security Party in or pursuant to any of the Security
Documents or in any notice, certificate or statement referred to
in or
delivered under any of the Security Documents is or proves to have
been
incorrect or misleading in any material respect;
or
|
11.1.6
|
Cross-default
:
any Indebtedness of the Borrower is not paid when due or any Indebtedness
of the Borrower becomes (whether by declaration or automatically
in
accordance with the relevant agreement or instrument constituting
the
same) due and payable prior to the date when it would otherwise have
become due (unless as a result of the exercise by the Borrower of
a
voluntary right of prepayment) or any creditor of the Borrower becomes
entitled to declare any such Indebtedness due and payable or any
facility
or commitment available to the Borrower relating to Indebtedness
is
withdrawn, suspended or cancelled by reason of any default (however
described) of the person concerned unless the Borrower shall have
satisfied the Bank that such withdrawal, suspension or cancellation
will
not affect or prejudice in any way the Borrower’s ability to pay its
|
debts as they fall due and fund its commitments, or any guarantee given by any Security Party in respect of Indebtedness is not honoured when due and called upon; or |
11.1.7
|
Legal
process
:
any judgment or order made against the Borrower is not stayed or
complied
with within seven (7) days or a creditor attaches or takes possession
of,
or a distress, execution, sequestration or other process is levied
or
enforced upon or sued out against, any of the undertakings, assets,
rights
or revenues of the Borrower and is not discharged within seven (7)
days;
or
|
11.1.8
|
Insolvency
:
the Borrower is unable or admits inability to pay its debts as they
fall
due; suspends making payments on any of its debts or announces an
intention to do so; becomes insolvent; has assets the value of which
is
less than the value of its liabilities (taking into account contingent
and
prospective liabilities); or suffers the declaration of a moratorium
in
respect of any of its Indebtedness;
or
|
11.1.9
|
Reduction
or loss of capital
:
a
meeting is convened by the Borrower for the purpose of passing any
resolution to purchase, reduce or redeem any of its share capital;
or
|
11.1.10
|
Winding
up
:
any corporate action, legal proceedings or other procedure or step
is
taken for the purpose of winding up or an order is made or resolution
passed for the winding up of the Borrower or a notice is issued convening
a meeting for the purpose of passing any such resolution;
or
|
11.1.11
|
Administration
:
any petition is presented, notice is given or other step is taken
for the
purpose of the appointment of an administrator of the Borrower or
the Bank
believes that any such petition or other step is imminent or an
administration order is made in relation to the Borrower;
or
|
11.1.12
|
Appointment
of receivers and managers
:
any administrative or other receiver is appointed of the Borrower
or any
part of its assets and/or undertaking or any other steps are taken
to
enforce any Encumbrance over all or any part of the assets of the
Borrower; or
|
11.1.13
|
Compositions
:
any corporate action, legal proceedings or other procedures or steps
are
taken, or negotiations commenced, by the Borrower or by any of its
creditors with a view to the general readjustment or rescheduling
of all
or part of its Indebtedness or to proposing any kind of composition,
compromise or arrangement involving such company and any of its creditors;
or
|
11.1.14
|
Analogous
proceedings
:
there occurs, in relation to the Borrower, in any country or territory
in
which it carries on business or to the jurisdiction of whose courts
any
part of its assets is subject, any event which, in the reasonable
opinion
of the Bank, appears in that country or territory to correspond with,
or
have an effect equivalent or similar to, any of those mentioned in
clauses
11.1.7 to 11.1.13 (inclusive) or any Security Party otherwise becomes
subject, in any such country or territory, to the operation of any
law
relating to insolvency, bankruptcy or liquidation;
or
|
11.1.15
|
Cessation
of business
:
the Borrower suspends or ceases or threatens to suspend or cease
to carry
on its business; or
|
11.1.16
|
Seizure
:
all or a material part of the undertaking, assets, rights or revenues
of,
or shares or other ownership interests in, the Borrower are seized,
nationalised, expropriated or compulsorily acquired by or under the
authority of any government; or
|
11.1.17
|
Invalidity
:
any of the Security Documents shall at any time and for any reason
become
invalid or unenforceable or otherwise cease to remain in full force
and
effect, or if the validity or enforceability of any of the Security
Documents shall at any time and for any reason be contested by any
Security Party which is a party thereto. or if any such Security
Party
shall deny that it has any, or any further, liability thereunder;
or
|
11.1.18
|
Unlawfulness
:
it becomes impossible or unlawful at any time for any Security Party,
to
fulfil any of the covenants and obligations expressed to be assumed
by it
in any of the Security Documents or for the Bank to exercise the
rights or
any of them vested in it under any of the Security Documents or otherwise;
or
|
11.1.19
|
Repudiation
:
any Security Party repudiates any of the Security Documents or does
or
causes or permits to be done any act or thing evidencing an intention
to
repudiate any of the Security Documents;
or
|
11.1.20
|
Encumbrances
enforceable
:
any Encumbrance (other than Permitted Liens) in respect of any of
the
property (or part thereof) which is the subject of any of the Security
Documents becomes enforceable; or
|
11.1.21
|
Material
adverse change
:
there occurs, in the opinion of the Bank, a material adverse change
in the
financial condition of the Borrower by reference to the financial
position
of the Borrower as described by the Borrower to the Bank in the
negotiation of this Agreement; or
|
11.1.22
|
Arrest
:
the Ship is arrested, confiscated, seized, taken in execution, impounded,
forfeited, detained in exercise or purported exercise of any possessory
lien or other claim or otherwise taken from the possession of the
Borrower
and the Borrower shall fail to procure the release of the Ship within
a
period of fourteen (14) days thereafter;
or
|
11.1.23
|
Registration
:
the registration of the Ship under the laws and flag of the Flag
State is
cancelled or terminated without the prior written consent of the
Bank;
or
|
11.1.24
|
Unrest
:
the Flag State becomes involved in hostilities or civil war or there
is a
seizure of power in the Flag State by unconstitutional means if,
in any
such case, such event could in the opinion of the Bank reasonably
be
expected to have a material adverse effect on the security constituted
by
any of the Security Documents; or
|
11.1.25
|
Environment
:
the Borrower and/or any of its Environmental Affiliates fails to
comply
with any Environmental Law or any Environmental Approval or the Ship
is
involved in any incident which gives rise or may give rise to an
Environmental Claim if, in any such case, such non-compliance or
incident
or the consequences thereof could, in the opinion of the Bank, reasonably
be expected to have a material adverse effect on the business, assets,
operations, property or financial condition of the Borrower or any
other
Security Party or on the security constituted by any of the Security
Documents; or
|
11.1.26
|
P&I
:
the Borrower or any other person fails or omits to comply with any
requirements of the protection and indemnity association or other
insurer
with which the Ship is entered for insurance or insured against protection
and indemnity risks (including oil pollution risks) to the effect
that any
cover (including, without limitation, any cover in respect of liability
for Environmental Claims arising in jurisdictions where the Ship
operates
or trades) is or may be liable to cancellation, qualification or
exclusion
at any time; or
|
11.1.27
|
Ownership
:
there is any change in the ultimate ownership of the shares in the
Borrower or the Manager from that described to the Bank in the negotiation
of this Agreement; or
|
11.1.28
|
Material
events
:
any other event occurs or circumstance arises which, in the opinion
of the
Bank, is likely materially and adversely to affect either (i) the
ability
of any Security Party to perform all or any of its obligations under
or
otherwise to comply with the terms of any of the Security Documents
(including, for the avoidance of doubt,) the Master Swap Agreement)
or
(ii) the security created by any of the Security
Documents.
|
11.2 |
Acceleration
|
11.2.1
|
the
obligation of the Bank to make the Commitment available shall be
terminated, whereupon the Commitment shall be reduced to zero forthwith;
and/or
|
11.2.2
|
the
Loan and all interest and commitment commission accrued and all other
sums
payable under the Security Documents have become due and payable,
whereupon the same shall, immediately or in accordance with the terms
of
such notice, become due and
payable.
|
11.3 |
Demand
basis
|
12 |
Indemnities
|
12.1 |
Miscellaneous
indemnities
|
12.1.1
|
any
default in payment by the Borrower of any sum under any of the Security
documents when due;
|
12.1.2
|
the
occurrence of any other Event of
Default;
|
12.1.3
|
any
prepayment of the Loan or part thereof being made under clauses 5.3,
9.2
or 13.1, or any other repayment or prepayment of the Loan or part
thereof
being made otherwise than on an Interest Payment Date relating to
the part
of the Loan prepaid or repaid; or
|
12.1.4
|
the
Loan or part thereof not being made for any reason (excluding any
default
by the Bank) after the Drawdown Notice has been
given,
|
12.2 |
Currency
indemnity
|
12.3 |
Environmental
indemnity
|
13 |
Unlawfulness
and increased costs
|
13.1 |
Unlawfulness
|
13.2 |
Increased
costs
|
13.2.1
|
subject
the Bank to Taxes or change the basis of Taxation of the Bank with
respect
to any payment under any of the Security Documents (other than Taxes
or
Taxation on the overall net income, profits or gains of the Bank
imposed
in the jurisdiction in which its principal or lending office under
this
Agreement is located); and/or
|
13.2.2
|
increase
the cost to, or impose an additional cost on, the Bank or its holding
company in making or keeping the Commitment available or maintaining
or
funding all or part of the Loan;
and/or
|
13.2.3
|
reduce
the amount payable or the effective return to the Bank under any
of the
Security Documents; and/or
|
13.2.4
|
reduce
the Bank’s or its holding company’s rate of return on its overall capital
by reason of a change in the manner in which it is required to allocate
capital resources to the Bank’s obligations under any of the Security
Documents; and/or
|
13.2.5
|
require
the Bank or its holding company to make a payment or forego a return
on or
calculated by reference to any amount received or receivable by the
Bank
under any of the Security Documents;
and/or
|
13.2.6
|
require
the Bank or its holding company to incur or sustain a loss (including
a
loss of future potential profits) by reason of being obliged to deduct
all
or part of the Commitment or the Loan from its capital for regulatory
purposes,
|
(a) |
the
Bank shall notify the Borrower in writing of such event promptly
upon its
becoming aware of the same; and
|
(b) |
the
Borrower shall on demand pay to the Bank the amount which the Bank
specifies (in a certificate setting forth the basis of the computation
of
such amount but not including any matters which the Bank or its holding
company regards as confidential) is required to compensate the Bank
and/or
(as the case may be) its holding company for such liability to Taxes,
cost, reduction, payment, foregone return or
loss.
|
13.3 |
Exception
|
14 |
Security
and set-off
|
14.1 |
Application
of moneys
|
14.1.1
|
first
in or towards payment of all unpaid fees, commissions and expenses
which
may be owing to the Bank under any of the Security Documents (including,
for the avoidance of doubt, the Master Swap
Agreement);
|
14.1.2
|
secondly
in or towards payment of any arrears of interest owing in respect
of the
Loan or any part thereof;
|
14.1.3
|
thirdly
in or towards repayment of the Loan (whether the same is due and
payable
or not);
|
14.1.4
|
fourthly
in or towards payment to the Bank for any loss suffered by reason
of any
such payment in respect of principal not being effected on an Interest
Payment Date relating to the part of the Loan
repaid;
|
14.1.5
|
fifthly,
in or towards payment to the Bank of any sum owing to the Bank under
the
Master Swap Agreement;
|
14.1.6
|
sixthly
in or towards payment to the Bank of any other sums owing to it under
any
of the other Security Documents;
and
|
14.1.7
|
seventhly
the surplus (if any) shall be paid to the Borrower or to whomsoever
else
may be entitled to receive such
surplus.
|
14.2 |
Set-off
|
14.2.1
|
The
Borrower authorises the Bank (without prejudice to any of the Bank’s
rights at law, in equity or otherwise), at any time and without notice
to
the Borrower, to apply any credit balance to which the Borrower is
then
entitled standing upon any account of the Borrower with any branch
of the
Bank in or towards satisfaction of any sum due and payable from the
Borrower to the Bank under any of the Security Documents. For this
purpose, the Bank is authorised to purchase with the moneys standing
to
the credit of such account such other currencies as may be necessary
to
effect such application.
|
14.2.2
|
Without
prejudice to its rights hereunder and/or under the Master Swap Agreement,
the Bank may at the same time as, or at any time after, any Default
under
this Agreement or the Borrower’s default under the Master Swap Agreement,
set-off any amount due now or in the future from the Borrower to
the Bank
under this Agreement against any amount due from the Bank to the
Borrower
under the Master Swap Agreement and apply the first amount in discharging
the second amount. The effect of any set-off under this clause 14.2.2
shall be effective to extinguish or, as the case may require, reduce
the
liabilities of the Bank under the Master Swap Agreement. The Bank
shall
not be obliged to exercise any right given to it by this clause 14.2.
The
Bank shall notify the Borrower forthwith upon the exercise or purported
exercise of any right of set-off giving full details in relation
thereto.
|
14.3 |
Further
assurance
|
14.4 |
Conflicts
|
15 |
Accounts
|
15.1 |
General
|
15.1.1
|
The
Borrower undertakes with the Bank that it will procure that all moneys
payable to the Borrower in respect of the Earnings (as defined in
the
General Assignment) of the Ship shall, unless and until the Bank
directs
to the contrary pursuant to clause 2.1.1 of the General Assignment,
be
paid to the Operating Account; and
|
15.1.2
|
The
Borrower undertakes with the Bank that it will procure that the Manager
on
or before the Drawdown Date opens each of the
Accounts;
|
15.2 |
Charging
of Accounts
|
16 |
Assignment,
transfer and lending
office
|
16.1 |
Benefit
and burden
|
16.2 |
No
assignment by Borrower
|
16.3 |
Assignment
by Bank
|
16.4 |
Transfer
|
16.5 |
Documenting
assignments and transfers
|
16.6 |
Lending
office
|
16.7 |
Disclosure
of information
|
17 |
Notices
and other matters
|
17.1 |
Notices
|
17.1.1
|
be
in writing delivered personally or by first-class prepaid letter
(airmail
if available) or facsimile transmission or other means of
telecommunication in permanent written
form;
|
17.1.2
|
be
deemed to have been received, subject as otherwise provided in the
relevant Security Document, in the case of a letter, when delivered
personally or three (3) days after it has been put in to the post
and, in
the case of a facsimile transmission or other means of telecommunication
in permanent written form, at the time of despatch (provided that
if the
date of despatch is not a business day in the country of the addressee
or
if the time of despatch is after the close of business in the country
of
the addressee it shall be deemed to have been received at the opening
of
business on the next such business day);
and
|
17.1.3
|
be
sent:
|
(a) |
if
to the Borrower at:
|
(b) |
if
to the Bank at:
|
17.2 |
No
implied waivers, remedies
cumulative
|
17.3 |
English
language
|
18 |
Governing
law and jurisdiction
|
18.1 |
Law
|
18.2 |
Submission
to jurisdiction
|
18.3 |
Contracts
(Rights of Third Parties) Act
1999
|
To:
|
Bayerische
Hypo- and Vereinsbank Aktiengesellschaft
7
Heraklitou Street
Athens
106 73
Greece
|
Dollar Amount
|
Currency in which Advance
is to be outstanding
|
Interest Period
|
Please credit the funds to:
|
|||
[•]
|
(a)
|
no
event or circumstance has occurred and is continuing which constitutes
a
Default;
|
(b)
|
the
representations and warranties contained in clauses 8.1 and 8.2 of
the
Loan Agreement are true and correct at the date hereof as if made
with
respect to the facts and circumstances existing at such
date;
|
(c)
|
the
borrowing to be effected by the drawdown of the Loan will be within
our
corporate powers, has been validly authorised by appropriate corporate
action and will not cause any limit on our borrowings (whether imposed
by
statute, regulation, agreement or otherwise) to be
exceeded;
|
(d)
|
there
has been no material adverse change in our financial position from
that
described by us to the Bank in the negotiation of the Loan Agreement;
and
|
(e)
|
we
will use the proceeds of the Loan for our benefit and under our full
responsibility and exclusively for the purpose specified in the Loan
Agreement.
|
1 |
Ship
conditions
|
1.1 |
Registration
and Encumbrances
|
1.2 |
Classification
|
1.3 |
Insurance
|
2 |
Constitutional
documents
|
3 |
Corporate
authorisations
|
(i) |
being
true and correct;
|
(ii) |
being
duly passed at meetings of the directors of such Security Party and
of the
shareholders of such Security Party each duly convened and
held;
|
(iii) |
not
having been amended, modified or revoked;
and
|
(iv) |
being
in full force and effect,
|
4
|
Specimen
signatures
|
5 |
Certificate
of incumbency
|
6 |
Borrower’s
consents and approvals
|
7 |
Other
consents and approvals
|
8 |
Certified
Management Agreement
|
9 |
Valuation
|
10 |
Insurance
opinion
|
11 |
Accounts
|
12 |
Cash
Collateral Account
|
1 |
Security
Documents, letters and other
documents
|
2 |
Mortgage
registration
|
3 |
Notices
of assignment
|
4 |
Cyprus
opinion
|
5 |
Liberian
legal opinion
|
6 |
Greek
legal opinion
|
7 |
Further
opinions
|
8 |
Borrower’s
process agent
|
9 |
Manager’s
process agent
|
10 |
Registration
forms
|
11 |
Manager’s
confirmation
|
12 |
Application
for DOC and SMC
|
13 |
ISPS
Code
|
14 |
Fee
|
15 |
Due
Diligence
|
I.M.O. No.
CALL SIGN
|
Name of Ship
|
Year of Registry or Date of
Provisional Registry/ Port of
Registry
|
||
9296626
C4JM2
|
Pedhoulas
Trader
|
91/2006,
Limassol, Cyprus
|
||
Whether a Sailing,
Steam or Motor Ship
|
Horse Power of Engines,
if any
|
|||
Motor
Ship
|
9400kw
|
|||
Metres
|
||||
Length
(Article 2(8))
|
222,55
|
|||
Breadth
(Regulation 2(3))
|
32,26
|
|||
Moulded
depth amidships to Upper Deck (Regulation 2(2))
|
20,03
|
|||
Number
of Tons
|
||||
Gross:
43151
|
Net:
27614
|
|||
and
as described in more detail in the Certificate of the Surveyor
and the
Register Book.
|
SIGNED,
SEALED AND DELIVERED
|
)
|
|||
as
a DEED
|
)
|
|||
by
|
)
|
|||
as
the duly authorised attorney-in-fact
|
)
|
|||
of
|
)
|
|||
PETRA
SHIPPING LTD
|
)
|
|||
pursuant
to a Power of Attorney
|
)
|
|||
dated
|
)
|
|||
in
the presence of:-
|
)
|
|||
(Seal)
|
||
Registrar
of Cyprus Ships
|
SIGNED,
SEALED AND DELIVERED
|
)
|
|
by
|
)
|
|
as
the duly authorised Attorney of
|
)
|
|
)
|
||
pursuant
to a Power of Attorney
|
)
|
|
dated
|
)
|
|
in
the presence of:-
|
)
|
|
Name:
|
||
Title:
|
||
Seal:
|
||
of
Consular Officer/Notary Public/Certifying Officer
|
(Seal)
|
||
Registrar
of Cyprus Ships
|
|
|
NORTON ROSE
|
Page
|
||
1
|
Definitions
|
1
|
2
|
Representations
and warranties
|
5
|
3
|
Mortgage
of the Ship
|
5
|
4
|
Covenant
to pay
|
6
|
5
|
Continuing
security and other matters
|
6
|
6
|
Covenants
|
7
|
7
|
Powers
of Mortgagee to protect security and remedy defaults
|
14
|
8
|
Powers
of Mortgagee on Event of Default
|
15
|
9
|
Application
of moneys
|
16
|
10
|
Remedies
cumulative and other provisions
|
17
|
11
|
Costs
and indemnity
|
17
|
12
|
Attorney
|
18
|
13
|
Further
assurance
|
18
|
14
|
Notices
|
18
|
15
|
Counterparts
|
18
|
Severability
of provisions
|
19
|
|
17
|
Law,
jurisdiction and language
|
19
|
(1)
|
PETRA
SHIPPING LTD
whose registered office is at 80 Broad Street, Monrovia, Republic
of
Liberia (the “
Owner
”);
and
|
(2)
|
BAYERISCHE
HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT
whose registered office is at Am Tucherpark 16, D-80538, Munich,
Germany,
acting for the purposes of this Deed through its office at 7 Heraklitou
Street, 106 73 Athens, Greece (the “
Mortgagee
”).
|
(A)
|
the
Owner is the sole, absolute and unencumbered, legal and beneficial
owner
of one hundred one hundredth (100/100th) shares in the Ship described
in
clause 1.2;
|
(B)
|
by
a Loan Agreement dated
and made between (1) the Owner (therein referred to as the “
Borrower
”)
and (2) the Mortgagee (therein referred to as the “
Bank
”),
the Mortgagee agreed (inter alia) to advance by way of a multicurrency
loan to the Owner, upon the terms and conditions therein contained,
a sum
of up to Thirty six million Dollars ($36,000,000) or the Equivalent
Amount
in an Optional Currency or Optional
Currencies;
|
(C)
|
by
a Master Swap Agreement dated
and made between (1) the Owner and (2) the Mortgagee, the Mortgagee
agreed
the terms and conditions upon which it would enter into an interest
rate
swap transaction or transactions with the Owner in respect of the
Loan
(whether in whole or in part as the case may be from time to
time);
|
(D)
|
the
Owner has executed in favour of the Mortgagee a statutory mortgage
of even
date herewith in account current form constituting a first priority
Cyprus
mortgage of one hundred one hundredth (100/100th) shares in the Ship;
and
|
(E)
|
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the Deed
of
Covenant referred to in the Loan Agreement but shall nonetheless
continue
in full force and effect notwithstanding any discharge of the
Mortgage.
|
1 |
Definitions
|
1.1 |
Defined
expressions
|
1.2 |
Definitions
|
(a) |
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including, without limitation, Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee or any Receiver in connection with the exercise of
the
powers referred to in or granted by this Deed or otherwise payable
by the
Owner in accordance with clause 11;
and
|
(b) |
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee or any Receiver until the date of receipt or recovery
thereof (whether before or after judgment) at a rate per annum calculated
in accordance with clause 3.4 of the Loan Agreement (as conclusively
certified by the Mortgagee or such Receiver, as the case may
be);
|
(a) |
the
Ship;
|
(b) |
the
Insurances;
|
(c) |
the
Earnings; and
|
(d) |
any
Requisition Compensation;
|
(a) |
the
actual, constructive, compromised or arranged total loss of the Ship;
or
|
(b) |
the
Compulsory Acquisition of the Ship;
or
|
(c) |
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Owner from such hijacking,
theft, condemnation, capture, seizure, arrest, detention or confiscation
within thirty (30) days after the occurrence thereof;
and
|
1.3 |
Insurance
terms
|
1.3.1
|
“
excess
risks
”
means the proportion (if any) of claims for general average, salvage
and
salvage charges and under the ordinary collision clause not recoverable
in
consequence of the value at which the Ship is assessed for the purpose
of
such claims exceeding her insured
value;
|
1.3.2
|
“
protection
and indemnity risks
”
means the usual risks (including oil pollution and freight, demurage
and
defence cover) covered by a United Kingdom protection and indemnity
association or a protection and indemnity association which is managed
in
London (including, without limitation, 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 8 of the Institute Time Clauses
(Hulls)
(1/11/95) or the Institute Amended Running Down Clause (1/10/71)
or any
equivalent provision); and
|
1.3.3
|
“
war
risks
”
includes those risks covered by the standard form of English marine
policy
with Institute War and Strikes Clauses Hulls - (Time) (1/11/95) attached
or similar cover.
|
1.4 |
Construction
of Mortgage terms
|
1.4.1
|
references
to “interest” shall be construed as references to interest covenanted to
be paid in accordance with clause 4.1.2 and any interest specified
in
paragraph (b) of the definition of “Expenses” in clause
1.2;
|
1.4.2
|
references
to “principal” shall be construed as references to all moneys (other than
interest) for the time being comprised in the Outstanding
Indebtedness;
|
1.4.3
|
the
expression “all sums for the time being owing by the Mortgagor to the
Mortgagee” means the whole of the Outstanding Indebtedness;
and
|
1.4.4
|
the
expression “Account Current” means an account or accounts which shall be
kept by the Owner with the Mortgagee and from which the Mortgagee
may
(without giving notice or making any demand) debit any part of the
Outstanding Indebtedness.
|
1.5 |
Headings
|
1.6 |
Construction
of certain terms
|
1.6.1
|
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Deed and references to this Deed include its
schedules;
|
1.6.2
|
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.6.3
|
words
importing the plural shall include the singular and vice
versa;
|
1.6.4
|
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.6.5
|
references
to a “
guarantee
”
shall include references to an indemnity or other assurance against
financial loss including, without limitation, an obligation to purchase
assets or services as a consequence of a default by any other person
to
pay any Indebtedness and “
guaranteed
”
shall be construed accordingly; and
|
1.6.6
|
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.7 |
Conflict
with Loan Agreement
|
2 |
Representations
and warranties
|
2.1 |
The
Owner hereby represents and warrants to the Mortgagee
that:
|
2.1.1
|
it
is the sole, absolute, legal and beneficial owner of the
Ship;
|
2.1.2
|
the
Ship is not subject to any charter which, if entered into after the
date
of this Deed, would have required the consent of the Mortgagee under
clause 6.1.15, and there is no existing or intended agreement or
arrangement whereby the Earnings may be shared with any person other
than
the Mortgagee as provided in the General
Assignment;
|
2.1.3
|
neither
the Mortgaged Property nor any part thereof is subject to any Encumbrance
save as constituted by the Mortgage and this Deed and the General
Assignment or otherwise permitted by the terms of this Deed;
and
|
2.1.4
|
it
has power and is entitled to register the Ship under the laws and
flag of
Cyprus.
|
3 |
Mortgage
of the Ship
|
4 |
Covenant
to pay
|
4.1 |
In
consideration of the advance by the Mortgagee to the Owner on or
before
the date hereof of the total principal sum of Thirty six million
Dollars
($36,000,000) or the Equivalent Amount in an Optional Currency or
Optional
Currencies (receipt of which sum the Owner hereby acknowledges) in
|
4.1.1
|
to
repay the Loan by the instalments and on the dates referred to and
otherwise in the manner and upon the terms set out in the Loan
Agreement;
|
4.1.2
|
to
pay interest on the Loan, and on any overdue interest or other moneys
payable under the Loan Agreement, at the rate or rates from time
to time
applicable thereto in the manner and upon the terms set out in the
Loan
Agreement;
|
4.1.3
|
to
pay all other moneys payable by the Owner under the Security Documents
or
any of them at the times and in the manner therein specified;
and
|
4.1.4
|
to
pay and discharge to the Mortgagee the Master Swap Agreement Liabilities
on their due date.
|
5 |
Continuing
security and other matters
|
5.1 |
Continuing
Security
|
5.1.1
|
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance by the Owner with all of the covenants, terms and conditions
contained in the Security Documents to which the Owner is or is to
be a
party, express or implied and the security so created shall not be
satisfied by any intermediate payment or satisfaction of any part
of the
amount hereby and thereby secured (or by any settlement of accounts
between the Owner or any other person who may be liable to the Mortgagee
in respect of the Outstanding Indebtedness or any part thereof and
the
Mortgagee);
|
5.1.2
|
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any other of the Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
5.1.3
|
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
5.2 |
Rights
additional
|
5.3 |
No
enquiry
|
5.4 |
Obligations
of Owner and Mortgagee
|
5.5 |
Discharge
of Mortgage
|
6 |
Covenants
|
6.1 |
The
Owner hereby covenants with the Mortgagee and undertakes throughout
the
Security Period:
|
6.1.1
|
Insurance
|
(a) |
Insured
risks, amounts and terms
|
(i) |
against
fire and usual marine risks (including excess risks) and war risks,
on an
agreed value basis, in such amounts (but not in any event less than
whichever shall be the greater of the market value of the Ship for
the
time being and One hundred and twenty per cent (120%) of the aggregate
of
(1) the Loan and (2) the Master Swap Agreement Liabilities) and upon
such
terms as shall from time to time be approved in writing by the Mortgagee;
and
|
(ii) |
against
protection and indemnity risks (including pollution risks for the
highest
amount in respect of which cover is or may become available for ships
of
the same type, size, age and flag as the Ship and a freight, demurrage
and
defence cover) for the full value and tonnage of the Ship (as approved
in
writing by the Mortgagee) and upon such terms as shall from time
to time
be approved in writing by the Mortgagee;
and
|
(iii) |
in
respect of such other matters of whatsoever nature and howsoever
arising
in respect of which insurance would be maintained by a prudent owner
of
the Ship;
|
(aa) |
any
mortgagee’s interest insurance which the Mortgagee may from time to time
effect in respect of the Ship upon such terms and in such amounts
(not
exceeding at any relevant time One hundred and ten per cent (110%)
of the
aggregate of (1) the Loan minus any sums standing to the credit of
the
Cash Collateral Account) and (2) the Master Swap Agreement Liabilities,
in
each case at such time) as it shall deem desirable;
and
|
(bb) |
any
other insurance cover which the Mortgagee may from time to time effect
in
respect of the Ship and/or in respect of its interest or potential third
party liability as mortgagee of the Ship as the Mortgagee shall deem
desirable having regard to any limitations in respect of amount or
extent
of cover which may from time to time be applicable to any of the
other
insurances referred to in this clause
6.1.1;
|
(b) |
Approved
brokers, insurers and associations
|
(c) |
Fleet
liens, set-off and cancellation
|
(d) |
Payment
of premiums and calls
|
(e) |
Renewal
|
(f) |
Guarantees
|
(g) |
Hull
policy documents, notices, loss payable clauses and brokers’
undertakings
|
(h) |
Associations’
loss payable clauses, undertakings and
certificates
|
(i) |
Extent
of cover and exclusions
|
(j) |
Information
regarding insurances
|
(k) |
Independent
report
|
(l) |
Collection
of claims
|
(m) |
Employment
of Ship
|
(n) |
Application
of recoveries
|
(o) |
Assignment
of Insurances
|
6.1.2
|
Ship’s
name and registration
|
6.1.3
|
Repair
|
6.1.4
|
Modification;
removal of parts; equipment owned by third
parties
|
(a) |
make
any modification to the Ship in consequence of which her structure,
type
or performance characteristics could or might be materially altered
or her
value materially reduced; or
|
(b) |
remove
any material part of the Ship or any equipment the value of which
is such
that its removal from the Ship would materially reduce the value
of the
Ship without replacing the same with equivalent parts or equipment
which
are owned by the Owner free from Encumbrances;
or
|
(c) |
install
on the Ship any equipment owned by a third party which cannot be
removed
without causing damage to the structure or fabric of the
Ship;
|
6.1.5
|
Maintenance
of class; compliance with
regulations
|
6.1.6
|
Surveys
|
6.1.7
|
Inspection
|
6.1.8
|
Prevention
of and release from arrest
|
6.1.9
|
Employment
|
6.1.10
|
Employment
|
(a) |
advise
the Mortgagee of any contract of employment for the Ship which is
of a
duration of more than twelve (12)
months;
|
(b) |
deliver
to the Mortgagee a copy of any Charter entered
into;
|
(c) |
(1)
execute a Charter Assignment in respect of any Charter and (2) execute
any
notice of assignment required in connection therewith and promptly
procure
the acknowledgement of any such notice of assignment by the relevant
Charterer; and
|
(d) |
pay
all legal and other costs incurred by the Mortgagee in connection
with any
such Charter Assignment;
|
6.1.11
|
Notification
of certain events
|
(a) |
any
damage to the Ship requiring repairs the cost of which will or might
exceed the Casualty Amount;
|
(b) |
any
occurrence in consequence of which the Ship has or may become a Total
Loss;
|
(c) |
any
requisition of the Ship for hire;
|
(d) |
any
requirement or recommendation made by any insurer or the Classification
Society or by any competent authority which is not, or cannot be,
complied
with in accordance with its terms;
|
(e) |
any
arrest or detention of the Ship or any exercise or purported exercise
of a
lien or other claim on the Ship or the Earnings or Insurances or
any part
thereof;
|
(f) |
any
petition or notice of meeting to consider any resolution to wind
up the
Owner (or any event analogous thereto under the laws of the place
of its
incorporation);
|
(g) |
the
occurrence of any Default; or
|
(h) |
the
occurrence of any Environmental Claim against the Owner or the Ship
or any
incident, event or circumstances which may give rise to any such
Environmental Claim;
|
6.1.12
|
Payment
of outgoings and evidence of
payments
|
6.1.13
|
Encumbrances
|
6.1.14
|
Sale
or other disposal
|
6.1.15
|
Chartering
|
(a) |
on
demise charter for any period;
|
(b) |
on
terms whereby more than two (2) months’ hire (or the equivalent) is
payable in advance; or
|
(c) |
below
the market rate prevailing at the time when the Ship is fixed or
other
than on arms’ length terms;
|
6.1.16
|
Sharing
of Earnings
|
6.1.17
|
Payment
of Earnings
|
6.1.18
|
Repairers’
liens
|
6.1.19
|
Manager
|
6.1.20
|
Registration
of Mortgage
|
6.1.21
|
Notice
of Mortgage
|
6.1.22
|
Conveyance
on default
|
6.1.23
|
Anti-drug
abuse
|
6.1.24
|
Compliance
with Environmental Laws
|
6.1.25
|
Compliance
with Code
|
7 |
Powers
of Mortgagee to protect security and remedy
defaults
|
7.1 |
Protective
action
|
7.2 |
Remedy
of defaults
|
7.2.1
|
if
the Owner fails to comply with any of the provisions of clause 6.1.1
the
Mortgagee shall be entitled (but not bound) to effect and thereafter
to
maintain all such insurances upon the Ship as in its discretion it
may
think fit in order to procure the compliance with such provisions
or
alternatively, to require the Ship (at the Owner’s risk) to remain in, or
to proceed to and remain in a port designated by the Mortgagee until
such
provisions are fully complied with;
|
7.2.2
|
if
the Owner fails to comply with any of the provisions of clauses 6.1.3,
6.1.5 or 6.1.6, the Mortgagee shall be entitled (but not bound) to
arrange
for the carrying out of such repairs, changes or surveys as it may
deem
expedient or necessary in order to procure the compliance with such
provisions; and
|
7.2.3
|
if
the Owner fails to comply with any of the provisions of clause 6.1.8
the
Mortgagee shall be entitled (but not bound) to pay and discharge
all such
debts, damages, liabilities and outgoings as are therein mentioned
and/or
to take any such measures as it may deem expedient or necessary for
the
purpose of securing the release of the Ship in order to procure the
compliance with such provisions
|
8 |
Powers
of Mortgagee on Event of
Default
|
8.1 |
Powers
|
8.1.1
|
to
take possession of the Ship;
|
8.1.2
|
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
8.1.3
|
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of any other part of the Mortgaged Property, and to
take
over or institute (if necessary using the name of the Owner) all
such
proceedings in connection therewith as the Mortgagee in its absolute
discretion thinks fit, and, in the case of the Insurances, to permit
the
brokers through whom collection or recovery is effected to charge
the
usual brokerage therefor;
|
8.1.4
|
to
discharge, compound, release or compromise claims in respect of the
Ship
or any other part of the Mortgaged Property which have given or may
give
rise to any charge or lien or other claim on the Ship or any other
part of
the Mortgaged Property or which are or may be enforceable by proceedings
against the Ship or any other part of the Mortgaged
Property;
|
8.1.5
|
to
sell the Ship or any share or interest therein with or without prior
notice to the Owner, and with or without the benefit of any charterparty,
and free from any claim by the Owner (whether in admiralty, in equity,
at
law or by statute) by public auction or private contract, at such
place
and upon such terms as the Mortgagee in its absolute discretion may
determine, with power to postpone any such sale, or otherwise to
sell the
Ship pursuant to the Mortgagee’s statutory power of sale under section 35
of the Merchant Shipping (Registration of Ships Sales and Mortgages)
Law
of 1963 (as amended) and without being answerable for any loss occasioned
by such sale or resulting from postponement thereof and with power,
where
the Mortgagee purchases the Ship, to make payment of the sale price
by
making an equivalent reduction in the amount of the Outstanding
Indebtedness in the manner referred to in clause
9.1;
|
8.1.6
|
to
manage, insure, maintain and repair the Ship, and to employ, sail
or lay
up the Ship in such manner and for such period as the Mortgagee,
in its
absolute discretion, deems expedient accounting only for net profits
arising from any such employment;
and
|
8.1.7
|
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 8.1.
|
8.2 |
Receiver
|
8.2.1
|
Appointment
|
8.2.2
|
Remuneration
|
8.2.3
|
Liability
of mortgagee in possession
|
8.3 |
Dealings
with Mortgagee or Receiver
|
9 |
Application
of moneys
|
9.1 |
Application
|
9.2 |
Shortfalls
|
10 |
Remedies
cumulative and other
provisions
|
10.1 |
No
implied waivers; remedies
cumulative
|
10.2 |
Delegation
|
10.3 |
Incidental
powers
|
11 |
Costs
and indemnity
|
11.1 |
Costs
|
11.2 |
Mortgagee’s
and Receiver’s indemnity
|
12 |
Attorney
|
12.1 |
Power
|
12.2 |
Exercise
of power
|
12.3 |
Filings
|
13 |
Further
assurance
|
14 |
Notices
|
15 |
Counterparts
|
16 |
Severability
of provisions
|
17 |
Law,
jurisdiction and language
|
17.1 |
Law
|
17.2 |
Submission
to jurisdiction
|
|
|
NORTON ROSE
|
Clause
|
Page
|
|
1
|
Definitions
|
1
|
2
|
Assignment
and application of funds
|
4
|
3
|
Continuing
security and other matters
|
6
|
4
|
Powers
of Mortgagee to protect security and remedy defaults
|
7
|
5
|
Powers
of Mortgagee on Event of Default
|
7
|
6
|
Attorney
|
8
|
7
|
Further
assurance
|
8
|
8
|
Costs
and indemnities
|
8
|
9
|
Remedies
cumulative and other provisions
|
9
|
10
|
Notices
|
9
|
11
|
Counterparts
|
10
|
12
|
Law
and jurisdiction
|
10
|
11
|
||
Schedule
2 Form of Notice of Assignment of Insurances
|
12
|
(1)
|
PETRA
SHIPPING LTD
a
corporation incorporated in Liberia whose registered office is at
80 Broad
Street, Monrovia, Republic of Liberia (the “
Owner
”);
and
|
(2)
|
BAYERISCHE
HYPO -UND VEREINSBANK AKTIENGESELLSCHAFT
a
company incorporated in Germany whose registered office is at Am
Tucherpark 16, D-80538, Munich, Germany, acting for the purposes
of this
Deed through its office at 7 Heraklitou Street, 106 73 Athens, Greece
(the
“
Mortgagee
”).
|
(A)
|
by
an Agreement (the “
Loan
Agreement
”)
dated
and made between the Owner (1) (therein referred to as the “
Borrower
”)
and the Mortgagee (2) (therein referred to as the “
Bank
”)
the Mortgagee agreed (inter alia) to advance by way of a multicurrency
loan to the Owner, upon the terms and conditions therein contained
the sum
of up to Thirty six million Dollars ($36,000,000) or the Equivalent
Amount
in an Optional Currency or Optional Currencies (the “
Loan
”);
|
(B)
|
by
a Master Swap Agreement dated
and made between (1) the Owner and (2) the Mortgagee, the Mortgagee
agreed
the terms and conditions upon which it would enter into an interest
rate
swap transaction or transactions with the Owner in respect of the
Loan
(whether in whole or in part as the case may be from time to
time);
|
(C)
|
pursuant
to the Loan Agreement there has been or will be executed by the Owner
in
favour of the Mortgagee a first priority Cyprus statutory ship mortgage
in
account current form and deed of covenant collateral thereto (together
the
“
Mortgage
”)
on the motor vessel
Pedhoulas
Trader
documented in the name of the Owner under the laws and flag of the
Republic of Cyprus under IMO Number 9296626 (the “
Ship
”)
and the Mortgage of even date herewith has been or will be registered
in
the Registry of Cyprus Ships as security for the payment by the Owner
of
the Outstanding Indebtedness (as that expression is defined in the
Mortgage); and
|
(D)
|
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the General
Assignment referred to in the Loan Agreement but shall nonetheless
continue in full force and effect notwithstanding any discharge of
the
Mortgage.
|
1 |
Definitions
|
1.1 |
Defined
expressions
|
1.2 |
Definitions
|
(a) |
the
Earnings;
|
(b) |
the
Insurances; and
|
(c) |
any
Requisition Compensation;
|
(a) |
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including without limitation Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee in connection with the exercise of the powers referred
to in
or granted by the Loan Agreement, the Mortgage, this Deed or any
other of
the Security Documents or otherwise payable by the Owner in accordance
with clause 11 of the Mortgage or clause 8;
and
|
(b) |
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee until the date of receipt or recovery thereof (whether
before or after judgment) at a rate per annum calculated in accordance
with clause 3.4 of the Loan Agreement (as conclusively certified
by the
Mortgagee);
|
1.3 |
Headings
|
1.4 |
Construction
of certain terms
|
1.4.1
|
references
to clauses and schedules are to be construed as references to clauses
of
and schedules to this Deed and references to this Deed include its
schedules;
|
1.4.2
|
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.4.3
|
words
importing the plural shall include the singular and vice
versa;
|
1.4.4
|
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.5
|
references
to a “
guarantee
”
include references to an indemnity or other assurance against financial
loss including, without limitation, an obligation to purchase assets
or
services as a consequence of a default by any other person to pay
any
Indebtedness and “
guaranteed
”
shall be construed accordingly; and
|
1.4.6
|
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.5 |
Conflict
with Loan Agreement
|
2 |
Assignment
and application of funds
|
2.1 |
Assignment
|
2.1.1
|
Earnings
|
2.1.2
|
Insurances
|
(a) |
any
moneys payable under the Insurances, other than any moneys payable
under
any loss of earnings insurance, shall be payable in accordance with
the
terms of the relevant Loss Payable Clause and the Mortgagee will
not in
the meantime give any notification to the contrary to the insurers
as
contemplated by the Loss Payable
Clauses;
|
(b) |
any
insurance moneys received by the Mortgagee in respect of any major
casualty (as specified in the relevant Loss Payable Clause) shall,
unless
prior to receipt or whilst such moneys are in the hands of the Mortgagee
there shall have occurred a Default (whereupon such insurance monies
shall
be applied in accordance with clause 2.3 or clause 2.6 (as the case
may
be)), be paid over to the Owner upon the Owner furnishing evidence
satisfactory to the Mortgagee that all loss and damage resulting
from such
casualty has been properly made good and repaired, and that all repair
accounts and other liabilities whatsoever in connection with the
casualty
have been fully paid and discharged by the Owner, provided however
that
the insurers with whom the fire and usual marine risks insurances
are
effected may, in the case of a major casualty, and with the previous
consent in writing of the Mortgagee, make payment on account of repairs
in
the course of being effected; and
|
(c) |
any
moneys payable under any loss of earnings insurance shall be payable
in
accordance with the terms of the relevant Loss Payable Clause and
shall be
subject to such provisions of this clause 2 as shall apply to Earnings
and
the Mortgagee will not give any notification to the insurers as
contemplated in such Loss Payable Clause unless and until the Mortgagee
shall have become entitled under clause 2.1.1 to direct that the
Earnings
be paid to the Mortgagee.
|
2.2 |
Notice
|
2.3 |
Application
|
2.3.1
|
recovery
under the Insurances (other than under any loss of earnings insurance
and
any such sum or sums as may have been received by the Mortgagee in
accordance with the relevant Loss Payable Clause in respect of a
major
casualty as therein defined and paid over to the Owner as provided
in
clause 2.1.2(b) or which fall to be otherwise applied under clause
2.6);
and
|
2.3.2
|
Requisition
Compensation
|
2.4 |
Shortfalls
|
2.5 |
Application
of Earnings received by
Mortgagee
|
2.5.1
|
if
received by the Mortgagee, or in the hands of the Mortgagee, prior
to the
occurrence of an Event of Default be retained by the Mortgagee and
shall
be paid over by the Mortgagee to the Owner at such times, in such
amounts.
and for such purposes and/or shall be applied by the Mortgagee in
or
towards satisfaction of any sums from time to time accruing due and
payable by the Owner under the Security Documents or any of them
or by
virtue of payment demanded thereunder, in each case as the Mortgagee
may
in its absolute discretion determine;
and
|
2.5.2
|
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.5.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.6 |
Application
of Insurances received by
Mortgagee
|
2.6.1
|
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of a Default but prior to the occurrence of an Event of
Default, be retained by the Mortgagee and shall be paid over by the
Mortgagee to the Owner at such times, in such amounts and for such
purposes and/or shall be applied by the Mortgagee in or towards
satisfaction of any sums from time to time accruing due and payable
by the
Owner under the Security Documents or any of them or by virtue of
payment
demanded thereunder, in each case as the Mortgagee may in its absolute
discretion determine; and
|
2.6.2
|
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.6.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.7 |
Use
of Owner’s name
|
2.8 |
Reassignment
|
3 |
Continuing
security and other matters
|
3.1 |
Continuing
security
|
3.1.1
|
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance with all of the covenants, terms and conditions contained
in
the Security Documents, express or implied, and that the security
so
created shall not be satisfied by any intermediate payment or satisfaction
of any part of the amount hereby and thereby secured (or by any settlement
of accounts between the Owner or any other person who may be liable
to the
Mortgagee in respect of the Outstanding Indebtedness or any part
thereof
and the Mortgagee);
|
3.1.2
|
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any of the other Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
3.1.3
|
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
3.2 |
Rights
additional
|
3.3 |
No
enquiry
|
3.4 |
Obligations
of Owner and Mortgagee
|
3.5 |
Discharge
of Mortgage
|
4 |
Powers
of Mortgagee to protect security and remedy
defaults
|
4.1 |
Protective
action
|
4.2 |
Remedy
of defaults
|
5 |
Powers
of Mortgagee on Event of
Default
|
5.1 |
Powers
|
5.1.1
|
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
5.1.2
|
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of the Earnings or Requisition Compensation or any
part
thereof, and to take over or institute (if necessary using the name
of the
Owner) all such proceedings in connection therewith as the Mortgagee
in
its absolute
|
discretion thinks fit, and, in the case of the Insurances, to permit any brokers through whom collection or recovery is effected to charge the usual brokerage therefor; |
5.1.3
|
to
discharge, compound, release or compromise claims in respect of the
Earnings, Insurances or Requisition Compensation or any part thereof
which
have given or may give rise to any charge or lien or other claim
on the
Earnings, Insurances or Requisition Compensation or any part thereof
or
which are or may be enforceable by proceedings against the Earnings,
Insurances or Requisition Compensation or any part thereof;
and
|
5.1.4
|
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 5.1.
|
6 |
Attorney
|
6.1 |
Appointment
|
6.2 |
Exercise
of power
|
6.3 |
Filings
|
7 |
Further
assurance
|
8 |
Costs
and indemnities
|
8.1 |
Costs
|
8.2 |
Mortgagee’s
indemnity
|
9 |
Remedies
cumulative and other
provisions
|
9.1 |
No
implied waivers; remedies
cumulative
|
9.2 |
Delegation
|
9.3 |
Incidental
powers
|
10 |
Notices
|
11 |
Counterparts
|
12 |
Law
and jurisdiction
|
12.1 |
Law
|
12.2 |
Submission
to jurisdiction
|
12.3 |
Contracts
(Rights of Third Parties) Act
1999
|
1 |
Hull
and machinery (marine and war
risks)
|
(a) |
all
claims hereunder in respect of an actual or constructive or compromised
or
arranged total loss, and all claims in respect of a major casualty
(that
is to say any casualty the claim in respect of which exceeds US$500,000
(or the equivalent in any other currency) inclusive of any deductible)
shall be paid in full to the Mortgagee or to its order;
and
|
(b) |
all
other claims hereunder shall be paid in full to the Owner or to its
order,
unless and until the Mortgagee shall have notified the insurers hereunder
to the contrary, whereupon all such claims shall be paid to the Mortgagee
or to its order.
|
2 |
Protection
and indemnity risks
|
3 |
War
risks
|
3 |
Loss
of earnings
|
To:
|
Bayerische
Hypo- und Vereinsbank Aktiengesellschaft
7
Heraklitou Street
106
73 Athens
Greece
|
From:
|
Safety
Management Overseas S.A.
Edificio
Torre Universal
Piso
12 Avenida Federico Boyd
P.O.
Box 8807
Panama
City
Republic
of Panama
|
1 |
Loan
Agreement
|
2 |
Confirmation
of appointment
|
3 |
Representation
and warranty
|
3.1 |
We
hereby represent and warrant that the copy of the Management Agreement
set
out in Appendix 1 to this letter is a true and complete copy of the
Management Agreement, that the Management Agreement constitutes valid
and
binding obligations of the Manager enforceable in accordance with
its
terms and that there have been no amendments or variations thereto
or
defaults thereunder by the Manager or, to the best of the Manager’s
knowledge and belief, the Borrower.
|
3.2 |
We
hereby confirm that the representations and warranties set out in
clauses
8.2.9, 8.2.10 and 8.2.11 of the Loan Agreement are true and correct
in all
respects.
|
4 |
Undertakings
|
4.1 |
the
Manager will not agree or purport to agree to any amendment or variation
of the Management Agreement without the prior written consent of
the
Bank;
|
4.2 |
the
Manager will procure that any sub-manager appointed by it pursuant
to the
provisions of the Management Agreement will, on or before the date
of such
appointment enter into an undertaking in favour of the Bank in
substantially the same form (
mutatis
mutandis
)
as this Letter;
|
4.3 |
the
Manager will not, without the prior written consent of the Bank,
take any
action or institute any proceedings or make or assert any claim on
or in
respect of the Ship or its policies and contracts of insurance (which
expression includes all entries of the Ship in a protection and indemnity
or war risks association) which are from time to time during the
Security
Period (as such term is defined in the General Assignment) in place
or
taken out or entered into by or for the benefit of the Borrower (whether
in the sole name of the Borrower or in the joint names of the Borrower
and
the Bank or otherwise) in respect of the Ship and her Earnings (as
such
term is defined below) or otherwise howsoever in connection with
the Ship
and all benefits thereof (including claims of whatsoever nature and
return
of premiums) (together the “
Insurances
”)
or all moneys whatsoever from time to time due or payable to the
Borrower
during the Security Period (as such term is defined in the General
Assignment) arising out of the use or operation of the Ship including
(but
without limiting the generality of the foregoing) all freight, hire
and
passage moneys, income arising under pooling arrangements, 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
(the
“
Earnings
”)
or any other property or other assets of the Borrower which the Bank
has
previously advised the Manager are subject to any Encumbrance or
right of
set-off in favour of the Bank by virtue of any of the security documents
executed in favour of the Bank pursuant to the Loan
Agreement;
|
4.4 |
the
Manager does hereby subordinate any claim that it may have against
the
Borrower or otherwise in respect of the Ship and its Earnings, Insurances
and Requisition Compensation (as such term is defined in the General
Assignment) to the claims of the Bank under the Loan Agreement and
the
other Security Documents (as such term is defined in the General
Assignment) and undertakes to exercise no right to which it may be
entitled in respect of the Borrower and/or the Ship and/or its Earnings
and/or Insurances and/or Requisition Compensation (as such term is
defined
in the General Assignment) in competition with the
Bank;
|
4.5 |
the
Manager will discontinue any such action or proceedings or claim
which may
have been taken, instituted or made or asserted, promptly upon notice
from
the Bank to do so;
|
4.6 |
the
Manager will promptly notify the Bank if at any time the amount owed
by
the Borrower to the Manager pursuant to the Management Agreement
(whether
in respect of the Manager’s remuneration or disbursements or otherwise)
exceeds US$100,000 or the equivalent in other currencies;
and
|
4.7 |
the
Manager will provide the Bank with such information concerning the
Ship as
the Bank may from time to time reasonably
require.
|
5 |
Insurance
assignment
|
5.1 |
By
way of security for the aggregate of the Loan and interest accrued
and
accruing thereon, the Expenses (as such term is defined in the General
Assignment) the Master Swap Agreement Liabilities (as such term is
defined
in the General Assignment) and all other sums of money from time
to time
owing by the Borrower to the Bank, whether actually or contingently,
under
the Security Documents (as such term is defined in the General Assignment)
or any of them to which the Borrower is or is to be a party (the
“
Outstanding
Indebtedness
”)
the Manager with full title guarantee hereby irrevocably and
unconditionally assigns and agrees to assign to the Bank all of the
Manager’s rights, title and interest in and to and the benefit of the
Insurances.
|
5.2 |
The
Manager hereby undertakes to procure that a duly completed notice
in the
form set out in Appendix 2 to this Letter is given to all insurers
of the
Ship and to procure that such notice is promptly endorsed on all
policies
and entries in respect of the Insurances and agrees promptly to authorise
and/or instruct any broker, insurer or association with or through
whom
Insurances may be effected to endorse on any policy or entry or otherwise
to give effect to such loss payable clause as may be stipulated by
the
Bank.
|
5.3 |
The
Bank shall, at the Manager’s cost, re-assign to the Manager all the
Manager’s right, title and interest in the Insurances upon the Outstanding
Indebtedness being discharged in full to the satisfaction of the
Bank.
|
5.4 |
Any
moneys in respect of the Insurances which would (but for the assignment
contained in clause 5.1 above) be payable to the Manager shall be
applied
in accordance with clause 2.3 of the General Assignment and/or (as
the
case may be) clause 2.6 of the General
Assignment.
|
6 |
Acknowledgement
|
7 |
Law
and jurisdiction
|
7.1 |
The
agreement constituted by this Letter shall be governed by and construed
in
accordance with English law.
|
7.2 |
The
Manager agrees, for the benefit of the Bank, that any legal action
or
proceedings arising out of or in connection with this letter against
the
Manager or any of its assets may be brought in the English courts.
The
Manager irrevocably and unconditionally submits to the jurisdiction
of
such courts and whoever irrevocably designates, appoints and empowers
Cheeswrights at present of 10 Philpot Lane, London EC3M 8BR, England,
receive for it and on its behalf, service of process issued out of
the
English courts in any such legal action or proceedings. The submission
to
such jurisdiction shall not (and shall not be construed so as to)
limit
the rights of the Bank to take any proceedings against the Manager
in the
courts of any other competent jurisdiction nor shall the taking of
proceedings in any one or more jurisdictions preclude the taking
of
proceedings in any other jurisdiction, whether concurrently or
not.
|
7.3 |
No
term of this Letter is enforceable under the Contracts (Rights of
Third
Parties) Act 1999 by a person who is not a party to this Letter or
to whom
this Letter is not addressed.
|
1. |
Interpretation
|
2. |
Obligations
|
3. |
Representations
|
4. |
Agreements
|
5. |
Events
of Default and Termination
Events
|
6. |
Early
Termination
|
7. |
Transfer
|
8. |
Contractual
Currency
|
9. |
Miscellaneous
|
10. |
Offices;
Multibranch Parties
|
11. |
Expenses
|
12. |
Notices
|
(i) |
if
in writing and delivered in person or by courier, on the date it
is
delivered;
|
(ii) |
if
sent by telex, on the date the recipient’s answerback is
received;
|
(iii)
|
if
sent by facsimile transmission, on the date that transmission is
received
by a responsible employee of the recipient in legible form (it being
agreed that the burden of proving receipt will be on the sender and
will
not be met by a transmission report generated by the sender’s facsimile
machine);
|
(iv)
|
if
sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
|
(v)
|
if
sent by electronic messaging system, on the date that electronic
message
is received, unless the date of that delivery (or attempted delivery)
or
that receipt, as applicable, is not a Local Business Day or that
communication is delivered (or attempted) or received, as applicable,
after the close of business on a Local Business Day, in which case
that
communication shall be deemed given and effective on the first following
day that is a Local Business Day.
|
13. |
Governing
Law and Jurisdiction
|
14. |
Definitions
|
dated
|
between
|
PART 1. |
TERMINATION
PROVISIONS.
|
(a) |
“
Specified
Entity
”
means in relation to Party A for the purpose
of:
|
Section
5(a)(v),
|
Not
Applicable
|
Section
5(a)(vi),
|
Not
Applicable
|
Section
5(a)(vii),
|
Not
Applicable
|
Section
5(b)(iv),
|
Not
Applicable
|
and
in relation to Party B for the purpose of:-
|
|
Section
5(a)(v),
|
Any
Affiliate
|
Section
5(a)(vi),
|
Any
Affiliate
|
Section
5(a)(vii),
|
Any
Affiliate
|
Section
5(b)(iv),
|
Any
Affiliate
|
b)
|
“
Specified
Transaction
”
will have the meaning specified in Section 14 of this Agreement,
but shall
include payment obligations of Party B under any term loan or facility
agreement with Party A.
|
(c)
|
The
“
Cross
Default
”
provisions of Section 5(a)(vi) will apply to Party A and will apply
to
Party B.
|
(i)
|
in
relation to Party A, 3% of shareholders’ equity of Party A as reported in
its most recent audited financial statements or its equivalent in
any
other currency or currency unit or any combination thereof;
and
|
(ii) |
in
relation to Party B, zero.
|
(d)
|
The
“
Credit
Event Upon Merger
”
provision of Section 5(b)(iv) will apply to Party A and will apply
to
Party B.
|
(e)
|
The
“
Automatic
Early Termination
”
provision of Section 6(a) will apply to Party A and will apply to
Party
B.
|
(f)
|
Payments
on Early Termination
.
For the purpose of Section 6(e) of this
Agreement:-
|
(i)
|
Market
Quotation will apply. Notwithstanding the foregoing, Loss will apply
in
respect of FX Transactions, Currency Option Transactions and
FRAs.
|
(ii)
|
The
Second Method will apply.
|
(g)
|
“
Termination
Currency
”
means:-
|
(i)
|
the
currency of a Terminated Transaction which is selected (A) by the
party
that is not the Defaulting Party, the Affected Party, or the Burdened
Party, as the case may be, or (B) in circumstances where there are
two
Affected Parties, by Party A in agreement with Party B;
or
|
(ii)
|
failing
such agreement or if any such currency determined in accordance with
(i)
above is not freely available,
Euro.
|
(h)
|
Additional
Termination Event
will apply. Any repayment, prepayment or cancellation, howsoever
described, in the Loan Agreement shall constitute an Additional
Termination Event for the purpose of this Agreement. For the purpose
of
the foregoing, the Affected Party shall be Party
B.
|
(a)
|
The
rights of the parties to terminate outstanding Transactions in accordance
with this Agreement will be limited to the amount of such repayment,
prepayment, or cancellation, or such other amount as may be prescribed
by
any applicable terms of the Loan Agreement (such amount, in each
case,
being referred to as the “Relevant
Amount”).
|
(b)
|
The
Relevant Amount will, for purposes of the calculation of any payment
to be
made under Section 6(e)(ii), be considered as the Notional Amount
of the
relevant Terminated Transaction.
|
(c)
|
With
effect from the Early Termination Date, the Notional Amount of the
relevant Transaction will be reduced by an amount equal to the Relevant
Amount.
|
PART 2. |
TAX
REPRESENTATIONS.
|
(a)
|
Payer
Representations
.
For the purpose of Section 3(e) of this Agreement, Party A and Party
B
will make the following
representation:-
|
(b)
|
Payee
Representations
.
Not Applicable.
|
PART 3. |
AGREEMENT
TO DELIVER DOCUMENTS.
|
(a)
|
For
the purpose of Sections 4(a)(i) and (ii) of this Agreement, each
party
agrees to deliver, in addition to such documents mentioned in Sections
4(a)(i) and (ii), the following documents, as applicable:- Not
Applicable.
|
(b)
|
For
purposes of Section 3(d) other documents to be delivered by each
party
concurrently with the execution and delivery of this Agreement
are:-
|
Party
A:
|
Certified
copy of relevant pages of Signature List, Certificate of Incumbency
or
such other evidence, satisfactory to Party B, of the power of the
person(s) binding Party A to do so.
|
|
Party
B:
|
(1)
|
Certified
copy of relevant pages of Signature List, Certificate of Incumbency
or
such other evidence, satisfactory to Party A, of the power of the
person(s) binding Party B to do so;
|
(2)
|
Duly
executed Credit Support Documents;
|
|
(3)
|
Opinion
of Liberian counsel confirming Party B’s authority, power and capacity to
enter into this Agreement, such opinion to be in a form acceptable
to
Party A;
|
|
(4)
|
Process
Agent Appointment Letter and, when available, the written acceptance
of
such Process Agent; and
|
Party
A and
Party
B:
|
Upon
request the most recently published and audited financial reports
of the
parties.
|
PART 4. |
MISCELLANEOUS.
|
(a) |
Addresses
for Notices
.
For the purpose of Section 12(a) of this
Agreement:-
|
Attention:
|
George
Papadopoulos
|
Tel:
|
+30
210 895 7070
|
Telefax
No:
|
+30
210 895 6900
|
(b)
|
Process
Agent
.
For the purpose of Section 13(c) of this
Agreement:-
|
(c) |
Offices
.
The provisions of Section 10(a) will apply to this
Agreement.
|
(d)
|
Multibranch
Party
.
For the purpose of Section 10(c) of this
Agreement:-
|
(e)
|
Calculation
Agent
.
The Calculation Agent is Party A.
|
(f)
|
Credit
Support Document
.
Details of any Credit Support
Document:-
|
(g)
|
Credit
Support Provider
.
Credit Support Provider means in relation to Party A: Not
Applicable
|
(h)
|
Governing
Law
.
This Agreement will be governed by and construed in accordance with
English law.
|
(i)
|
Netting
of Payments
.
Subparagraph (ii) of Section 2(c) of this Agreement will apply to
all
Transactions.
|
(j)
|
“
Affiliate
”
will have the meaning specified in Section 14. For the purpose of
Section
3(c)“Affiliate” shall mean in relation to Party A any Bank Affiliate.
“Bank Affiliate” means any bank controlled, directly or indirectly, by
Party A. For this purpose “control” of any bank means ownership of a
majority of the voting power of the bank, and a “bank” means any entity,
which is recognised as a bank by the jurisdiction of its
incorporation.
|
PART 5. |
OTHER
PROVISIONS.
|
1.
|
Incorporation
by reference
.
Reference is made to the 2000 ISDA Definitions, as published by the
International Swap and Derivatives Association, Inc. as amended and
restated from time to time, which are hereby incorporated by reference.
In
the event of an inconsistency between the provisions of this Agreement
and
the ISDA Definitions, this Agreement shall
prevail.
|
2.
|
Scope
of Agreement
.
Notwithstanding anything contained in this Agreement to the contrary,
any
transaction which may otherwise constitute a “Specified Transaction” for
purposes of this Agreement which has been or will be entered into
between
the parties shall constitute a “Transaction” which is subject to, governed
by, and construed in accordance with the terms of this Agreement,
except
when the parties expressly agree that this provision will not
apply.
|
3.
|
Affected
Parties in Termination Events
.
For purposes of Section 6(e) (Payments on Early Termination), both
parties
shall be deemed to be Affected Parties in connection with any Illegality
or Tax Event, so that payments in connection with early termination
shall
be calculated as provided in Section
6(e)(ii).
|
4.
|
Other
Defaults
|
5.
|
Deferral
of Payments in Connection with Illegality
.
If a party gives a notice of Illegality, the due date for any payment
scheduled to be made by either party pursuant to Section 2 in connection
with any Affected Transaction at any time after that notice is effective
shall be deferred to the earliest to occur of (i) the date for settlement
payments pursuant to Section 6(e) in connection with an Early Termination
Date, (ii) the final Scheduled Payment Date for the Affected Transactions
and (iii) the date on which arrangements made pursuant to Section
6(b)(ii)
to avoid the Illegality are effected. Any payments deferred pursuant
to
this provision shall be made on the deferred payment date together
with
interest accrued on each deferred amount from and including its originally
scheduled due date to but excluding the deferred due date (or, if
an Early
Termination Date is designated, to but excluding the day it is designated)
at the Non-default Rate.
|
6.
|
Recording
of Conversations
.
Each party to this Agreement acknowledges and agrees to the tape
recording
of conversations of the trading personnel of the parties in connection
with this Agreement.
|
7.
|
Indemnification
.
If an Early Termination Date shall be deemed to have occurred under
Section (a) the Defaulting Party hereby agrees to indemnify the
Non-defaulting Party on demand against all loss or damage the
Non-defaulting Party may sustain or incur in respect of each Transaction
as a result of movements in exchange rates and Market Quotations
between
the Early Termination Date and the date (“the Determination Date”) upon
which the Non-defaulting Party first becomes aware that the Early
Termination Date has been deemed to have occurred under Section
6(a).
|
If
the Non-defaulting Party shall determine that it would gain or benefit
from the movement in exchange rates and Market Quotations between
the
Early Termination Date and the Determination Date, the amount of
such gain
or benefit shall be deducted from the Settlement Amount for the purposes
of determining the amount payable by the Defaulting Party or be added
to
the Settlement Amount for the purposes of determining the amount
payable
by the Non- defaulting Party, pursuant to Section
6(e)(i)(3).
|
The
Determination Date shall be a date not later than the date upon which
the
creditors generally of the Defaulting Party are notified of the occurrence
of the Event of Default leading to the deemed Early Termination
Date.
|
8.
|
Relationship
Between Parties
.
Each party will be deemed to represent to the other party on the
date on
which it enters into a Transaction that (absent a written agreement
between the parties that expressly imposes affirmative obligations
to the
contrary for that Transaction):-
|
(a)
|
Non-Reliance
.
It is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that
Transaction is appropriate or proper for it based upon its own judgment
and upon advice from such advisers as it has deemed necessary. It
is not
relying on any communication (written or oral) of the other party
as
investment advice or as a recommendation to enter into that Transaction;
it being understood that information and explanations related to
the terms
and conditions of a Transaction shall not be considered investment
advice
or a recommendation to enter into that Transaction. No communication
(written or oral) received from the other party shall be deemed to
be an
assurance or guarantee as to the expected results of that
Transaction.
|
(b)
|
Assessment
and Understanding
.
It is capable of assessing the merits of and understanding (on its
own
behalf or through independent professional advice), and understands
and
accepts, the terms, conditions and risks of that Transaction. It
is also
capable of assuming, and assumes, the risks of that
Transaction.
|
(c)
|
Status
of Parties
.
The other party is not acting as a fiduciary for or an adviser to
it in
respect of that Transaction.
|
9.
|
Subordination
.
The Borrower agrees that it shall not prove or claim for such an
amount in
any liquidation, administration, arrangement or similar procedure
involving any other Security Party.
|
10.
|
Third
Party Rights
.
Nothing in this Agreement is intended to confer on any person any
right to
enforce any term which that person would not have but for the Contracts
(Rights of Third Parties) Act 1999.
|
11.
|
Hedging
.
Each party acknowledges and agrees that no Transaction may be entered
into
under this Agreement other than for the purpose of hedging the interest
risk associated with the Loan
Agreement.
|
12.
|
Escrow
.
If, whether by reason of the time difference between the cities in
which
payments are to be made or otherwise, it is not possible for simultaneous
payments to be made on any date on which both parties are required
to make
payments hereunder, either party may at its option and in its sole
discretion notify the other party that payments on that date are
to be
made in escrow. In this case deposit of the payment due earlier on
that
date shall be made by 2:00 p.m. (local time at the place for the
earlier
payment) on that date with an escrow agent selected by the party
giving
the notice, accompanied by irrevocable payment instructions (i) to
release
the deposited payment to the intended recipient upon receipt by the
escrow
agent of the required deposit of the corresponding payment from the
other
party on the same date accompanied by irrevocable payment instructions
to
the same effect or (ii) if the required deposit of the corresponding
payment is not made on that same date, to return the payment deposited
to
the party that paid it into escrow. The party that elects to have
payments
made in escrow shall pay the costs of the escrow arrangements and
shall
cause those arrangements to provide that the intended recipient of
the
payment due to be deposited first shall be entitled to interest on
that
deposited payment for each day in the period of its deposit at the
rate
offered by the escrow agent for that day (at 11;00 a.m. local time
on that
day) for overnight deposits in the relevant currency in the office
where
it holds that deposited payment if that payment is not released by
5:00
p.m. local time on the date it is deposited for any reason other
than the
intended recipient’s failure to make the escrow deposit it is required to
make hereunder in a timely fashion.
|
13.
|
Pari
Passu
.
Party B agrees that at all times its obligations under any Transactions
shall rank at least pari passu in right of payment and security with
all
of Party B’s Specified Indebtedness other than Specified Indebtedness
preferred by law. In addition, in the event Party B has pledged,
or at any
time hereafter does pledge, collateral as security for any of its
outstanding Specified Indebtedness, then Party B’s obligations to Party A
under any Transaction shall be secured on a pari passu basis with
such
Specified Indebtedness.
|
PART 6. |
ADDITIONAL
TERMS FOR FX TRANSACTIONS AND CURRENCY OPTION
TRANSACTIONS.
|
1.
|
(a)
|
Reference
is made to the 1998 FX and Currency Option Definitions as published
by the
International Swaps and Derivatives Association, Inc., the Emerging
Markets Traders Association and The Foreign Exchange Committee and
as
amended from time to time (the “
FX
and Currency Option Definitions
”),
which are hereby incorporated by reference with respect to “
FX
Transactions
”
and “
Currency
Option Transactions
”
as defined by the FX and Currency Option Definitions, except as
specifically provided herein or in the relevant Confirmation.
|
In
the event of an inconsistency between the provisions of this Agreement
and
the FX and Currency Option Definitions, this Agreement shall prevail.
In
the event of an inconsistency between the ISDA Definitions and the
FX and
Currency Option Definitions, the FX and
Currency
|
Option Definitions shall prevail with respect to FX and Currency Option Transactions. | ||
(b)
|
Confirmations
.
Any FX and Currency Option Transaction into which the parties have
or may
enter will be governed by this Agreement in all circumstances except
when
the parties expressly agree that this provision will not apply. Each
such
transaction will be deemed to be a “
Transaction
”
and each confirmation or other confirming evidence will be deemed
to
constitute a “
Confirmation
”
for the purpose of this Agreement, even where not so specified in
the
confirmation or other confirming evidence for such
transaction.
|
2. |
Payment
of Premium
|
(a)
|
Unless
otherwise agreed in writing by the parties, the Premium related to
a
Currency Option Transaction shall be paid on its Premium Payment
Date in
immediately available funds.
|
(b)
|
If
any Premium is not received on the Premium Payment Date, the Seller
may
elect: (i) to accept a late payment of such Premium; (ii) to give
written notice of such non-payment and, if such payment shall not
be
received within three (3) Local Business Days of such notice, treat
the
related Currency Option Transaction as void; or (iii) to give written
notice of such non-payment and, if such payment shall not be received
within three (3) Local Business Days of such notice, treat such
non-payment as an Event of Default under Section 5(a)(i) of this
Agreement. If the Seller elects to act under either clause (i) or
(ii) of
the preceding sentence, the Buyer shall pay all out-of-pocket costs
and
actual damages incurred in connection with such unpaid or late Premium
or
void Currency Option Transaction, including, without limitation,
interest
on such Premium from and including the Premium Payment Date to but
excluding the late payment date in the same currency as such Premium
at
overnight LIBOR and any other losses, costs or expenses incurred
by the
Seller in connection with such terminated Currency Option Transaction,
for
the loss of its bargain, its cost of funding, or the loss incurred
as a
result of terminating, liquidating, obtaining or re-establishing
a delta
hedge or related trading position with respect to such Currency Option
Transaction.
|
3.
|
Payment
Instructions
.
All payments made hereunder in respect of FX Transactions and Currency
Option Transactions shall be made in accordance with the standing
payment
instructions provided by the parties (or as otherwise specified in
the
relevant Confirmation).
|
PART 7. |
ADDITIONAL
TERMS FOR FORWARD RATE
AGREEMENTS.
|
1.
|
FRABBA
Transactions.
|
Any
forward rate agreement into which the parties have entered and in
respect
of which the confirmation or other confirming evidence refers to
or
incorporates the British Bankers’ Association London Interbank Forward
Rate Agreements Recommended Terms and Conditions (1985 edition) (“FRABBA
Terms”) will be governed by this Agreement. Any forward rate agreement
into which the parties may enter and in respect of which the confirmation
or other confirming evidence refers to or incorporates the FRABBA
Terms
will be governed by this Agreement in all circumstances except when
the
parties expressly agree that this provision will not apply. Each
such
transaction will be deemed to be a Transaction and each such confirmation
or other confirming evidence will be deemed to constitute a Confirmation
for purposes of this Agreement. Sections B, C and E and clauses 1,
4, 5
and 6 of Section D of the FRABBA Terms are hereby incorporated by
reference in this Agreement. Those Sections are applicable only to
transactions to which this provision relates and will prevail in
the event
of any inconsistency with any other provision of this Agreement.
In the
event of any other inconsistency between the
|
FRABBA Terms and this Agreement, this Agreement will govern. Clauses 2, 3, 7, 8, 9 and 10 of Section D of the FRABBA Terms are not applicable to any transaction to which this provision relates. |
2. |
For
the avoidance of doubt:
|
|
(a)
|
the
term “BBA Interest Settlement Rate” as used in the FRABBA Terms or the
term “Settlement Rate” shall be understood to read “Floating Rate” as
determined by the relevant Floating Rate Option as defined in the
ISDA
Definitions;
|
(b)
|
the
terms “Contract Currency” and “FRABBA Currencies” as used in the FRABBA
Terms shall be deemed to include all Currencies as defined in the
ISDA
Definitions;
|
|
(c)
|
the
term “Fixing Date” as defined in the FRABBA Terms shall be determined
according to the relevant Floating Rate Option as defined in the
ISDA
Definitions; and
|
|
(d)
|
the
FRABBA Terms outlined in Part 7(1) above which are stated to be
incorporated by reference in this Agreement shall be incorporated
mutatis
mutandis
as
though such terms were expressed in ISDA terminology as used in
the ISDA
Definitions and in this Agreement.
|
Signature:
|
Signature:
|
|||||||
Name:
|
Name:
|
|||||||
Title:
|
Title:
|
|||||||
Date:
|
Date:
|
Signature:
|
||||
Name:
|
||||
Title:
|
||||
Date:
|
|
|
NORTON ROSE
|
Clause
|
Page
|
|
1
|
Definitions
|
1
|
2
|
Restrictions
|
2
|
3
|
First
fixed charge
|
3
|
4
|
Further
documentation etc.
|
3
|
5
|
Representations
|
4
|
6
|
Notices
|
4
|
7
|
Supplemental
|
4
|
8
|
Law
and jurisdiction
|
5
|
(1) |
PETRA
SHIPPING LTD
,
a
corporation incorporated in the Republic of Liberia having its registered
office at 80 Broad Street, Monrovia, Liberia (the “Owner”);
and
|
(2) |
BAYERISCHE
HYPO -UND VEREINSBANK AKTIENGESELLSCHAFT
,
a
company incorporated in Germany whose registered office is at Am
Tucherpark 16, D-80538 Munich, Germany, acting for the purposes of
this
Deed through its office at 7 Heraklitou Street, 106 73 Athens, Greece
(the
“
Bank
”).
|
(A) |
By
a loan agreement dated
and made between (i) the Owner as borrower and (ii) the Bank as lender
(the “
Loan
Agreement
”),
the Bank agreed to make available to the Owner upon the terms and
conditions therein described a multicurrency loan of up to Thirty
six
million Dollars ($36,000,000) or the Equivalent Amount in an Optional
Currency or Optional Currencies;
|
(B) |
The
Owner has entered into or may enter into one or more Transactions
(as such
term is defined in the 1992 ISDA Master Agreement dated
between
the Owner
and
the Bank (the “
Master
Swap Agreement
”))
as evidenced by one or more Confirmations (as such term is defined
in the
Master Swap Agreement) which are governed by the Master Agreement;
and
|
(C) |
It
is a condition precedent to the Bank advancing the loan under the
Loan
Agreement that the Owner as security for, inter alia, its obligations
under the Loan Agreement shall execute this
Deed.
|
1 |
Definitions
|
1.1 |
In
this Deed, unless the context otherwise requires, the following
expressions shall have the following
meanings:
|
(a) |
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature suffered, incurred or paid by the Bank in connection
with
the exercise of the powers referred to in or granted by the Loan
Agreement, the Master Swap Agreement, this Deed or any of the other
Security Documents or otherwise payable by the Owner;
and
|
(b) |
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Bank until the date of receipt or recovery thereof (whether
before
or after judgment) at a rate per annum calculated in accordance with
clause 3.4 of the Loan Agreement (as conclusively certified by the
Bank);
|
1.2 |
For
the purposes of this Deed an amount shall be deemed to be outstanding
and
to be due and payable to the Bank if the Bank is then entitled to
demand
payment of that amount, notwithstanding that it has not yet served
a
demand.
|
1.3 |
Clause
1.1 (Purpose) and clause 1.2 (Definitions) of the Loan Agreement
shall
apply with any necessary modifications for the purposes of this
Deed.
|
2 |
Restrictions
|
2.1 |
In
this clause references to assignment includes the creation, or permitting
to arise, of any form of beneficial interest or Security Interest
and
every other kind of disposition.
|
2.2 |
An
act or transaction which is contrary to, or inconsistent with, this
clause
shall be void as regards the Bank.
|
3 |
First
fixed charge
|
3.1 |
The
Owner with full title guarantee, hereby charges and agrees to charge
and
releases and agrees to release to the Bank as a continuing security
for
payment of the Outstanding Indebtedness, by way of first fixed charge,
the
Secured Property.
|
3.2 |
Upon
the occurrence of a Default the charge shall become enforceable and
the
Bank shall be entitled then or at any later time or times to appropriate
all or any part of the Secured Property in or towards discharge of
the
then Outstanding Indebtedness or any part thereof, and may do so
notwithstanding that any maturity date attached to any part or parts
of
the Secured Property may not yet have
arrived.
|
3.3 |
A
certificate signed by a director or other senior officer of the Bank
and
which states that on a specified date and (if the certificate also
states
this) at a specified time the Bank exercised its rights under this
clause
to appropriate a specified amount of Secured Property in the discharge
of
a specified amount of the Outstanding Indebtedness shall be conclusive
evidence that:
|
3.3.1
|
the
Bank’s liabilities in respect of the specified amount of Secured Property;
and
|
3.3.2
|
the
specified amount of Outstanding Indebtedness,
|
4 |
Further
documentation etc.
|
4.1 |
The
Owner shall execute forthwith any document which the Bank may specify
for
the purpose of:
|
4.1.1
|
supplementing
the rights which this Deed confers on the Bank in relation to the
Secured
Property; or
|
4.1.2
|
creating
a mortgage of the Secured Property to replace or supplement the charge
created in clause 3 above; or
|
4.1.3
|
registering
or otherwise perfecting this Deed or any mortgage created under clause
4.1.2 above; or
|
4.1.4
|
ensuring
or confirming the validity of anything done or to be done under this
Deed.
|
4.2 |
Any
such document shall be in the terms specified by the Bank and, in
the case
of a mortgage of the Secured Property, those terms may include a
provision
entitling the Bank, on or after a Default, to appropriate, or otherwise
deal with, the Secured Property for the purpose of discharging the
Outstanding Indebtedness.
|
4.3 |
The
Owner shall also forthwith do any act and execute any document (including
a document which amends or replaces this Deed) which the Bank specifies
for the purpose of enabling or assisting the Bank to comply, in relation
to the Secured Property and/or the Outstanding Indebtedness, with
any
requirement (legally binding or not) applicable to the Bank and,
in
particular, the requirements of any banking supervisory authority
with
regard to netting of cash
collateral.
|
4.4 |
For
the purpose of securing performance of the Owner’s obligations under
clauses 4.1 to 4.3, the Owner irrevocably appoints the Bank as its
attorney, on its behalf and in its name or otherwise to sign or execute
any document which, in the opinion of the Bank, the Owner is obliged,
or
could be
|
4.5 |
The
Bank may appoint any person or persons as its substitute under that
power
of attorney referred to in clause 4.4 and may also delegate that
power of
attorney to any person or persons.
|
5 |
Representations
|
5.1 |
The
Owner represents and warrants to the Bank as
follows:
|
5.1.1
|
the
Owner is the sole legal and beneficial owner of the Secured Property
and
has good marketable title to it;
|
5.1.2
|
no
third party has or will have any interest, right or claim of any
kind in
relation to any of the Secured
Property;
|
5.1.3
|
the
Owner has the corporate power, and has taken all necessary corporate
action to authorise the execution of this Deed, the Loan Agreement
and the
Master Swap Agreement; and
|
5.1.4
|
nothing
in this Deed will or might result in the Owner contravening any law
or
regulation which is now in force or which has been published but
not yet
brought into force or any contractual or other obligation which the
Owner
now has to a third party.
|
6 |
Notices
|
6.1 |
Clause
17 (Notices and other matters) of the Loan Agreement will apply to
this
Deed mutatis mutandis as if references to the Loan Agreement were
references to this Deed save that references therein to the “Borrower”
shall be construed as references to the
Owner.
|
7 |
Supplemental
|
7.1 |
This
Deed, including the charge created by clause 3, shall remain in force
as a
continuing security until the Security Period has
ended.
|
7.2 |
The
rights of the Bank under this Deed will not be discharged or prejudiced
by:
|
7.2.1
|
any
kind of amendment or supplement to the other Security
Documents;
|
7.2.2
|
any
arrangement or concession, including a rescheduling, which the Bank
may
make in relation to any of the Loan Agreement, the Master Swap Agreement
and the other Security Documents, or any action by the Bank and/or
the
Owner and/or any other party thereto which is contrary to the terms
of the
Loan Agreement, the Master Swap Agreement and the other Security
Documents;
|
7.2.3
|
any
release or discharge, whether granted by the Bank or effected by
the
operation of any law, of all or any of the obligations of the Owner
and/or
any other party thereto under any of the Loan Agreement, the Master
Swap
Agreement and the other Security
Documents;
|
7.2.4
|
any
change in the ownership and/or control of the Owner and/or any other
party
thereto and/or merger, demerger or reorganisation involving the Owner
and/or any other party thereto;
|
7.2.5
|
any
event or matter which is similar to, or connected with, any of the
foregoing;
|
7.3 |
Nothing
in this Deed excludes or restricts any right of counterclaim, set-off,
right to net payments, or any other right or remedy which the Bank
would
have had other than under the general law, the Loan Agreement, the
Master
Swap Agreement and the other Security
Documents.
|
8 |
Law
and jurisdiction
|
8.1 |
Law
|
8.2 |
Submission
to jurisdiction
|
8.3 |
Contracts
(Rights of Third Parties) Act
1999
|
1 |
The
Additional Cost is an addition to the interest rate to compensate
the Bank
for the cost of compliance with (a) the requirements of the Bank
of
England and/or the Financial Services Authority (or, in either case,
any
other authority which replaces all or any of its functions) or (b)
the
requirements of the European Central
Bank.
|
2 |
On,
or as soon as possible after, the first day of each Interest Period,
the
Bank shall calculate, as a percentage rate, its Additional Cost in
accordance with the following paragraphs. The Additional Cost will
be
expressed as a percentage rate per annum and will be rounded up to
four
decimal places.
|
3 |
The
Additional Cost when the Bank lends from an office in any member
state of
the European Union that has adopted or adopts the Euro as its lawful
currency in accordance with legislation of the European Union relating
to
Economic and Monetary Union will be the percentage (expressed as
a per
annum rate) which is its reasonable determination of the cost of
complying
with the minimum reserve requirements of the European Central Bank
in
respect of loans made from that
office.
|
4 |
The
Additional Cost for the Bank lending from an office in the United
Kingdom
will be calculated as follows:
|
(a) |
in
relation to a sterling Loan:
|
(b) |
in
relation to a Loan in any currency other than
sterling:
|
A |
is
the percentage of Eligible Liabilities (assuming these to be in excess
of
any stated minimum) which that Lender is from time to time required
to
maintain as an interest free cash ratio deposit with the Bank of
England
to comply with cash ratio
requirements.
|
B |
is
the percentage rate of interest (excluding the Margin and the Additional
Cost and, if any part of the Loan has not been paid on its due date,
the
additional rate of interest specified in clause 3.4 payable for the
relevant Interest Period on the
Loan.
|
C |
is
the percentage (if any) of Eligible Liabilities which that Lender
is
required from time to time to maintain as interest bearing Special
Deposits with the Bank of England.
|
D |
is
the percentage rate per annum payable by the Bank of England to the
Agent
on interest bearing Special
Deposits.
|
E |
is
designed to compensate the Bank for amounts payable under the Fees
Rules
and is calculated by the Bank as being the most recent rate of charge
payable by it to the Financial Services Authority under the Fees
Rules in
respect of the relevant financial year of the Financial Services
Authority
(calculated for this purpose by the Bank as being the average of
the Fee
Tariffs applicable to the Bank for that financial year) and expressed
in
pounds per £1,000,000 of the Tariff Base of the
Bank.
|
5 |
For
the purposes of this schedule:
|
(a)
|
“
Eligible
Liabilities
”
and “
Special
Deposits
”
have the meanings given to them from time to time under or pursuant
to the
Bank of England Act 1998 or (as may be appropriate) by the Bank of
England;
|
(b)
|
“
Fees
Rules
”
means the rules on periodic fees contained in the Supervision manual
of
the Financial Services Authority’s Handbook of rules and guidance or such
other law or regulation as may be in force from time to time in respect
of
the payment of fees for the acceptance of
deposits;
|
(c)
|
“
Fee
Tariffs
”
means the fee tariffs specified in the Fees Rules under the activity
group
A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee
required
pursuant to the Fees Rules but taking into account any applicable
discount
rate);
|
(d)
|
“
Tariff
Base
”
has the meaning given to it in, and will be calculated in accordance
with,
the Fees Rules; and
|
(e)
|
“
pounds
”
and “
£
”
means the lawful currency of the United
Kingdom.
|
6 |
In
application of the above formulae, A, B, C and D will be included
in the
formulae as figures and not as percentages (i.e. 5 per cent will
be
included in the formula as 5 and not a 0.05). A negative result obtained
by subtracting D from B shall be taken as zero. The resulting figures
shall be rounded to four decimal
places.
|
7 |
Any
determination by the Bank in accordance with this schedule in relation
to
a formula, the Additional Cost or any amount payable to it shall,
in the
absence of manifest error, be conclusive and binding on the
Borrower.
|
8 |
The
Bank may from time to time, after consultation with the Borrowers
determine and notify the Borrowers of any amendments which need to
be made
to this schedule to comply with any change in law, regulation or
any
requirements from time to time imposed by the Bank of England, the
Financial Services Authority or the European Central Bank (or, in
any
case, any other authority which replaces all or any of its functions)
and
any such determination shall, in the absence of manifest error, be
conclusive and binding on the
Borrowers.
|
SIGNED
|
)
|
||
by
G. PAPADOPOULOS
|
)
|
||
for
and on behalf of
|
)
|
/s/
G. Papadopoulos
|
|
PETRA
SHIPPING LTD
|
)
|
Attorney-in-Fact
|
|
SIGNED
|
)
|
||
by
V. MANTZAVINOS
|
)
|
/s/
V. Mantzavinos
|
|
and
by A. KERPENIOTIS
|
)
|
Authorised
Signatory
|
|
by
for and on behalf of
|
)
|
||
BAYERISCHE
HYPO- UND VEREINSBANK
|
)
|
/s/
A. Kerpeniotis
|
|
AKTIENGESELLSCHAFT
|
)
|
Authorised
Signatory
|
EXHIBIT 10.18
To: | Petra Shipping Ltd |
32 Karamanii Avenue | |
166 05 Voula | |
Greece | |
Fax no: +30 210 895 6900 | |
Attention: Mr. George Papadopoulos |
18 January 2008
Dear Sirs
Loan Agreement dated 11 January 2007 for a multi-currency loan of $36,000,000 to Petra Shipping Ltd (the Loan Agreement)
We refer to the Loan Agreement and to the conversion request you have sent us dated 17 January 2008 (the New Conversion Request ). Please note that, pursuant to the New Conversion Request, Thirty Nine Million Eight Hundred Thousand and Thirteen Swiss Francs (CHF39,813,000) (the Funds ) have been converted with value 18 January 2008 to Thirty Six Million One Hundred Seventy Thousand Six Hundred and Eighteen United States Dollars and Seventy Cents (USD36,170,618.70) at an exchange rate of 1,1007 $/CHF.
We note your acknowledgment of the excess amount of Four Million One Hundred Seventy Thousand Six Hundred and Eighteen United States Dollars and Seventy Cents (USD4,170,618.70) and agree to your request of waiving the requirement for additional cash collateral to be deposited to the Multicurrency Cash Collateral Account pursuant to clause 4.6 of Loan Agreement. Such waiver shall not in any way prejudice or affect the powers conferred upon the Bank under the Loan Agreement and the other Security Documents or the right of the Bank thereafter to act strictly in accordance with the terms of the Loan Agreement and the other Security Documents.
In consideration of the above, we also hereby agree to your request that the repayment of aforementioned excess amount be applied to the remaining repayment instalments and the balloon repayment so that the current balance of the Loan being Thirty Eight Million One Hundred Seventy Thousand Six Hundred and Eighteen United States Dollars and Seventy Cents (USD38,170,618.70) be repayable in twenty-one instalments of One Million One Hundred Thousand United States Dollars (USD1,100,000) each plus a final repayment of Fifteen Million Seventy Thousand Six Hundred and Eighteen United States Dollars and Seventy Cents (USD15,070,618.70), all repayable in each of the Repayment Dates.
Finally, it is also hereby agreed that no further conversion of the Loan, currently denominated in United States Dollars, will be effected until the final maturity date of the Loan and hence the multicurrency option is hereby cancelled and the Loan will remain in United States Dollars until the final maturity date.
Words and expressions defined In the Loan Agreement shall have the same meaning when used herein.
This letter shall be governed by English law.
Please confirm your agreement to this letter by countersigning a copy of this letter.
Yours sincerely
|
|
For and on behalf of | |
Bayerische Hypo-und Vereinsbank Aktiengesellschaft | |
We acknowledge and agree to the above
|
|
for and on behalf Petra Shipping Limited |
Clause
|
Page
|
|
1
|
Purpose
and definitions
|
1
|
2
|
The
Commitment and the Loan
|
10
|
3
|
Interest
and Interest Periods
|
11
|
4
|
Currencies
|
13
|
5
|
Repayment
and prepayment
|
15
|
6
|
Commitment
commission, fees and expenses
|
18
|
7
|
Payments
and taxes; accounts and calculations
|
19
|
8
|
Representations
and warranties
|
20
|
9
|
Undertakings
|
24
|
10
|
Conditions
|
30
|
11
|
Events
of Default
|
31
|
12
|
Indemnities
|
34
|
13
|
Unlawfulness
and increased costs
|
35
|
14
|
Security
and set-off
|
37
|
15
|
Accounts
|
38
|
16
|
Assignment,
transfer and lending office
|
38
|
17
|
Notices
and other matters
|
39
|
18
|
Governing
law and jurisdiction
|
40
|
Schedule
1 Form of Drawdown Notice
|
41
|
|
Schedule
2 Documents and evidence required as conditions precedent
|
42
|
|
Schedule
3 Form of Mortgage
|
47
|
|
Schedule
4 Form of Deed of Covenant
|
48
|
|
Schedule
5 Form of General Assignment
|
49
|
|
Schedule
6 Form of Manager’s Undertaking
|
50
|
|
Schedule
7 Form of Master Swap Agreement
|
51
|
|
Schedule
8 Form of Master Agreement Security Deed
|
52
|
|
Schedule
9 Calculation of Additional Cost
|
53
|
1
|
Purpose
and definitions
|
1.1 |
Purpose
|
1.2 |
Definitions
|
(a)
|
for
interest rate fixing purposes:
|
(i)
|
in
relation to a rate fixing in respect of euro, a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer
system (TARGET) is operating; or
|
(ii)
|
in
relation to a rate fixing in respect of any other Optional Currency
or
Dollars, a day on which banks are open for business in the principal
financial centre in, respectively, the jurisdiction of the relevant
Optional Currency or, in the case of Dollars, New York City;
and
|
(b)
|
for
all other purposes (including, but not limited to, payments and receiving
notices):
|
(i)
|
on
which banks are open for business in London, Munich and Athens;
and
|
(ii)
|
in
relation to payments in euros, a day on which banks are open for
business
in such other principal financial centre or centres of relevant
Participating Member States as the Bank may nominate;
or
|
(iii)
|
in
relation to payments in any other Optional Currency or Dollars, a
day on
which banks are open for business in the principal financial centre
in,
respectively, the jurisdiction of the relevant Optional Currency
or, in
the case of Dollars, New York City;
|
(a)
|
the
rate of interest for such period which appears on the Reuters page
Euribor
01 (or such other page on the Reuters screen as may customarily be
used
from time to time to display EURIBOR rates) at or about 11:00 a.m.
(Brussels time) on the Quotation Date for such period;
or
|
(b)
|
if
the relevant rate of EURIBOR cannot be determined in accordance with
paragraph (a) above, the rate (rounded upwards if necessary to the
nearest
one sixteenth of one per cent) the Bank offers for deposits in an
amount
approximately equal to the amount in relation to which EURIBOR is
to be
determined for a period equivalent to such period to prime banks
in the
London Interbank Market at or about 11:00 am. (London time) on the
Quotation Date for such period;
|
(a)
|
for
the period commencing on the Drawdown Date and ending on the Third
Anniversary, equal to one hundred and ten per cent (110%) of the
amount
which is the aggregate of (i) the Loan (or the Equivalent Amount
in
Dollars when the Loan or part thereof is denominated in an Optional
Currency) and (ii) the cost (if any) (as certified by the Bank whose
certificate shall, in the absence of manifest error, be conclusive
and
binding on the Borrower and the Bank) of terminating any Transaction
entered into pursuant to the Master Swap Agreement;
and
|
(b)
|
for
the period commencing on the date falling immediately after the Third
Anniversary and ending on the last day of the Security Period (as
defined
in the Deed of Covenant), equal to one hundred and twenty per cent
(120%)
of the amount which is the aggregate of (i) the Loan (or the Equivalent
Amount in Dollars when the Loan or part thereof is denominated in
an
Optional Currency) and (ii) the cost (if any) (as certified by the
Bank
whose certificate shall, in the absence of manifest error, be conclusive
and binding on the Borrower and the Bank) of terminating any Transaction
entered into pursuant to the Master Swap
Agreement;
|
(a)
|
the
actual, constructive, compromised or arranged total loss of the Ship;
or
|
(b)
|
the
Compulsory Acquisition of the Ship;
or
|
(c)
|
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Borrower from such
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation within thirty (30) days after the occurrence
thereof;
|
1.3 |
Headings
|
1.4 |
Construction
of certain terms
|
1.4.1 |
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Agreement and references to this Agreement
include
its schedules;
|
1.4.2 |
references
to (or to any specified provision of) this Agreement or any other
document
shall be construed as references to this Agreement, that provision
or that
document as in force for the time being and as amended in accordance
with
terms thereof, or, as the case may be, with the agreement of the
relevant
parties;
|
1.4.3 |
references
to a “regulation” include any present or future regulation, rule,
directive, requirement, request or guideline (whether or not having
the
force of law) of any agency, authority, central bank or government
department or any self-regulatory or other national or supra-national
authority,
|
1.4.4 |
words
importing the plural shall include the singular and vice
versa;
|
1.4.5 |
references
to a time of day are to London
time;
|
1.4.6 |
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.7 |
references
to a “guarantee” include references to an indemnity or other assurance
against financial loss including, without limitation, an obligation
to
purchase assets or services as a consequence of a default by any
other
person to pay any Indebtedness and “guaranteed” shall be construed
accordingly; and
|
1.4.8 |
references
to any enactment shall be deemed to include references to such enactment
as re-enacted, amended or extended.
|
2
|
The
Commitment and the Loan
|
2.1 |
Agreement
to lend
|
2.2 |
Drawdown
|
2.3 |
Amount
|
2.4 |
Availability
|
2.5 |
Termination
of Commitment
|
2.6 |
Application
of Proceeds
|
3
|
Interest
and Interest Periods
|
3.1 |
Normal
interest rate
|
3.2 |
Selection
of Interest Periods
|
3.3 |
Determination
of Interest Periods
|
3.3.1 |
the
first Interest Period in respect of an Advance shall commence on
the
Drawdown Date and each subsequent Interest Period in respect of such
Advance shall commence on the last day of the previous Interest Period
in
respect of such Advance;
|
3.3.2 |
if
any Interest Period would otherwise overrun a Repayment Date, then,
in the
case of the last Repayment Date, such Interest Period shall end on
such
Repayment Date, and in the case of any other Repayment Date or Repayment
Dates, the Advance or, if more than one, the aggregate of the Advances
shall be divided into parts so that there is one part (in the case
of more
than one Advance to be calculated on pro-rata basis between the Advances
in the aggregate Dollar Amount of all such Advances) in the amount
of the
repayment instalment due on each Repayment Date falling during that
Interest Period and having an Interest Period ending on the relevant
Repayment Date and another part (in the case of more than one Advance
to
be calculated on a pro-rata basis between the Advances in the aggregate
Dollar Amount of all such Advances) in the amount of the balance
of the
Loan having an Interest Period ascertained in accordance with clause
3.2
and the other provisions of this clause 3.3 and the expression “Interest
Period in respect of the Loan” when used in
|
3.3.3 |
if
the Borrower fails to specify the duration of an Interest Period
in
accordance with the provisions of clause 3.2 and this clause 3.3
such
Interest Period shall have a duration of six (6) months or such other
period as shall comply with this clause
3.3.
|
3.4 |
Default
interest
|
3.5 |
Notification
of Interest Periods and interest
rate
|
3.6 |
Market
disruption;
non-availability
|
3.6.1 |
If
and whenever, at any time prior to the commencement of any Interest
Period, the Bank shall have determined (which determination shall,
in the
absence of manifest error, be
conclusive):
|
(a) |
that
adequate and fair means do not exist for ascertaining LIBOR or, as
the
case may be, EURIBOR during such Interest Period;
or
|
(b) |
that
deposits in Dollars are not available to the Bank in the London Interbank
Market in the ordinary course of business in sufficient amounts to
fund
the Loan for such Interest Period;
|
3.6.2 |
During
the period of ten (10) days after any Determination Notice has been
given
by the Bank under clause 3.6.1, the Bank shall certify an alternative
basis (the “
Substitute
Basis
”)
for maintaining the Loan. The Substitute Basis may (without limitation)
include alternative interest periods, alternative currencies or
alternative rates of interest but shall include a margin above the
cost of
funds (including Additional Cost), if any, to the Bank equivalent
to the
Margin. Each Substitute Basis so certified shall be binding upon
the
Borrower and shall take effect in accordance with its terms from
the date
specified in the Determination Notice until such time as the Bank
notifies
the Borrower that none of the circumstances specified in clause 3.6.1
continues to exist whereupon the normal interest rate fixing provisions
of
this Agreement shall apply.
|
4
|
Currencies
|
4.1 |
Selection
of currencies
|
4.2 |
Limit
on currencies;
non-availability
|
4.2.1 |
The
Loan or any part thereof may not be drawn down in and may not be
converted
into or remain outstanding in an Optional Currency
if:
|
(a) |
in
consequence thereof there would be more than three (3) Advances
outstanding at any time; or
|
(b) |
in
consequence thereof there would be more than two (2) Optional Currencies
outstanding at any time; or
|
(c) |
in
consequence thereof an Advance shall be denominated in more than
one
currency; or
|
(d) |
the
amount to be converted is less than $1,000,000 or an integral multiple
of
$1,000,000; or
|
(e) |
the
Bank notifies the Borrower not later than 3 p.m. on the fourth
Banking Day
before the date on which the Loan or the relevant part thereof
is to be
drawn down or the beginning of the relevant Interest Period, that
deposits
of such Optional Currency are not readily available to the Bank
in an
amount comparable with the Loan or the relevant part thereof;
or
|
(f) |
the
Bank determines (which determination shall be conclusive) at any
time
prior to 10 a.m. (local time in the place of payment) on the first
day of
the relevant Interest Period that by reason of any change in currency
availability, currency exchange rates or exchange controls it is
or will
be impracticable for the Loan or the relevant part thereof to be
drawn
down in, converted into or remain outstanding in that Optional
Currency;
or
|
(g) |
a
Default has occurred and is continuing;
or
|
(h) |
a
Transaction is outstanding under the Master Swap
Agreement,
|
4.3 |
Currency
amounts on drawdown
|
4.3.1 |
Drawdown
in Optional Currency
|
If
the Loan is to be drawn down in full or in part in an Optional Currency,
the Bank shall, subject to clauses 10.1 and 10.2, advance to the
Borrower
on the Drawdown Date the Equivalent Amount of such Optional Currency
(as
determined by the Bank) which can be purchased with the Dollar Amount
of
the Loan or the relevant part thereof as at the Drawdown
Date.
|
4.3.2 |
Drawdown
in Dollars
|
If
the Loan or part thereof is to be drawn down in Dollars, the Bank
shall,
subject to clauses 10.1 and 10.2, advance to the Borrower on the
Drawdown
Date, the Dollar Amount of the Loan or such part
thereof.
|
4.4 |
Currency
amount on conversion
|
4.5 |
Notional
obligations
|
4.6 |
Currency
Correction
|
4.7 |
Release
of moneys in Multicurrency Cash Collateral
Account
|
4.8 |
Incidental
costs and expenses
|
5
|
Repayment
and prepayment
|
5.1 |
Repayment
|
5.1.1 |
Subject
to the terms of this Agreement, the Borrower shall repay the Loan
by
twenty four consecutive instalments, one such instalment to be repaid
on
each of the Repayment Dates Subject to the provisions of this Agreement,
the amount of each such instalment other than the last instalment
shall be
One million Dollars ($1,000,000) or the equivalent amount in an Optional
Currency calculated in accordance with clause 5.7 and the amount
of the
last instalment shall be Thirteen million Dollars ($13,000,000)
(comprising a balloon repayment of Twelve million Dollars ($12,000,000)
and a repayment instalment of One million Dollars ($1,000,000)) or
the
equivalent amount in an Optional Currency calculated in accordance
with
clause 5.7
PROVIDED
ALWAYS THAT
should the Loan be, for any reason (including enforcement), fully
repaid
or prepaid, notwithstanding anything to the contrary in this Agreement
and
in particular the repayment profile provided in this clause 5.1.1
and the
provisions of clauses 5.2 and 5.7, the Borrower shall pay to the
Bank such
an amount and in such currency or, as the case may be, currencies
as is
necessary to ensure that the Bank receives an amount equal to the
Loan in
the currencies outstanding immediately prior to the Loan being repaid
or
prepaid in full and the above repayment profile shall be disregarded
for
the purposes of such repayment or prepayment. If the Commitment is
not
drawn in full, the amount of each repayment instalment shall be reduced
proportionately
|
5.1.2 |
The
Borrower shall, at any time after the Third Anniversary have the
right
(subject to paragraphs (a) to (d) below) to request the Bank to defer
the
payment of up to two non-consecutive repayment instalments payable
pursuant to clause 5.1.1 (other than the final instalment) in
whole:
|
(a) |
such
option shall be exercisable by a written notice to the Bank from
the
Borrower which specifies the instalment to be deferred and which
is
received by the Bank at least fifteen (15) days before the Repayment
Date
upon which the relevant instalment falls
due;
|
(b) |
each
such notice shall be irrevocable once
given;
|
(c) |
upon
each occasion that an instalment is deferred pursuant to this proviso,
the
amount of the balloon repayment shall be increased by the amount
of the
relevant instalment deferred; and
|
(d) |
such
option may only be exercised if (i) the written notice to the Bank
has
been received within the time period specified in paragraph (a) above
and
(ii) at the time the relevant notice is received by the Bank no Default
has occurred.
|
5.2 |
Voluntary
prepayment
|
5.3 |
Master
Swap Agreement, Repayments and
Prepayments
|
5.3.1 |
Notwithstanding
any provision of the Master Swap Agreement to the contrary, in the
case of
a prepayment of all or part of the Loan (including, without limit,
upon a
Total Loss in accordance with clause 5.4 and under clause 9.2) then,
subject to clause 5.3.2, the Bank shall be entitled but not obliged
(and,
where relevant, may do without the consent of the Borrower, where
it would
otherwise be required whether under the Master Swap Agreement or
otherwise) to amend, re-book, supplement, cancel, close out, net
out,
terminate, liquidate, transfer or assign all or any part of the rights,
benefits and obligations created by any Transaction and/or the Master
Swap
Agreement and/or to obtain or re-establish any hedge or related trading
position in any manner and with any person the Bank in its absolute
discretion may determine and both the Bank’s and the Borrower’s continuing
obligations under any Transaction and/or Master Swap Agreement shall,
unless agreed otherwise by the Bank, be calculated so far as the
Bank
considers it practicable by reference to the amended repayment schedule
for the Loan taking into account the fact that less than the full
amount
of the Loan remains outstanding.
|
5.3.2 |
If
less than the full amount of the Loan remains outstanding, following
a
prepayment under this Agreement and the Bank in its absolute discretion
agrees, following a written request of the Borrower, that the Borrower
may
be permitted to maintain all or part of a Transaction in an amount
not
wholly matched with or linked to all or part of the Loan, the Borrower
shall within ten (10) days of being notified by the Bank of such
requirement, provide the Bank with, or procure the provision to the
Bank
of, such additional security as shall in the opinion of the Bank
be
adequate to secure the performance of such Transaction, which additional
security shall take such form, be constituted by such documentation
and be
entered into between such parties, as the Bank in its absolute discretion
may approve or require, and each document comprising such additional
security shall constitute a Credit Support
Document.
|
5.3.3 |
The
Borrower shall on the first written demand of the Bank indemnify
the Bank
in respect of all losses, costs and expenses (including, but not
limited
to, legal costs and expenses) incurred or sustained by the Bank as
a
consequence of or in relation to the effecting of any matter or
Transactions referred to in this clause
5.3.
|
5.3.4 |
Notwithstanding
any provision of the Master Swap Agreement to the contrary, if for
any
reason a Transaction has been entered into but the Loan is not drawn
down
under this Agreement then, subject to clause 5.3.5 the Bank shall
be
entitled but not obliged (and, where relevant, may do so without
the
consent of the Borrower where it would otherwise be required whether
under
the Master Swap Agreement or otherwise) to amend, re-book, supplement,
cancel, close out, net out, terminate, liquidate, transfer or assign
all
or any part of the rights, benefits and obligations created by such
Transaction and/or the Master Swap
|
5.3.5 |
If
a Transaction has been entered into but the Loan is not drawn down
under
this Agreement and the Bank in its absolute discretion agrees, following
a
written request of the Borrower, that the Borrower may be permitted
to
maintain all or part of a Transaction, the Borrower shall within
ten (10)
days of being notified by the Bank of such requirement, provide the
Bank
with, or procure the provision to the Bank of, such additional security
as
shall in the opinion of the Bank be adequate to secure the performance
of
such Transaction, which additional security shall take such form,
be
constituted by such documentation and be entered into between such
parties, as the Bank in its absolute discretion may approve or require,
and each document comprising such additional security shall constitute
a
Credit Support Document for the purposes of the Master Swap Agreement
and/or otherwise.
|
5.3.6 |
Without
prejudice to or limitation of the obligations of the Borrower under
clause
5.3.3, in the event that the Bank exercises any of its rights under
clauses 5.3.1, 5.3.2, 5.3.3 or 5.3.4 and such exercise results in
all or
part of a Transaction being terminated such Transaction or the part
thereof terminated (which shall for the purposes hereof be treated
as a
separate Transaction) in each case shall be treated under the Master
Swap
Agreement in the same manner as if it were a Terminated Transaction
(as
defined in Section 14 of the Master Swap Agreement) pursuant to an
Event
of Default (as so defined in that Section 14) by the Borrower and,
accordingly, the Bank shall be permitted to recover from the Borrower
a
payment for early termination calculated in accordance with the provisions
of section 6(e)(i) of the Master Swap Agreement in respect of such
Transaction.
|
5.4 |
Prepayment
on Total Loss
|
5.4.1 |
in
the case of an actual total loss of the Ship on the actual date and
at the
time the Ship was lost or, if such date is not known, on the date
on which
the Ship was last reported;
|
5.4.2 |
in
the case of a constructive total loss of the Ship, upon the date
and at
the time notice of abandonment of the Ship is given to the insurers
of the
Ship for the time being (provided a claim for total loss is admitted
by
such insurers) or, if such insurers do not forthwith admit such a
claim,
at the date and at the time at which either a total loss is subsequently
admitted by the insurers or a total loss is subsequently adjudged
by a
competent court of law or arbitration tribunal to have
occurred;
|
5.4.3 |
in
the case of a compromised or arranged total loss, on the date upon
which a
binding agreement as to such compromised or arranged total loss
has been
entered into by the insurers of the
Ship;
|
5.4.4 |
in
the case of Compulsory Acquisition, on the date upon which the relevant
requisition of title or other compulsory acquisition occurs;
and
|
5.4.5 |
in
the case of hijacking, theft, condemnation, capture, seizure, arrest,
detention or confiscation of the Ship (other than where the same
amounts
to Compulsory Acquisition of
|
5.5
|
Amounts
payable on prepayment
|
5.6 |
Notice
of prepayment; reduction of repayment
instalments
|
5.7 |
Currency
amounts repayable
|
5.8 |
Cash
Collateral Deposit
Prepayment
|
6
|
Commitment
commission, fees and
expenses
|
6.1 |
Fees
|
6.1.1 |
a
total fee of Thirty six thousand Dollars ($36,000) on the date of
this
Agreement; and
|
6.1.2 |
a
commitment commission computed (a) from 1 June 2006 until 23 November
2006
at the rate of 0.15% per annum on the amount of $27,000,000 and (b)
from
24 November 2006 until the earlier of (i) the Drawdown Date and (ii)
the
Termination Date at the rate of 0.15% per annum on the daily undrawn
amount of the Commitment and in each case payable
quarterly.
|
6.2 |
Expenses
|
6.2.1 |
in
connection with the negotiation, preparation, execution and, where
relevant, registration of the Security Documents and of any amendment
or
extension of or the granting of any waiver or consent under, any
of the
Security Documents (including, for the avoidance of doubt, the Master
Swap
Agreement); and
|
6.2.2 |
in
contemplation of, or otherwise in connection with, the enforcement
of, or
preservation of any rights under, any of the Security Documents
(including, for the avoidance of doubt, the Master Swap Agreement),
or
otherwise in respect of the moneys owing under any of the Security
Documents (including, for the avoidance of doubt, the Master Swap
Agreement), together with interest at the rate referred to in clause
3.4
from the date on which such expenses were incurred to the date of
payment
(as well after as before judgment).
|
6.3 |
Value
Added Tax
|
6.4 |
Stamp
and other duties
|
7
|
Payments
and taxes; accounts and
calculations
|
7.1 |
No
set-off or counterclaim
|
7.2 |
Payment
by the Bank
|
7.3 |
Non-Banking
Days
|
7.4 |
Calculations
|
7.5 |
Certificates
conclusive
|
7.6 |
Grossing-up
for Taxes
|
7.7 |
Loan
account
|
8
|
Representations
and warranties
|
8.1 |
Continuing
representations and
warranties
|
8.1.1 |
Due
incorporation
|
8.1.2 |
Corporate
power
|
8.1.3 |
Binding
obligations
|
8.1.4 |
No
conflict with other obligations
|
8.1.5 |
No
litigation
|
8.1.6 |
No
filings required
|
8.1.7 |
Choice
of law
|
8.1.8 |
No
immunity
|
8.1.9 |
Consents
obtained
|
8.2 |
Initial
representations and
warranties
|
8.2.1 |
Pari
passu
|
8.2.2 |
No
default under other Indebtedness
|
8.2.3 |
Information
|
8.2.4 |
No
withholding Taxes
|
8.2.5 |
No
Default
|
8.2.6 |
the
Ship
|
(a) |
in
the absolute ownership of the Borrower who will on and after the
Drawdown
Date be the sole, legal and beneficial owner of the
Ship;
|
(b) |
registered
in the name of the Borrower through the Registry as a ship under
the laws
and flag of the Flag State;
|
(c) |
operationally
seaworthy and in every way fit for service;
and
|
(d) |
classed
with the Classification free of all requirements and recommendations
of
the Classification Society;
|
8.2.7 |
Ship’s
employment
|
8.2.8 |
Freedom
from Encumbrances
|
8.2.9 |
Compliance
with Environmental Laws and
Approvals
|
(a) |
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have complied with
the
provisions of all Environmental
Laws;
|
(b) |
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have obtained all
Environmental Approvals and are in compliance with all such Environmental
Approvals; and
|
(c) |
neither
the Borrower nor to the best of the Borrower’s knowledge and belief
(having made due enquiry) any of its Environmental Affiliates has
received
notice of any Environmental Claim that the Borrower or any such
Environmental Affiliate is not in compliance with any Environmental
Law or
any Environmental Approval;
|
8.2.10 |
No
Environmental Claims
|
8.2.11 |
No
potential Environmental Claims
|
8.2.12 |
No
material adverse change
|
8.2.13 |
ISPS
Code
|
8.2.14 |
Copies
true and complete
|
8.3 |
Repetition
of representations and
warranties
|
9
|
Undertakings
|
9.1 |
General
|
9.1.1 |
Notice
of Default
|
9.1.2 |
Consents
and licences
|
9.1.3 |
Use
of proceeds
|
9.1.4 |
Pari
passu
|
9.1.5 |
Financial
statements
|
9.1.6 |
Delivery
of reports
|
9.1.7 |
Provision
of further information
|
9.1.8 |
Obligations
under Security Documents
|
9.1.9 |
Compliance
with Code
|
9.1.10 |
Withdrawal
of DOC and SMC
|
9.1.11 |
Issuance
of DOC and SMC
|
9.1.12 |
ISPS
Code compliance
|
(a) |
maintain
at all times a valid and current ISSC in respect of the
Ship;
|
(b) |
immediately
notify the Bank in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the ISSC in respect of
the
Ship; and
|
(c) |
procure
that the Ship will comply at all times with the ISPS
Code;
|
9.1.13 |
Employment
|
(a) |
advise
the Bank of any contract of employment for the Ship which is
of a duration
of more than twelve (12)
months;
|
(b) |
deliver
to the Bank a copy of any Charter entered
into;
|
(c) |
(1)
execute a Charter Assignment in respect of any Charter and (2)
execute any
notice of assignment required in connection therewith and promptly
procure
the acknowledgement of any such notice of assignment by the relevant
Charterer; and
|
(d) |
pay
all legal and other costs incurred by the Bank in connection with
any such
Charter Assignment;
|
9.1.14 |
Banking
operations
|
9.1.15 |
Know
your customer information
|
9.2 |
Security
value maintenance
|
9.2.1 |
Security
shortfall
|
(a) |
prepay
such sum in Dollars as will result in the Security Requirement
after such
prepayment (taking into account any other repayment of the Loan
made
between the date of the notice and the date of such prepayment)
being
equal to the Security Value;
or
|
(b) |
constitute
to the satisfaction of the Bank such further security for the Loan
as
shall be acceptable to the Bank having a value for security purposes
(as
determined by the Bank in its absolute discretion) at the date upon
which
such further security shall be constituted which, when added to the
Security Value, shall not be less than the Security Requirement as
at such
date.
|
9.2.2 |
Valuation
of Ship
|
9.2.3 |
Information
|
9.2.4 |
Costs
|
9.2.5 |
Valuation
of additional security
|
9.2.6 |
Documents
and evidence
|
9.2.7 |
Security
release
|
(a) |
at
any time during the period commencing on the date of this Agreement
and
ending on the Third Anniversary, exceeds one hundred and ten per
cent
(110%) of the aggregate of (i) the Loan (or the Equivalent Amount
in
Dollars when the Loan or part thereof is denominated in one or more
Optional Currencies) and (ii) the cost (if any) (as certified by
the Bank
whose certificate shall in the absence of manifest error, be binding
on
the Borrower) of terminating any Transaction entered into pursuant to the
Master Agreement; and
|
(b) |
at
any time after the Third Anniversary, exceeds one hundred and twenty
per
cent (120%) of the aggregate of (i) the Loan (or the Equivalent Amount
in
Dollars when the Loan or part thereof is denominated in one or more
Optional Currencies) and (ii) the cost (if any) (as certified by
the Bank
whose certificate shall in the absence of manifest error, be binding
on
the Borrower) of terminating any Transaction entered into pursuant
to the
Master Agreement,
|
9.3 |
Negative
undertakings
|
9.3.1 |
Negative
pledge
|
9.3.2 |
No
merger
|
9.3.3 |
Disposals
|
9.3.4 |
Other
business
|
9.3.5 |
Acquisitions
|
9.3.6 |
Other
obligations
|
9.3.7 |
No
borrowing
|
9.3.8 |
Repayment
of borrowings
|
9.3.9 |
Guarantees
|
9.3.10 |
Loans
|
9.3.11 |
Sureties
|
9.3.12 |
Share
capital and distribution
|
9.3.13 |
Shareholding
and structure
|
9.3.14 |
Subsidiaries
|
9.3.15 |
Manager
|
9.3.16 |
Constitutional
documents
|
9.4 |
Cash
Collateral Account Balance
|
10
|
Conditions
|
10.1 |
Documents
and evidence
|
10.1.1 |
the
Bank, or its duly authorised representative, shall have received,
not
later than two (2) Banking Days before the day on which the Drawdown
Notice is given, the documents and evidence specified in Part 1 of
schedule 2 in form and substance satisfactory to the Bank;
and
|
10.1.2 |
the
Bank, or its duly authorised representative, shall have received,
on or
prior to the Drawdown Date, the documents and evidence specified
in Part 2
of schedule 2 in form and substance satisfactory to the
Bank.
|
10.2 |
General
conditions precedent
|
10.2.1 |
the
representations and warranties contained in clauses 8.1 and 8.2 are
true
and correct on and as of each such time as if each was made with
respect
to the facts and circumstances existing at such time;
and
|
10.2.2 |
no
Default shall have occurred and be continuing or would result from
the
making of the Loan.
|
10.3 |
Waiver
of conditions precedent
|
10.4 |
Further
conditions precedent
|
11
|
Events
of Default
|
11.1 |
Events
|
11.1.1 |
Non-payment:
any Security Party fails to pay any sum payable by it under any of
the
Security Documents at the time, in the currency and in the manner
stipulated in the Security Documents (and so that, for this purpose,
sums
payable on demand shall be treated as having been paid at the stipulated
time if paid within three (3) Banking Days of demand);
or
|
11.1.2 |
Master
Swap Agreement:
(i)
an Event of Default or Potential Event of Default (in each case as
defined
in the Master Swap Agreement) has occurred and is continuing under
the
Master Swap Agreement or (ii) an Early Termination Date (as defined
in the
Master Swap Agreement) has occurred or been or become capable of
being
effectively designated under the Master Swap Agreement or (iii) a
person
entitled to do so gives notice of an Early Termination Date under
section
6(b)(iv) of the Master Swap Agreement or (iv) the Master Swap Agreement
is
terminated, cancelled, suspended, rescinded or revoked or otherwise
ceases
to remain in full force and effect for any reason;
or
|
11.1.3 |
Breach
of Insurance and certain other obligations:
the Borrower fails to obtain and/or maintain the Insurances (as defined
in, and in accordance with the requirements of, the Security Documents)
or
if any insurer in respect of such Insurances cancels the Insurances
or
disclaims liability by reason, in either case, of mis-statement in
any
proposal for the Insurances or for any other failure or default on
the
part of the Borrower or any other person or the Borrower commits
any
breach of or omits to observe any of the obligations or undertakings
expressed to be assumed by it under clauses 9.2, 9.3 or 9.4;
or
|
11.1.4 |
Breach
of other obligations:
any
Security Party commits any breach of or omits to observe any of
its
obligations or undertakings expressed to be assumed by it under
any of the
|
11.1.5 |
Misrepresentation:
any
representation or warranty made or deemed to be made or repeated
by or in
respect of any Security Party in or pursuant to any of the Security
Documents or in any notice, certificate or statement referred to
in or
delivered under any of the Security Documents is or proves to have
been
incorrect or misleading in any material respect;
or
|
11.1.6 |
Cross-default:
any
Indebtedness of the Borrower is not paid when due or any Indebtedness
of
the Borrower becomes (whether by declaration or automatically in
accordance with the relevant agreement or instrument constituting
the
same) due and payable prior to the date when it would otherwise have
become due (unless as a result of the exercise by the Borrower of
a
voluntary right of prepayment) or any creditor of the Borrower becomes
entitled to declare any such Indebtedness due and payable or any
facility
or commitment available to the Borrower relating to Indebtedness
is
withdrawn, suspended or cancelled by reason of any default (however
described) of the person concerned unless the Borrower shall have
satisfied the Bank that such withdrawal, suspension or cancellation
will
not affect or prejudice in any way the Borrower’s ability to pay its debts
as they fall due and fund its commitments, or any guarantee given
by any
Security Party in respect of Indebtedness is not honoured when due
and
called upon; or
|
11.1.7 |
Legal
process:
any
judgment or order made against the Borrower is not stayed or complied
with
within seven (7) days or a creditor attaches or takes possession
of, or a
distress, execution, sequestration or other process is levied or
enforced
upon or sued out against, any of the undertakings, assets, rights
or
revenues of the Borrower and is not discharged within seven (7) days;
or
|
11.1.8 |
Insolvency:
the
Borrower is unable or admits inability to pay its debts as they fall
due;
suspends making payments on any of its debts or announces an intention
to
do so; becomes insolvent; has assets the value of which is less than
the
value of its liabilities (taking into account contingent and prospective
liabilities); or suffers the declaration of a moratorium in respect
of any
of its Indebtedness; or
|
11.1.9 |
Reduction
or loss of capital:
a
meeting is convened by the Borrower for the purpose of passing any
resolution to purchase, reduce or redeem any of its share capital;
or
|
11.1.10 |
Winding
up:
any
corporate action, legal proceedings or other procedure or step is
taken
for the purpose of winding up or an order is made or resolution passed
for
the winding up of the Borrower or a notice is issued convening a
meeting
for the purpose of passing any such resolution;
or
|
11.1.11 |
Administration:
any
petition is presented, notice is given or other step is taken for
the
purpose of the appointment of an administrator of the Borrower or the Bank
believes that any such petition or other step is imminent or an
administration order is made in relation to the Borrower;
or
|
11.1.12 |
Appointment
of receivers and managers:
any
administrative or other receiver is appointed of the Borrower or
any part
of its assets and/or undertaking or any other steps are taken to
enforce
any Encumbrance over all or any part of the assets of the Borrower;
or
|
11.1.13 |
Compositions:
any
corporate action, legal proceedings or other procedures or steps
are
taken, or negotiations commenced, by the Borrower or by any of its
creditors with a view to
|
11.1.14 |
Analogous
proceedings:
there
occurs, in relation to the Borrower, in any country or territory
in which
it carries on business or to the jurisdiction of whose courts any
part of
its assets is subject, any event which, in the reasonable opinion
of the
Bank, appears in that country or territory to correspond with, or
have an
effect equivalent or similar to, any of those mentioned in clauses
11.1.7
to 11.1.13 (inclusive) or any Security Party otherwise becomes subject,
in
any such country or territory, to the operation of any law relating
to
insolvency, bankruptcy or liquidation;
or
|
11.1.15 |
Cessation
of business:
the
Borrower suspends or ceases or threatens to suspend or cease to carry
on
its business; or
|
11.1.16 |
Seizure:
all
or a material part of the undertaking, assets, rights or revenues
of, or
shares or other ownership interests in, the Borrower are seized,
nationalised, expropriated or compulsorily acquired by or under the
authority of any government; or
|
11.1.17 |
Invalidity:
any
of the Security Documents shall at any time and for any reason become
invalid or unenforceable or otherwise cease to remain in full force
and
effect, or if the validity or enforceability of any of the Security
Documents shall at any time and for any reason be contested by any
Security Party which is a party thereto, or if any such Security
Party
shall deny that it has any, or any further, liability thereunder;
or
|
11.1.18 |
Unlawfulness:
it
becomes impossible or unlawful at any time for any Security Party,
to
fulfil any of the covenants and obligations expressed to be assumed
by it
in any of the Security Documents or for the Bank to exercise the
rights or
any of them vested in it under any of the Security Documents or otherwise;
or
|
11.1.19 |
Repudiation:
any
Security Party repudiates any of the Security Documents or does or
causes
or permits to be done any act or thing evidencing an intention to
repudiate any of the Security Documents;
or
|
11.1.20 |
Encumbrances
enforceable:
any
Encumbrance (other than Permitted Liens) in respect of any of the
property
(or part thereof) which is the subject of any of the Security Documents
becomes enforceable; or
|
11.1.21 |
Material
adverse change:
there
occurs, in the opinion of the Bank, a material adverse change in
the
financial condition of the Borrower by reference to the financial
position
of the Borrower as described by the Borrower to the Bank in the
negotiation of this Agreement; or
|
11.1.22 |
Arrest:
the
Ship is arrested, confiscated, seized, taken in execution, impounded,
forfeited, detained in exercise or purported exercise of any possessory
lien or other claim or otherwise taken from the possession of the
Borrower
and the Borrower shall fail to procure the release of the Ship within
a
period of fourteen (14) days thereafter;
or
|
11.1.23 |
Registration:
the registration of the Ship under the laws and flag of the Flag
State is
canceled or terminated without the prior written consent of the Bank;
or
|
11.1.24 |
Unrest:
the Flag State becomes involved in hostilities or civil war or there
is a
seizure of power in the Flag State by unconstitutional means if,
in any
such case, such event could in the opinion of the Bank reasonably
be
expected to have a material adverse effect on the security constituted
by
any of the Security Documents; or
|
11.1.25 |
Environment:
the Borrower and/or any of its Environmental Affiliates fails to
comply
with any Environmental Law or any Environmental Approval or the Ship
is
involved in any incident which gives rise or may give rise to an
Environmental Claim if, in any such case, such non-compliance or
incident
or the consequences thereof could, in the opinion of the Bank, reasonably
be expected to have a material adverse effect on the business, assets,
operations, property or financial condition of the Borrower or any
other
Security Party or on the security constituted by any of the Security
Documents; or
|
11.1.26 |
P&I:
the Borrower or any other person fails or omits to comply with any
requirements of the protection and indemnity association or other
insurer
with which the Ship is entered for insurance or insured against protection
and indemnity risks (including oil pollution risks) to the effect
that any
cover (including, without limitation, any cover in respect of liability
for Environmental Claims arising in jurisdictions where the Ship
operates
or trades) is or may be liable to cancellation, qualification or
exclusion
at any time; or
|
11.1.27 |
Ownership:
there is any change in the ultimate ownership of the shares in the
Borrower or the Manager from that described to the Bank in the negotiation
of this Agreement; or
|
11.1.28 |
Material
events:
any other event occurs or circumstance arises which, in the opinion
of the
Bank, is likely materially and adversely to affect either (i) the
ability
of any Security Party to perform all or any of its obligations under
or
otherwise to comply with the terms of any of the Security Documents
(including, for the avoidance of doubt,) the Master Swap Agreement)
or
(ii) the security created by any of the Security
Documents.
|
11.2 |
Acceleration
|
11.2.1 |
the
obligation of the Bank to make the Commitment available shall be
terminated, whereupon the Commitment shall be reduced to zero forthwith;
and/or
|
11.2.2 |
the
Loan and all interest and commitment commission accrued and all other
sums
payable under the Security Documents have become due and payable,
whereupon the same shall, immediately or in accordance with the terms
of
such notice, become due and
payable.
|
11.3 |
Demand
basis
|
12
|
Indemnities
|
12.1 |
Miscellaneous
indemnities
|
12.1.1 |
any
default in payment by the Borrower of any sum under any of the Security
Documents when due;
|
12.1.2 |
the
occurrence of any other Event of
Default;
|
12.1.3 |
any
prepayment of the Loan or part thereof being made under clauses 5.3,
9.2
or 13.1, or any other repayment or prepayment of the Loan or part
thereof
being made otherwise than on an Interest Payment Date relating to
the part
of the Loan prepaid or repaid; or
|
12.1.4 |
the
Loan or part thereof not being made for any reason (excluding any
default
by the Bank) after the Drawdown Notice has been
given,
|
12.2 |
Currency
indemnity
|
12.3 |
Environmental
indemnity
|
13
|
Unlawfulness
and increased costs
|
13.1 |
Unlawfulness
|
13.2 |
Increased
costs
|
13.2.1 |
subject
the Bank to Taxes or change the basis of Taxation of the Bank with
respect
to any payment under any of the Security Documents (other than Taxes
or
Taxation on the overall net income, profits or gains of the Bank
imposed
in the jurisdiction in which its principal or lending office under
this
Agreement is located); and/or
|
13.2.2 |
increase
the cost to, or impose an additional cost on, the Bank or its holding
company in making or keeping the Commitment available or maintaining
or
funding all or part of the Loan;
and/or
|
13.2.3 |
reduce
the amount payable or the effective return to the Bank under any
of the
Security Documents; and/or
|
13.2.4 |
reduce
the Bank’s or its holding company’s rate of return on its overall capital
by reason of a change in the manner in which it is required to allocate
capital resources to the Bank’s obligations under any of the Security
Documents; and/or
|
13.2.5 |
require
the Bank or its holding company to make a payment or forego a return
on or
calculated by reference to any amount received or receivable by
the Bank
under any of the Security Documents;
and/or
|
13.2.6 |
require
the Bank or its holding company to incur or sustain a loss (including
a
loss of future potential profits) by reason of being obliged to deduct
all
or part of the Commitment or the Loan from its capital for regulatory
purposes,
|
(a) |
the
Bank shall notify the Borrower in writing of such event promptly
upon its
becoming aware of the same; and
|
(b) |
the
Borrower shall on demand pay to the Bank the amount which the Bank
specifies (in a certificate setting forth the basis of the computation
of
such amount but not including any matters which the Bank or its
holding
company regards as confidential) is required to compensate the
Bank and/or
(as the case may be) its holding company for such liability to
Taxes,
cost, reduction, payment, foregone return or
loss.
|
13.3 |
Exception
|
14
|
Security
and set-off
|
14.1 |
Application
of moneys
|
14.1.1 |
first
in or towards payment of all unpaid fees, commissions and expenses
which
may be owing to the Bank under any of the Security Documents (including,
for the avoidance of doubt, the Master Swap
Agreement);
|
14.1.2 |
secondly
in or towards payment of any arrears of interest owing in respect
of the
Loan or any part thereof;
|
14.1.3 |
thirdly
in or towards repayment of the Loan (whether the same is due and
payable
or not);
|
14.1.4 |
fourthly
in or towards payment to the Bank for any loss suffered by reason
of any
such payment in respect of principal not being effected on an Interest
Payment Date relating to the part of the Loan
repaid;
|
14.1.5 |
fifthly,
in or towards payment to the Bank of any sum owing to the Bank under
the
Master Swap Agreement;
|
14.1.6 |
sixthly
in or towards payment to the Bank of any other sums owing to it under
any
of the other Security Documents;
and
|
14.1.7 |
seventhly
the surplus (if any) shall be paid to the Borrower or to whomsoever
else
may be entitled to receive such
surplus.
|
14.2 |
Set-off
|
14.2.1 |
The
Borrower authorises the Bank (without prejudice to any of the Bank’s
rights at law, in equity or otherwise), at any time and without notice
to
the Borrower, to apply any credit balance to which the Borrower is
then
entitled standing upon any account of the Borrower with any branch
of the
Bank in or towards satisfaction of any sum due and payable from the
Borrower to the Bank under any of the Security Documents. For this
purpose, the Bank is authorised to purchase with the moneys standing
to
the credit of such account such other currencies as may be necessary
to
effect such application.
|
14.2.2 |
Without
prejudice to its rights hereunder and/or under the Master Swap
Agreement,
the Bank may at the same time as, or at any time after, any Default
under
this Agreement or the Borrower’s default under the Master Swap Agreement,
set-off any amount due now or in the future from the Borrower to
the Bank
under this Agreement against any amount due from the Bank to the
Borrower
under the Master Swap Agreement and apply the first amount in discharging
the second amount. The effect of any set-off under this clause
14.2.2
shall be effective to extinguish or, as the case may require, reduce
the
liabilities of the Bank under the Master Swap Agreement. The Bank
shall
not be obliged to exercise any right given to it by this clause
14.2. The
Bank shall notify the Borrower forthwith upon the exercise or purported
exercise of any right of set-off giving full details in relation
thereto.
|
14.3 |
Further
assurance
|
14.4 |
Conflicts
|
15
|
Accounts
|
15.1 |
General
|
15.1.1 |
The
Borrower undertakes with the Bank that it will procure that all moneys
payable to the Borrower in respect of the Earnings (as defined in
the
General Assignment) of the Ship shall, unless and until the Bank
directs
to the contrary pursuant to clause 2.1.1 of the General Assignment,
be
paid to the Operating Account; and
|
15.1.2 |
The
Borrower undertakes with the Bank that it will procure that the Manager
on
or before the Drawdown Date opens each of the
Accounts;
|
15.2 |
Charging
of Accounts
|
16
|
Assignment,
transfer and lending
office
|
16.1 |
Benefit
and burden
|
16.2 |
No
assignment by Borrower
|
16.3 |
Assignment
by Bank
|
16.4 |
Transfer
|
16.5 |
Documenting
assignments and transfers
|
16.6 |
Lending
office
|
16.7 |
Disclosure
of information
|
17
|
Notices
and other matters
|
17.1 |
Notices
|
17.1.1 |
be
in writing delivered personally or by first-class prepaid letter
(airmail
if available) or facsimile transmission or other means of
telecommunication in permanent written
form,
|
17.1.2 |
be
deemed to have been received, subject as otherwise provided in the
relevant Security Document, in the case of a letter, when delivered
personally or three (3) days after it has been put in to the post
and, in
the case of a facsimile transmission or other means of telecommunication
in permanent written form, at the time of despatch (provided that
if the
date of despatch is not a business day in the country of the addressee
or
if the time of despatch is after the close of business in the country
of
the addressee it shall be deemed to have been received at the opening
of
business on the next such business day);
and
|
17.1.3 |
be
sent:
|
(a) |
if
to the Borrower at:
|
(b) |
if
to the Bank at:
|
17.2 |
No
implied waivers, remedies
cumulative
|
17.3 |
English
language
|
18
|
Governing
law and jurisdiction
|
18.1 |
Law
|
18.2 |
Submission
to jurisdiction
|
18.3 |
Contracts
(Rights of Third Parties) Act
1999
|
To: |
Bayerische
Hypo- und Vereinsbank
Aktiengesellschaft
|
Dollar
Amount
|
Currency
in which Advance is
to
be outstanding
|
Interest
Period
|
Please
credit the funds to:
|
|||
[
l
]
|
(a)
|
no
event or circumstance has occurred and is continuing which constitutes
a
Default;
|
(b)
|
the
representations and warranties contained in clauses 8.1 and 8.2 of
the
Loan Agreement are true and correct at the date hereof as if made
with
respect to the facts and circumstances existing at such
date;
|
(c)
|
the
borrowing to be effected by the drawdown of the Loan will be within
our
corporate powers, has been validly authorised by appropriate corporate
action and will not cause any limit on our borrowings (whether imposed
by
statute, regulation, agreement or otherwise) to be
exceeded;
|
(d)
|
there
has been no material adverse change in our financial position from
that
described by us to the Bank in the negotiation of the Loan Agreement;
and
|
(e)
|
we
will use the proceeds of the Loan for our benefit and under our full
responsibility and exclusively for the purpose specified in the Loan
Agreement.
|
1
|
Ship
conditions
|
1.1 |
Registration
and Encumbrances
|
1.2 |
Classification
|
1.3 |
Insurance
|
2
|
Constitutional
documents
|
3
|
Corporate
authorisations
|
(i)
|
being
true and correct;
|
(ii)
|
being
duly passed at meetings of the directors of such Security Party and
of the
shareholders of such Security Party each duly convened and
held;
|
(iii)
|
not
having been amended, modified or revoked;
and
|
(iv)
|
being
in full force and effect,
|
4
|
Specimen
signatures
|
5
|
Certificate
of incumbency
|
6
|
Borrower’s
consents and approvals
|
7
|
Other
consents and approvals
|
8
|
Certified
Management Agreement
|
9
|
Valuation
|
10
|
Insurance
opinion
|
11
|
Accounts
|
12
|
Cash
Collateral Account
|
1
|
Security
Documents, letters and other
documents
|
2
|
Mortgage
registration
|
3
|
Notices
of assignment
|
4
|
Cyprus
opinion
|
5
|
Liberian
legal opinion
|
6
|
Greek
legal opinion
|
7
|
Further
opinions
|
8
|
Borrower’s
process agent
|
9
|
Manager’s
process agent
|
10
|
Registration
forms
|
11
|
Manager’s
confirmation
|
12
|
Application
for DOC and SMC
|
13
|
ISPS
Code
|
14
|
Fee
|
15
|
Due
Diligence
|
Dated
March
2007
|
PEMER
SHIPPING LTD
|
(1)
|
|
and
|
||
BAYERISCHE
HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT
|
(2)
|
MORTGAGE
AND DEED OF COVENANT
relating
to m.v.
Pedhoulas
Merchant
|
I.M.O.
No.
CALL
SIGN
|
Name
of Ship
|
Year
of Registry or Date of
Provisional
Registry/ Port of
Registry
|
||
9279800
C4JL2
|
Pedhoulas
Merchant
|
92/2006,
Limassol, Cyprus
|
||
Whether
a Sailing, Steam or
Motor
Ship
|
Horse
Power of Engines, if any
|
|||
Motor
Ship
|
9400
kw
|
Metres
|
|
Length
(Article 2(8))
|
222,55
|
Breadth
(Regulation 2(3))
|
32,26
|
Moulded
depth amidships to Upper Deck (Regulation 2(2))
|
20,03
|
Number
of Tons
|
|
Gross:
43151
|
Net:
27614
|
and
as described in more detail in the Certificate of the Surveyor and
the
Register Book.
|
SIGNED,
SEALED AND DELIVERED
|
)
|
|
as
a DEED
|
)
|
|
by
|
)
|
|
as
the duly authorised attorney-in-fact
|
)
|
|
of
|
)
|
|
PEMER
SHIPPING LTD
|
)
|
___________________________
|
pursuant
to a Power of Attorney
|
)
|
|
dated
|
)
|
|
in
the presence of:-
|
)
|
SIGNED,
SEALED AND DELIVERED
|
)
|
by
|
)
|
as
the duly authorised Attorney of
|
)
|
)
|
|
pursuant
to a Power of Attorney
|
)
|
dated
|
)
|
in
the presence of:-
|
)
|
THE
COMMON SEAL OF
|
)
|
|
)
|
||
was
hereunto affixed
|
)
|
|
in
the presence of:-
|
)
|
SIGNED,
SEALED AND DELIVERED
|
)
|
|
by
|
)
|
|
and
|
)
|
|
as
the duly authorised Attorney/
|
)
|
_________________________
|
Signatories
of
|
)
|
|
)
|
_________________________
|
|
pursuant
to a Power of Attorney/
|
)
|
|
Instruments
of Procuration dated
|
)
|
|
in
|
)
|
|
the
presence of:-
|
)
|
Dated
March
2007
|
PEMER
SHIPPING LTD
|
(1)
|
|
and
|
||
BAYERISCHE
HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT
|
(2)
|
MORTGAGE
AND DEED OF COVENANT
relating
to m.v.
Pedhoulas
Merchant
|
I.M.O.
No.
CALL
SIGN
|
Name
of Ship
|
Year
of Registry or Date of
Provisional
Registry/Port of
Registry
|
||
9279800
C4JL2
|
Pedhoulas
Merchant
|
92/2006,
Limassol, Cyprus
|
||
Whether
a Sailing, Steam or
Motor
Ship
|
Horse
Power of Engines,
if
any
|
|||
Motor
Ship
|
9400
kw
|
Metres
|
|
Length
(Article 2(8))
|
222,55
|
Breadth
(Regulation 2(3))
|
32,26
|
20,03
|
Number
of Tons
|
||
Gross:
43151
|
Net:
27614
|
|
and
as described in more detail in the Certificate of the Surveyor and
the
Register Book.
|
SIGNED,
SEALED AND DELIVERED
|
)
|
|
as
a
DEED
|
)
|
|
by
|
)
|
|
as
the duly authorised attorney-in-fact
|
)
|
|
of
|
)
|
|
PEMER
SHIPPING LTD
|
)
|
____________________________
|
pursuant
to a Power of Attorney
|
)
|
|
dated
|
)
|
|
in
the presence of:-
|
)
|
SIGNED,
SEALED AND DELIVERED
|
)
|
|
by
|
)
|
|
as
the duly authorised Attorney of
|
)
|
|
)
|
||
pursuant
to a Power of Attorney
|
)
|
|
dated
|
)
|
|
in
the presence of:-
|
)
|
THE
COMMON SEAL OF
|
)
|
|
)
|
||
was
hereunto affixed
|
)
|
|
in
the presence of:-
|
)
|
SIGNED,
SEALED AND DELIVERED
|
)
|
|
by
|
)
|
|
and
|
)
|
|
as
the duly authorised Attorney/
|
)
|
________________________
|
Signatories
of
|
)
|
|
)
|
________________________
|
|
pursuant
to a Power of Attorney/
|
)
|
|
Instruments
of Procuration dated
|
)
|
|
in
|
)
|
|
the
presence of:-
|
)
|
Clause
|
|
Page
|
1
|
Definitions
|
1
|
2
|
Representations
and warranties
|
5
|
3
|
Mortgage
of the Ship
|
6
|
4
|
Covenant
to pay
|
6
|
5
|
Continuing
security and other matters
|
6
|
6
|
Covenants
|
7
|
7
|
Powers
of Mortgagee to protect security and remedy defaults
|
15
|
8
|
Powers
of Mortgagee on Event of Default
|
16
|
9
|
Application
of moneys
|
18
|
10
|
Remedies
cumulative and other provisions
|
18
|
11
|
Costs
and indemnity
|
19
|
12
|
Attorney
|
19
|
13
|
Further
assurance
|
20
|
14
|
Notices
|
20
|
15
|
Counterparts
|
20
|
16
|
Severability
of provisions
|
20
|
17
|
Law,
jurisdiction and language
|
20
|
(1)
|
PEMER
SHIPPING LTD
whose
registered office is at 80 Broad Street, Monrovia, Republic of Liberia
(the “
Owner
”);
and
|
(2)
|
BAYERISCHE
HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT
whose
registered office is at Am Tucherpark 16, D-80538, Munich, Germany,
acting
for the purposes of this Deed through its office at 7 Heraklitou
Street,
106 73 Athens, Greece (the “
Mortgagee
”).
|
(A)
|
the
Owner is the sole, absolute and unencumbered, legal and beneficial
owner
of one hundred one hundredth (100/100th) shares in the Ship described
in
clause 1.2;
|
(B) |
by
a Loan Agreement
dated
March
2007 and made between (1) the Owner (therein referred to as the
“
Borrower
”)
and (2) the Mortgagee (therein referred to as the “
Bank
”),
the Mortgagee agreed (inter alia) to advance by way of a multicurrency
loan to the Owner, upon the terms and conditions therein contained,
a sum
of up to Thirty six million Dollars ($36,000,000) or the Equivalent
Amount
in an Optional Currency or Optional
Currencies;
|
(C)
|
by
a Master Swap Agreement
dated March
2007 and made between (1) the Owner and (2) the Mortgagee, the Mortgagee
agreed the terms and conditions upon which it would enter into an
interest
rate swap transaction or transactions with the Owner in respect of
the
Loan (whether in whole or in part as the case may be from time to
time);
|
(D)
|
the
Owner has executed in favour of the Mortgagee a statutory mortgage
of even
date herewith in account current form constituting a first priority
Cyprus
mortgage of one hundred one hundredth (100/100th) shares in the Ship;
and
|
(E)
|
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the Deed
of
Covenant referred to in the Loan Agreement but shall nonetheless
continue
in full force and effect notwithstanding any discharge of the
Mortgage.
|
1
|
Definitions
|
1.1 |
Defined
expressions
|
1.2 |
Definitions
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including, without limitation, Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee or any Receiver in connection with the exercise of
the
powers referred to in or granted by this Deed or otherwise payable
by the
Owner in accordance with clause 11;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee or any Receiver until the date of receipt or recovery
thereof (whether before or after judgment) at a rate per annum calculated
in accordance with clause 3.4 of the Loan Agreement (as conclusively
certified by the Mortgagee or such Receiver, as the case may
be);
|
(a)
|
the
Ship;
|
(b)
|
the
Insurances;
|
(c)
|
the
Earnings; and
|
(d)
|
any
Requisition Compensation;
|
(a)
|
the
actual, constructive, compromised or arranged total loss of the Ship;
or
|
(b)
|
the
Compulsory Acquisition of the Ship;
or
|
(c)
|
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Owner from such hijacking,
theft, condemnation, capture, seizure, arrest, detention or confiscation
within thirty (30) days after the occurrence thereof;
and
|
1.3 |
Insurance
terms
|
1.3.1 |
“
excess
risks
”
means the proportion (if any) of claims for general average, salvage
and
salvage charges and under the ordinary collision clause not recoverable
in
consequence of the value at which the Ship is assessed for the purpose
of
such claims exceeding her insured
value;
|
1.3.2 |
“
protection
and indemnity risks
”
means the usual risks (including oil pollution and freight, demurrage
and
defence cover) covered by a United Kingdom protection and indemnity
association or a protection and indemnity association which is managed
in
London (including, without limitation, 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 8 of the Institute Time Clauses Hulls)
(1/11/95) or the Institute Amended Running Down Clause (1/10/71)
or any
equivalent provision); and
|
1.3.3 |
“
war
risks
”
includes those risks covered by the standard form of English marine
policy
with Institute War and Strikes Clauses Hulls - (Time) (1/11/95) attached
or similar cover.
|
1.4 |
Construction
of Mortgage terms
|
1.4.1 |
references
to “interest” shall be construed as references to interest covenanted to
be paid in accordance with clause 4.1.2 and any interest specified
in
paragraph (b) of the definition of “Expenses” in clause
1.2;
|
1.4.2 |
references
to “principal” shall be construed as references to all moneys (other than
interest) for the time being comprised in the Outstanding
Indebtedness;
|
1.4.3 |
the
expression “all sums for the time being owing by the Mortgagor to the
Mortgagee” means the whole of the Outstanding Indebtedness;
and
|
1.4.4 |
the
expression “Account Current” means an account or accounts which shall be
kept by the Owner with the Mortgagee and from which the Mortgagee
may
(without giving notice or making any demand) debit any part of the
Outstanding Indebtedness.
|
1.5 |
Headings
|
1.6 |
Construction
of certain terms
|
1.6.1 |
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Deed and references to this Deed include its
schedules;
|
1.6.2 |
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.6.3 |
words
importing the plural shall include the singular and vice
versa;
|
1.6.4 |
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.6.5 |
references
to a “
guarantee
”
shall
include references to an indemnity or other assurance against financial
loss including, without limitation, an obligation to purchase assets
or
services as a consequence of a default by any other person to pay
any
Indebtedness and “
guaranteed
”
shall
be construed accordingly; and
|
1.6.6 |
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.7 |
Conflict
with Loan Agreement
|
2 |
Representations
and warranties
|
2.1 |
The
Owner hereby represents and warrants to the Mortgagee
that:
|
2.1.1 |
it
is the sole, absolute, legal and beneficial owner of the
Ship;
|
2.1.2 |
the
Ship is not subject to any charter which, if entered into after the
date
of this Deed, would have required the consent of the Mortgagee under
clause 6.1.15, and there is no existing or intended agreement or
arrangement whereby the Earnings may be shared with any person other
than
the Mortgagee as provided in the General
Assignment;
|
2.1.3 |
neither
the Mortgaged Property nor any part thereof is subject to any Encumbrance
save as constituted by the Mortgage and this Deed and the General
Assignment or otherwise permitted by the terms of this Deed;
and
|
2.1.4 |
it
has power and is entitled to register the Ship under the laws and
flag of
Cyprus.
|
3 |
Mortgage
of the Ship
|
4 |
Covenant
to pay
|
4.1
|
In
consideration of the advance by the Mortgagee to the Owner on or
before
the date hereof of the total principal sum of Thirty six million
Dollars
($36,000,000) or the Equivalent Amount in an Optional Currency or
Optional
Currencies (receipt of which sum the Owner hereby acknowledges) in
accordance with the provisions of the Loan Agreement, the Owner hereby
covenants with the Mortgagee:
|
4.1.1 |
to
repay the Loan by the instalments and on the dates referred to and
otherwise in the manner and upon the terms set out in the Loan
Agreement;
|
4.1.2 |
to
pay interest on the Loan, and on any overdue interest or other moneys
payable under the Loan Agreement, at the rate or rates from time
to time
applicable thereto in the manner and upon the terms set out in the
Loan
Agreement;
|
4.1.3 |
to
pay all other moneys payable by the Owner under the Security Documents
or
any of them at the times and in the manner therein specified;
and
|
4.1.4 |
to
pay and discharge to the Mortgagee the Master Swap Agreement Liabilities
on their due date.
|
5 |
Continuing
security and other matters
|
5.1 |
Continuing
Security
|
5.1.1 |
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance by the Owner with all of the covenants, terms and conditions
contained in the Security Documents to which the Owner is or is to
be a
party, express or implied and the security so created shall not be
satisfied by any intermediate payment or satisfaction of any part
of the
amount hereby and thereby secured (or by any settlement of accounts
between the Owner or any other person who may be liable to the Mortgagee
in respect of the Outstanding Indebtedness or any part thereof and
the
Mortgagee);
|
5.1.2 |
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any other of the Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
5.1.3 |
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming
|
5.2 |
Rights
additional
|
5.3 |
No
enquiry
|
5.4 |
Obligations
of Owner and Mortgagee
|
5.5 |
Discharge
of Mortgage
|
6 |
Covenants
|
6.1
|
The
Owner hereby covenants with the Mortgagee and undertakes throughout
the
Security Period:
|
6.1.1 |
Insurance
|
(a) |
Insured
risks, amounts and terms
|
(i) |
against
fire and usual marine risks (including excess risks) and war risks,
on an
agreed value basis, in such amounts (but not in any event less than
whichever shall be the greater of the market value of the Ship for
the
time being and One hundred and twenty per cent (120%) of the aggregate
of
(1) the Loan and (2) the Master Swap Agreement Liabilities) and upon
such
terms as shall from time to time be approved in writing by the Mortgagee;
and
|
(ii) |
against
protection and indemnity risks (including pollution risks for the
highest
amount in respect of which cover is or may become available for ships
of
the same type, size, age and flag as the Ship and a freight, demurrage
and
defence cover) for the full value and tonnage of the Ship (as approved
in
writing by the Mortgagee) and upon such terms as shall from time
to time
be approved in writing by the Mortgagee;
and
|
(iii) |
in
respect of such other matters of whatsoever nature and howsoever
arising
in respect of which insurance would be maintained by a prudent owner
of
the Ship;
|
(aa) |
any
mortgagee’s interest insurance which the Mortgagee may from time to time
effect in respect of the Ship upon such terms and in such amounts
(not
exceeding at any relevant time One hundred and ten per cent (110%)
of the
aggregate of (1) the Loan minus any sums standing to the credit of
the
Cash Collateral Account) and (2) the Master Swap Agreement Liabilities,
in
each case at such time) as it shall deem desirable;
and
|
(bb) |
any
other insurance cover which the Mortgagee may from time to time effect
in
respect of the Ship and/or in respect of its interest or potential
third
party liability as mortgagee of the Ship as the Mortgagee shall deem
desirable having regard to any limitations in respect of amount or
extent
of cover which may from time to time be applicable to any of the
other
insurances referred to in this clause
6.1.1.
|
(b) |
Approved
brokers, insurers and associations
|
(c) |
Fleet
liens, set-off and cancellation
|
(d) |
Payment
of premiums and calls
|
(e) |
Renewal
|
(f) |
Guarantees
|
(g) |
Hull
policy documents, notices, loss payable clauses and brokers’
undertakings
|
(h) |
Associations’
loss payable clauses, undertakings and
certificates
|
(i) |
Extent
of cover and exclusions
|
(j) |
Information
regarding insurances
|
(k) |
Independent
report
|
(l) |
Collection
of claims
|
(m) |
Employment
of Ship
|
(n) |
Application
of recoveries
|
(o) |
Assignment
of Insurances
|
6.1.2 |
Ship’s
name and registration
|
6.1.3 |
Repair
|
6.1.4 |
Modification;
removal of parts; equipment owned by third
parties
|
(a) |
make
any modification to the Ship in consequence of which her structure,
type
or performance characteristics could or might be materially altered
or her
value materially reduced; or
|
(b) |
remove
any material part of the Ship or any equipment the value of which
is such
that its removal from the Ship would materially reduce the value
of the
Ship without replacing the same with equivalent parts or equipment
which
are owned by the Owner free from Encumbrances;
or
|
(c) |
install
on the Ship any equipment owned by a third party which cannot be
removed
without causing damage to the structure or fabric of the
Ship;
|
6.1.5 |
Maintenance
of class; compliance with
regulations
|
6.1.6 |
Surveys
|
6.1.7 |
Inspection
|
6.1.8 |
Prevention
of and release from arrest
|
6.1.9 |
Employment
|
6.1.10 |
Trading
|
(a) |
advise
the Mortgagee of any contract of employment for the Ship which is
of a
duration of more than twelve (12)
months;
|
(b) |
deliver
to the Mortgagee a copy of any Charter entered
into;
|
(c) |
(1)
execute a Charter Assignment in respect of any Charter and (2) execute
any
notice of assignment required in connection therewith and promptly
procure
the acknowledgement of any such notice of assignment by the relevant
Charterer; and
|
(d) |
pay
all legal and other costs incurred by the Mortgagee in connection
with any
such Charter Assignment;
|
6.1.11 |
Notification
of certain events
|
(a) |
any
damage to the Ship requiring repairs the cost of which will or might
exceed the Casualty Amount;
|
(b) |
any
occurrence in consequence of which the Ship has or may become a Total
Loss;
|
(c) |
any
requisition of the Ship for hire;
|
(d) |
any
requirement or recommendation made by any insurer or the Classification
Society or by any competent authority which is not, or cannot be,
complied
with in accordance with its terms;
|
(e) |
any
arrest or detention of the Ship or any exercise or purported exercise
of a
lien or other claim on the Ship or the Earnings or Insurances or
any part
thereof;
|
(f) |
any
petition or notice of meeting to consider any resolution to wind
up the
Owner (or any event analogous thereto under the laws of the place
of its
incorporation);
|
(g) |
the
occurrence of any Default; or
|
(h) |
the
occurrence of any Environmental Claim against the Owner or the Ship
or any
incident, event or circumstances which may give rise to any such
Environmental Claim;
|
6.1.12 |
Payment
of outgoings and evidence of
payments
|
6.1.13 |
Encumbrances
|
6.1.14 |
Sale
or other disposal
|
6.1.15 |
Chartering
|
(a) |
on
demise charter for any period;
|
(b) |
on
terms whereby more than two (2) months’ hire (or the equivalent) is
payable in advance; or
|
(c) |
below
the market rate prevailing at the time when the Ship is fixed or
other
than on arms’ length terms;
|
6.1.16 |
Sharing
of Earnings
|
6.1.17 |
Payment
of Earnings
|
6.1.18 |
Repairers’
liens
|
6.1.19 |
Manager
|
6.1.20 |
Registration
of Mortgage
|
6.1.21 |
Notice
of Mortgage
|
6.1.22 |
Conveyance
on default
|
6.1.23 |
Anti-drug
abuse
|
6.1.24 |
Compliance
with Environmental Laws
|
6.1.25 |
Compliance
with Code
|
7
|
Powers
of Mortgagee to protect security and remedy
defaults
|
7.1
|
Protective
action
|
7.2
|
Remedy
of defaults
|
7.2.1 |
if
the Owner fails to comply with any of the provisions of clause 6.1.1
the
Mortgagee shall be entitled (but not bound) to effect and thereafter
to
maintain all such insurances upon the Ship as in its discretion it
may
think fit in order to procure the compliance with such provisions
or
alternatively, to require the Ship (at the Owner’s risk) to remain in, or
to proceed to and remain in a port designated by the Mortgagee until
such
provisions are fully complied with;
|
7.2.2 |
if
the Owner fails to comply with any of the provisions of clauses 6.1.3,
6.1.5 or 6.1.6, the Mortgagee shall be entitled (but not bound) to
arrange
for the carrying out of such repairs, changes or surveys as it may
deem
expedient or necessary in order to procure the compliance with such
provisions; and
|
7.2.3 |
if
the Owner fails to comply with any of the provisions of clause 6.1.8
the
Mortgagee shall be entitled (but not bound) to pay and discharge
all such
debts, damages, liabilities and outgoings as are therein mentioned
and/or
to take any such measures as it may deem expedient or necessary for
the
purpose of securing the release of the Ship in order to procure the
compliance with such provisions
|
8
|
Powers
of Mortgagee on Event of
Default
|
8.1
|
Powers
|
8.1.1 |
to
take possession of the Ship;
|
8.1.2 |
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
8.1.3 |
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of any other part of the Mortgaged Property, and to
take
over or institute (if necessary using the name of the Owner) all
such
proceedings in connection therewith as the Mortgagee in its absolute
discretion thinks fit, and, in the case of the Insurances, to permit
the
brokers through whom collection or recovery is effected to charge
the
usual brokerage therefor;
|
8.1.4 |
to
discharge, compound, release or compromise claims in respect of the
Ship
or any other part of the Mortgaged Property which have given or may
give
rise to any charge or lien or other claim on the Ship or any other
part of
the Mortgaged Property or which are or may be enforceable by proceedings
against the Ship or any other part of the Mortgaged
Property;
|
8.1.5 |
to
sell the Ship or any share or interest therein with or without prior
notice to the Owner, and with or without the benefit of any charterparty,
and free from any claim by the Owner (whether in admiralty, in equity,
at
law or by statute) by public auction or private contract, at such
place
and upon such terms as the Mortgagee in its absolute discretion may
determine, with power to postpone any such sale, or otherwise to
sell the
Ship pursuant to the Mortgagee’s statutory power of sale under section 35
of the Merchant Shipping (Registration of Ships Sales and Mortgages)
Law
of 1963 (as amended) and without being answerable for any loss
|
8.1.6 |
to
manage, insure, maintain and repair the Ship, and to employ, sail
or lay
up the Ship in such manner and for such period as the Mortgagee,
in its
absolute discretion, deems expedient accounting only for net profits
arising from any such employment;
and
|
8.1.7 |
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 8.1.
|
8.2
|
Receiver
|
8.2.1 |
Appointment
|
8.2.2 |
Remuneration
|
8.2.3 |
Liability
of mortgagee in possession
|
8.3
|
Dealings
with Mortgagee or Receiver
|
9
|
Application
of moneys
|
9.1
|
Application
|
9.2
|
Shortfalls
|
10
|
Remedies
cumulative and other
provisions
|
10.1
|
No
implied waivers; remedies
cumulative
|
10.2
|
Delegation
|
10.3
|
Incidental
powers
|
11
|
Costs
and indemnity
|
11.1
|
Costs
|
11.2
|
Mortgagee’s
and Receiver’s indemnity
|
12
|
Attorney
|
12.1
|
Power
|
12.2
|
Exercise
of power
|
12.3
|
Filings
|
13
|
Further
assurance
|
14
|
Notices
|
15
|
Counterparts
|
16
|
Severability
of provisions
|
17
|
Law,
jurisdiction and language
|
17.1
|
Law
|
17.2
|
Submission
to jurisdiction
|
EXECUTED
as a
DEED
|
)
|
|
by
|
)
|
|
for
and on behalf of
|
)
|
|
PEMER
SHIPPING LTD
|
)
|
|
pursuant
to a power of attorney
|
)
|
|
dated
|
)
|
_____________________
|
in
the presence of:
|
)
|
Attorney-in-Fact
|
EXECUTED
as a
DEED
|
)
|
|
by
|
)
|
_____________________
|
and
|
)
|
Authorised
signatory
|
by
|
)
|
|
for
and on behalf of
|
)
|
|
BAYERISCHE
HYPO- UND VEREINSBANK
|
)
|
_____________________
|
AKTIENGESELLSCHAFT
|
)
|
Authorised
signatory
|
in
the presence of:
|
)
|
Dated
March 2007
|
PEMER
SHIPPING LTD
|
(1)
|
|
and
|
||
BAYERISCHE
HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT
|
(2)
|
Clause
|
Page
|
|
1
|
Definitions
|
1
|
2
|
Assignment
and application of funds
|
4
|
3
|
Continuing
security and other matters
|
6
|
4
|
Powers
of Mortgagee to protect security and remedy defaults
|
7
|
5
|
Powers
of Mortgagee on Event of Default
|
8
|
6
|
Attorney
|
8
|
7
|
Further
assurance
|
9
|
8
|
Costs
and indemnities
|
9
|
9
|
Remedies
cumulative and other provisions
|
10
|
10
|
Notices
|
10
|
11
|
Counterparts
|
10
|
12
|
Law
and jurisdiction
|
10
|
Schedule
1 Forms of Loss Payable Clauses
|
12
|
|
Schedule
2 Form of Notice of Assignment of Insurances
|
13
|
(1)
|
PEMER
SHIPPING LTD
a
corporation incorporated in Liberia whose registered office is at
80 Broad
Street, Monrovia, Republic of Liberia (the “
Owner
”);
and
|
(2)
|
BAYERISCHE
HYPO -UND VEREINSBANK AKTIENGESELLSCHAFT
a
company incorporated in Germany whose registered office is at Am
Tucherpark 16, D-80538, Munich, Germany, acting for the purposes
of this
Deed through its office at 7 Heraklitou Street, 106 73 Athens, Greece
(the
“
Mortgagee
”).
|
(A)
|
by
an Agreement (the “
Loan
Agreement
”)
dated March
2007 and made between the Owner (1) (therein referred to as the
“Borrower”) and the Mortgagee (2) (therein referred to as the
“
Bank
”)
the Mortgagee agreed (inter alia) to advance by way of a multicurrency
loan to the Owner, upon the terms and conditions therein contained
the sum
of up to Thirty six million Dollars ($36,000,000) or the Equivalent
Amount
in an Optional Currency or Optional Currencies (the “
Loan
”);
|
(B) |
by
a Master Swap Agreement
dated
March
2007 and made between (1) the Owner and (2) the Mortgagee, the Mortgagee
agreed the terms and conditions upon which it would enter into an
interest
rate swap transaction or transactions with the Owner in respect of
the
Loan (whether in whole or in part as the case may be from time to
time);
|
(C)
|
pursuant
to the Loan Agreement there has been or will be executed by the Owner
in
favour of the Mortgagee a first priority Cyprus statutory ship mortgage
in
account current form and deed of covenant collateral thereto (together
the
“
Mortgage
”)
on the motor vessel
Pedhoulas
Merchant
documented
in the name of the Owner under the laws and flag of the Republic
of Cyprus
under IMO Number 9279800 (the “
Ship
”)
and the Mortgage of even date herewith has been or will be registered
in
the Registry of Cyprus Ships as security for the payment by the Owner
of
the Outstanding Indebtedness (as that expression is defined in the
Mortgage); and
|
(D)
|
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the General
Assignment referred to in the Loan Agreement but shall nonetheless
continue in full force and effect notwithstanding any discharge of
the
Mortgage.
|
1.
|
Definitions
|
1.1
|
Defined
expressions
|
1.2
|
Definitions
|
(a)
|
the
Earnings;
|
(b)
|
the
Insurances; and
|
(c)
|
any
Requisition Compensation;
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including without limitation Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee in connection with the exercise of the powers referred
to in
or granted by the Loan Agreement, the Mortgage, this Deed or any
other of
the Security Documents or otherwise payable by the Owner in accordance
with clause 11 of the Mortgage or clause 8;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee until the date of receipt or recovery thereof (whether
before or after judgment) at a rate per annum calculated in accordance
with clause 3.4 of the Loan Agreement (as conclusively certified
by the
Mortgagee);
|
1.3
|
Headings
|
1.4
|
Construction
of certain terms
|
1.4.1 |
references
to clauses and schedules are to be construed as references to clauses
of
and schedules to this Deed and references to this Deed include its
schedules;
|
1.4.2 |
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time
|
1.4.3 |
words
importing the plural shall include the singular and vice
versa;
|
1.4.4 |
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.5 |
references
to a “
guarantee
”
include references to an indemnity or other assurance against financial
loss including, without limitation, an obligation to purchase assets
or
services as a consequence of a default by any other person to pay
any
Indebtedness and “
guaranteed
”
shall be construed accordingly; and
|
1.4.6 |
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.5
|
Conflict
with Loan Agreement
|
2
|
Assignment
and application of funds
|
2.1
|
Assignment
|
2.1.1 |
Earnings
|
2.1.2 |
Insurances
|
(a) |
any
moneys payable under the Insurances, other than any moneys payable
under
any loss of earnings insurance, shall be payable in accordance with
the
terms of the relevant Loss Payable Clause and the Mortgagee will
not in
the meantime give any notification to the contrary to the insurers
as
contemplated by the Loss Payable
Clauses;
|
(b) |
any
insurance moneys received by the Mortgagee in respect of any major
casualty (as specified in the relevant Loss Payable Clause) shall,
unless
prior to receipt or whilst such moneys are in the hands of the Mortgagee
there shall have occurred a Default (whereupon such insurance monies
shall
be applied in accordance with
|
(c) |
any
moneys payable under any loss of earnings insurance shall be payable
in
accordance with the terms of the relevant Loss Payable Clause and
shall be
subject to such provisions of this clause 2 as shall apply to Earnings
and
the Mortgagee will not give any notification to the insurers as
contemplated in such Loss Payable Clause unless and until the Mortgagee
shall have become entitled under clause 2.1.1 to direct that the
Earnings
be paid to the Mortgagee.
|
2.2
|
Notice
|
2.3
|
Application
|
2.3.1 |
recovery
under the Insurances (other than under any loss of earnings insurance
and
any such sum or sums as may have been received by the Mortgagee
in
accordance with the relevant Loss Payable Clause in respect of
a major
casualty as therein defined and paid over to the Owner as provided
in
clause 2.1.2(b) or which fall to be otherwise applied under clause
2.6);
and
|
2.3.2 |
Requisition
Compensation
|
2.4
|
Shortfalls
|
2.5
|
Application
of Earnings received by
Mortgagee
|
2.5.1 |
if
received by the Mortgagee, or in the hands of the Mortgagee, prior
to the
occurrence of an Event of Default be retained by the Mortgagee and
shall
be paid over by the Mortgagee to the Owner at such times, in such
amounts
and for such purposes and/or shall be applied by the
|
2.5.2 |
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.5.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.6
|
Application
of Insurances received by
Mortgagee
|
2.6.1 |
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of a Default but prior to the occurrence of an Event of
Default, be retained by the Mortgagee and shall be paid over by the
Mortgagee to the Owner at such times, in such amounts and for such
purposes and/or shall be applied by the Mortgagee in or towards
satisfaction of any sums from time to time accruing due and payable
by the
Owner under the Security Documents or any of them or by virtue of
payment
demanded thereunder, in each case as the Mortgagee may in its absolute
discretion determine; and
|
2.6.2 |
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.6.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.7
|
Use
of Owner’s name
|
2.8
|
Reassignment
|
3
|
Continuing
security and other matters
|
3.1
|
Continuing
security
|
3.1.1 |
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance with all of the covenants, terms and conditions contained
in
the Security Documents, express or implied, and that the security
so
created shall not be satisfied by any intermediate payment or satisfaction
of any part of the amount hereby and thereby secured (or by any settlement
of accounts between the Owner or any other person who may be liable
to the
Mortgagee in respect of the Outstanding Indebtedness or any part
thereof
and the Mortgagee);
|
3.1.2 |
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any of the other Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
3.1.3 |
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
3.2
|
Rights
additional
|
3.3
|
No
enquiry
|
3.4
|
Obligations
of Owner and Mortgagee
|
3.5
|
Discharge
of Mortgage
|
4
|
Powers
of Mortgagee to protect security and remedy
defaults
|
4.1
|
Protective
action
|
4.2
|
Remedy
of defaults
|
5
|
Powers
of Mortgagee on Event of
Default
|
5.1
|
Powers
|
5.1.1 |
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
5.1.2 |
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of the Earnings or Requisition Compensation or any
part
thereof, and to take over or institute (if necessary using the name
of the
Owner) all such proceedings in connection therewith as the Mortgagee
in
its absolute discretion thinks fit, and, in the case of the Insurances,
to
permit any brokers through whom collection or recovery is effected
to
charge the usual brokerage
therefor;
|
5.1.3 |
to
discharge, compound, release or compromise claims in respect of the
Earnings, Insurances or Requisition Compensation or any part thereof
which
have given or may give rise to any charge or lien or other claim
on the
Earnings, Insurances or Requisition Compensation or any part thereof
or
which are or may be enforceable by proceedings against the Earnings,
Insurances or Requisition Compensation or any part thereof;
and
|
5.1.4 |
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 5.1.
|
6
|
Attorney
|
6.1
|
Appointment
|
6.2
|
Exercise
of power
|
6.3
|
Filings
|
7
|
Further
assurance
|
8
|
Costs
and indemnities
|
8.1
|
Costs
|
8.2
|
Mortgagee’s
indemnity
|
9
|
Remedies
cumulative and other
provisions
|
9.1
|
No
implied waivers; remedies
cumulative
|
9.2
|
Delegation
|
9.3
|
Incidental
powers
|
10
|
Notices
|
10.1
|
The
provisions of clause 17.1 of the Loan Agreement shall apply mutatis
mutandis in respect of any certificate, notice, demand or other
communication given or made under this Deed save that any references
in
clause 16.1 of the Loan Agreement to the “Borrower” and the “Bank” should
be read as referring to the Owner and the Mortgagee,
respectively.
|
11
|
Counterparts
|
11.1
|
This
Deed may be entered into in the form of two counterparts, each executed
by
one of the parties, and, provided both the parties shall so execute
this
Deed, each of the executed counterparts, when duly exchanged or delivered,
shall be deemed to be an original but, taken together, they shall
constitute one instrument.
|
12
|
Law
and jurisdiction
|
12.1
|
Law
|
12.2
|
Submission
to jurisdiction
|
12.3
|
Contracts
(Rights of Third Parties) Act
1999
|
1
|
Hull
and machinery (marine and war
risks)
|
(a)
|
all
claims hereunder in respect of an actual or constructive or compromised
or
arranged total loss, and all claims in respect of a major casualty
(that
is to say any casualty the claim in respect of which exceeds US$500,000
(or the equivalent in any other currency) inclusive of any deductible)
shall be paid in full to the Mortgagee or to its order;
and
|
(b)
|
all
other claims hereunder shall be paid in full to the Owner or to its
order,
unless and until the Mortgagee shall have notified the insurers hereunder
to the contrary, whereupon all such claims shall be paid to the Mortgagee
or to its order.
|
2
|
Protection
and indemnity risks
|
3
|
War
risks
|
3
|
Loss
of earnings
|
EXECUTED
as a DEED
|
)
|
|
by
|
)
|
|
for
and on behalf of
|
)
|
_________________________
|
PEMER
SHIPPING LTD
|
)
|
Attorney-in-Fact
|
in
the presence of:
|
)
|
EXECUTED
as a DEED
|
)
|
|
by
|
)
|
_________________________
|
and
by
|
)
|
Authorised
signatory
|
for
and on behalf of
|
)
|
|
BAYERISCHE
HYPO -UND VEREINSBANK
|
)
|
_________________________
|
AKTIENGESELLSCHAFT
|
)
|
Authorised
signatory
|
in
the presence of:
|
)
|
To:
|
Bayerische
Hypo- und Vereinsbank Aktiengesellschaft
|
7
Heraklitou Street
|
|
106
73 Athens
|
|
Greece
|
|
From:
|
Safety
Management Overseas S.A.
|
Edificio
Torre Universal
|
|
Piso
12 Avenida Federico Boyd
|
|
P.O.
Box 8807
|
|
Panama
City
|
|
Republic
of Panama
|
1
|
Loan
Agreement
|
2
|
Confirmation
of appointment
|
3
|
Representation
and warranty
|
3.1
|
We
hereby represent and warrant that the copy of the Management Agreement
set
out in Appendix 1 to this letter is a true and complete copy of the
Management Agreement, that the Management Agreement constitutes valid
and
binding obligations of the Manager enforceable in accordance with
its
terms and that there have been no amendments or variations thereto
or
defaults thereunder by the Manager or, to the best of the Manager’s
knowledge and belief, the Borrower.
|
3.2
|
We
hereby confirm that the representations and warranties set out in
clauses
8.2.9, 8.2.10 and 8.2.11 of the Loan Agreement are true and correct
in all
respects.
|
4
|
Undertakings
|
4.1
|
the
Manager will not agree or purport to agree to any amendment or variation
of the Management Agreement without the prior written consent of
the
Bank;
|
4.2
|
the
Manager will procure that any sub-manager appointed by it pursuant
to the
provisions of the Management Agreement will, on or before the date
of such
appointment enter into an undertaking in favour of the Bank in
substantially the same form
(mutatis
mutandis)
as
this Letter;
|
4.3
|
the
Manager will not, without the prior written consent of the Bank,
take any
action or institute any proceedings or make or assert any claim on
or in
respect of the Ship or its policies and contracts of insurance (which
expression includes all entries of the Ship in a protection and indemnity
or war risks association) which are from time to time during the
Security
Period (as such term is defined in the General Assignment) in place
or
taken out or entered into by or for the benefit of the Borrower (whether
in the sole name of the Borrower or in the joint names of the Borrower
and
the Bank or otherwise) in respect of the Ship and her Earnings (as
such
term is defined below) or otherwise howsoever in connection with
the Ship
and all benefits thereof (including claims of whatsoever nature and
return
of premiums) (together the “
Insurances
”)
or all moneys whatsoever from time to time due or payable to the
Borrower
during the Security Period (as such term is defined in the General
Assignment) arising out of the use or operation of the Ship including
(but
without limiting the generality of the foregoing) all freight, hire
and
passage moneys, income arising under pooling arrangements, 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 (the “
Earnings
”)
or any other property or other assets of the Borrower which the Bank
has
previously advised the Manager are subject to any Encumbrance or
right of
set-off in favour of the Bank by virtue of any of the security documents
executed in favour of the Bank pursuant to the Loan
Agreement;
|
4.4
|
the
Manager does hereby subordinate any claim that it may have against
the
Borrower or otherwise in respect of the Ship and its Earnings, Insurances
and Requisition Compensation (as such term is defined in the General
Assignment) to the claims of the Bank under the Loan Agreement and
the
other Security Documents (as such term is defined in the General
Assignment) and undertakes to exercise no right to which it may be
entitled in respect of the Borrower and/or the Ship and/or its Earnings
and/or Insurances and/or Requisition Compensation (as such term is
defined
in the General Assignment) in competition with the
Bank;
|
4.5
|
the
Manager will discontinue any such action or proceedings or claim
which may
have been taken, instituted or made or asserted, promptly upon notice
from
the Bank to do so;
|
4.6
|
the
Manager will promptly notify the Bank if at any time the amount owed
by
the Borrower to the Manager pursuant to the Management Agreement
(whether
in respect of the Manager’s remuneration or disbursements or otherwise)
exceeds US$100,000 or the equivalent in other currencies;
and
|
4.7
|
the
Manager will provide the Bank with such information concerning the
Ship as
the Bank may from time to time reasonably
require.
|
5
|
Insurance
assignment
|
5.1
|
By
way of security for the aggregate of the Loan and interest accrued
and
accruing thereon, the Expenses (as such term is defined in the General
Assignment) the Master Swap Agreement Liabilities (as such term is
defined
in the General Assignment) and all other sums of money from time
to time
owing by the Borrower to the Bank, whether actually or contingently,
under
the Security Documents (as such term is defined in the General Assignment)
or any of them to which the Borrower is or is to be a party (the
“
Outstanding
Indebtedness
”)
the Manager with full title guarantee hereby irrevocably and
unconditionally assigns and agrees to assign to the Bank all of the
Manager’s rights, title and interest in and to and the benefit of the
Insurances.
|
5.2
|
The
Manager hereby undertakes to procure that a duly completed notice
in the
form set out in Appendix 2 to this Letter is given to all insurers
of the
Ship and to procure that such notice is promptly endorsed on all
policies
and entries in respect of the Insurances and agrees promptly to authorise
and/or instruct any broker, insurer or association with or through
whom
Insurances may be effected to endorse on any policy or entry or otherwise
to give effect to such loss payable clause as may be stipulated by
the
Bank.
|
5.3
|
The
Bank shall, at the Manager’s cost, re-assign to the Manager all the
Manager’s right, title and interest in the Insurances upon the Outstanding
Indebtedness being discharged in full to the satisfaction of the
Bank.
|
5.4
|
Any
moneys in respect of the Insurances which would (but for the assignment
contained in clause 5.1 above) be payable to the Manager shall be
applied
in accordance with clause 2.3 of the General Assignment and/or (as
the
case may be) clause 2.6 of the General
Assignment.
|
6
|
Acknowledgement
|
7
|
Law
and jurisdiction
|
7.1
|
The
agreement constituted by this Letter shall be governed by and construed
in
accordance with English law.
|
7.2
|
The
Manager agrees, for the benefit of the Bank, that any legal action
or
proceedings arising out of or in connection with this letter against
the
Manager or any of its assets may be brought in the English courts.
The
Manager irrevocably and unconditionally submits to the jurisdiction
of
such courts and whoever irrevocably designates, appoints and empowers
Cheeswrights at present of 10 Philpot Lane, London EC3M 8BR, England,
receive for it and on its behalf, service of process issued out of
the
English courts in any such legal action or proceedings. The submission
to
such jurisdiction shall not (and shall not be construed so as to)
limit
the rights of the Bank to take any proceedings against the Manager
in the
courts of any other competent jurisdiction nor shall the taking of
proceedings in any one or more jurisdictions preclude the taking
of
proceedings in any other jurisdiction, whether concurrently or
not.
|
7.3
|
No
term of this Letter is enforceable under the Contracts (Rights of
Third
Parties) Act 1999 by a person who is not a party to this Letter or
to whom
this Letter is not addressed.
|
1. |
Interpretation
|
2. |
Obligations
|
(a) |
General
Conditions.
|
3. |
Representations
|
(a) |
Basic
Representations.
|
4. |
Agreements
|
5. |
Events
of Default and Termination
Events
|
6. |
Early
Termination
|
7. |
Transfer
|
8. |
Contractual
Currency
|
9. |
Miscellaneous
|
10. |
Offices;
Multibranch Parties
|
11. |
Expenses
|
12. |
Notices
|
13. |
Governing
Law and Jurisdiction
|
14. |
Definitions
|
By:
|
||
Name:
|
||
Title:
|
||
Date:
|
By:
|
By:
|
|||
Name:
|
Name: | |||
Title:
|
Title:
|
|||
Date
|
Date
|
(a) |
“
Specified
Entity
”
means in relation to Party A for the purpose
of:-
|
(b) |
“
Specified
Transaction
”
will have the meaning specified in Section 14 of this Agreement,
but shall
include payment obligations of Party B under any term loan or facility
agreement with Party A.
|
(c) |
The
“
Cross
Default
”
provisions of Section 5(a)(vi) will apply to Party A and will apply
to
Party B
.
|
(i)
|
in
relation to Party A, 3% of shareholders’ equity of Party A as reported in
its most recent audited financial statements or its equivalent in
any
other currency or currency unit or any combination thereof;
and
|
(ii)
|
in
relation to Party B, zero.
|
(d) |
The
“
Credit
Event Upon Merger
”
provision
of Section 5(b)(iv) will apply to Party A and will apply to Party
B.
|
(e) |
The
“
Automatic
Early Termination
”
provision
of Section 6(a) will apply to Party A and will apply to Party
B.
|
(f) |
Payments
on Early Termination.
For
the purpose of Section 6(e) of this
Agreement:-
|
(i)
|
Market
Quotation will apply. Notwithstanding the foregoing, Loss will apply
in
respect of FX Transactions, Currency Option Transactions and
FRAs.
|
(ii)
|
The
Second Method will apply.
|
(g) |
“
Termination
Currency
”
means:-
|
(i)
|
the
currency of a Terminated Transaction which is selected (A) by the
party
that is not the Defaulting Party, the Affected Party, or the Burdened
Party, as the case may be, or (B) in circumstances where there are
two
Affected Parties, by Party A in agreement with Party B;
or
|
(ii)
|
failing
such agreement or if any such currency determined in accordance with
(i)
above is not freely available,
Euro.
|
(h)
|
Additional
Termination Event
will
apply. Any repayment, prepayment or cancellation, howsoever described,
in
the Loan Agreement shall constitute an Additional Termination Event
for
the purpose of this Agreement. For the purpose of the foregoing,
the
Affected Party shall be Party B.
|
(a)
|
The
rights of the parties to terminate outstanding Transactions in accordance
with this Agreement will be limited to the amount of such repayment,
prepayment, or cancellation, or such other amount as may be prescribed
by
any applicable terms of the Loan Agreement (such amount, in each
case,
being referred to as the “Relevant
Amount”).
|
(b)
|
The
Relevant Amount will, for purposes of the calculation of any payment
to be
made under Section 6(e)(ii), be considered as the Notional Amount
of the
relevant Terminated Transaction.
|
(c)
|
With
effect from the Early Termination Date, the Notional Amount of the
relevant Transaction will be reduced by an amount equal to the Relevant
Amount.
|
(a)
|
Payer
Representations.
For
the purpose of Section 3(e) of this Agreement, Party A and Party
B will
make the following representation:-
|
(b)
|
Payee
Representations.
Not Applicable.
|
(a)
|
For
the purpose of Sections 4(a)(i) and (ii) of this Agreement, each
party
agrees to deliver, in addition to such documents mentioned in Sections
4(a)(i) and (ii), the following documents, as applicable:- Not
Applicable.
|
(b)
|
For
purposes of Section 3(d) other documents to be delivered by each
party
concurrently with the execution and delivery of this Agreement
are:-
|
Party
A:
|
Certified
copy of relevant pages of Signature List, Certificate of Incumbency
or
such other evidence, satisfactory to Party B, of the power of the
person(s) binding Party A to do so.
|
Party
B:
|
(1)
|
Certified
copy of relevant pages of Signature List, Certificate of Incumbency
or
such other evidence, satisfactory to Party A, of the power of the
person(s) binding Party B to do so;
|
(2)
|
Duly
executed Credit Support Documents;
|
(3)
|
Opinion
of Liberian counsel confirming Party B’s authority, power and capacity to
enter into this Agreement, such opinion to be in a form acceptable
to
Party A;
|
(4)
|
Process
Agent Appointment Letter and, when available, the written acceptance
of
such Process Agent; and
|
Party
B:
|
Upon
request the most recently published and audited financial reports
of the
parties.
|
(a) |
Addresses
for Notices.
For
the purpose of Section 12(a) of this
Agreement:-
|
Attention: |
George
Papadopoulos
|
Tel: | +30 210 895 7070 |
Telefax No: | +30 210 895 6900 |
(b)
|
Process
Agent.
For
the purpose of Section 13(c) of this
Agreement:-
|
(c)
|
Offices.
The
provisions of Section 10(a) will apply to this
Agreement.
|
(d)
|
Multibranch
Party.
For
the purpose of Section 10(c) of this
Agreement:-
|
(e)
|
Calculation
Agent.
The
Calculation Agent is Party A.
|
(f)
|
Credit
Support Document.
Details
of any Credit Support Document:-
|
(g)
|
Credit
Support Provider.
Credit
Support Provider means in relation to Party A: Not
Applicable
|
(h)
|
Governing
Law.
This
Agreement will be governed by and construed in accordance with English
law.
|
(i)
|
Netting
of Payments.
Subparagraph
(ii) of Section 2(c) of this Agreement will apply to all
Transactions.
|
(j)
|
“
Affiliate
”
will
have the meaning specified in Section 14. For the purpose of Section
3(c)
“Affiliate” shall mean in relation to Party A any Bank Affiliate. “Bank
Affiliate” means any bank controlled, directly or indirectly, by Party A.
For this purpose “control” of any bank means ownership of a majority of
the voting power of the bank, and a “bank” means any entity, which is
recognised as a bank by the jurisdiction of its
incorporation.
|
1.
|
Incorporation
by reference.
Reference
is made to the 2000 ISDA Definitions, as published by the International
Swap and Derivatives Association, Inc. as amended and restated from
time
to time, which are hereby incorporated by reference. In the event
of an
inconsistency between the provisions of this Agreement and the ISDA
Definitions, this Agreement shall
prevail.
|
2.
|
Scope
of Agreement.
Notwithstanding
anything contained in this Agreement to the contrary, any transaction
which may otherwise constitute a “Specified Transaction” for purposes of
this Agreement which has been or will be entered into between the
parties
shall constitute a “Transaction” which is subject to, governed by, and
construed in accordance with the terms of this Agreement, except
when the
parties expressly agree that this provision will not
apply.
|
3.
|
Affected
Parties in Termination Events.
For
purposes of Section 6(e) (Payments on Early Termination), both parties
shall be deemed to be Affected Parties in connection with any Illegality
or Tax Event, so that payments in connection with early termination
shall
be calculated as provided in Section
6(e)(ii).
|
4.
|
Other
Defaults
|
5.
|
Deferral
of Payments in Connection with Illegality.
If
a party gives a notice of Illegality, the due date for any payment
scheduled to be made by either party pursuant to Section 2 in connection
with any Affected Transaction at any time after that notice is effective
shall be deferred to the earliest to occur of (i) the date for settlement
payments pursuant to Section 6(e) in connection with an Early Termination
Date, (ii) the final Scheduled Payment Date for the Affected Transactions
and (iii) the date on which arrangements made pursuant to Section
6(b)(ii)
to avoid the Illegality are effected. Any payments deferred pursuant
to
this provision shall be made on the deferred payment date together
with
interest accrued on each deferred amount from and including its originally
scheduled due date to but excluding the deferred due date (or, if
an Early
Termination Date is designated, to but excluding the day it is designated)
at the Non-default Rate.
|
6.
|
Recording
of Conversations.
Each
party to this Agreement acknowledges and agrees to the tape recording
of
conversations of the trading personnel of the parties in connection
with
this Agreement.
|
7.
|
Indemnification.
If
an Early Termination Date shall be deemed to have occurred under
Section 6(a) the Defaulting Party hereby agrees to indemnify the
Non-defaulting Party on demand against all loss or damage the
Non-defaulting Party may sustain or incur in respect of each Transaction
as a result of movements in exchange rates and Market Quotations
between
the Early Termination Date and the date (“the Determination Date”) upon
which the Non-defaulting Party first becomes aware that the Early
Termination Date has been deemed to have occurred under Section
6(a).
|
8.
|
Relationship
Between Parties.
Each
party will be deemed to represent to the other party on the date
on which
it enters into a Transaction that (absent a written agreement between
the
parties that expressly imposes affirmative obligations to the contrary
for
that Transaction):-
|
(a)
|
Non-Reliance.
It
is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that
Transaction is appropriate or proper for it based upon its own judgment
and upon advice from such advisers as it has deemed necessary. It
is not
relying on any communication (written or oral) of the other party
as
investment advice or as a recommendation to enter into that Transaction;
it being understood that information and explanations related to
the terms
and conditions of a Transaction shall not be considered investment
advice
or a recommendation to enter into that Transaction. No communication
(written or oral) received from the other party shall be deemed to
be an
assurance or guarantee as to the expected results of that
Transaction.
|
(b)
|
Assessment
and Understanding.
It
is capable of assessing the merits of and understanding (on its own
behalf
or through independent professional advice), and understands and
accepts,
the terms, conditions and risks of that Transaction. It is also capable
of
assuming, and assumes, the risks of that
Transaction.
|
(c)
|
Status
of Parties.
The
other party is not acting as a fiduciary for or an adviser to it
in
respect of that Transaction.
|
9.
|
Subordination.
The
Borrower agrees that it shall not prove or claim for such an amount
in any
liquidation, administration, arrangement or similar procedure involving
any other Security Party.
|
10.
|
Third
Party Rights.
Nothing
in this Agreement is intended to confer on any person any right to
enforce
any term which that person would not have but for the Contracts (Rights
of
Third Parties) Act 1999.
|
11.
|
Hedging.
Each
party acknowledges and agrees that no Transaction may be entered
into
under this Agreement other than for the purpose of hedging the interest
risk associated with the Loan
Agreement.
|
12.
|
Escrow.
If,
whether by reason of the time difference between the cities in which
payments are to be made or otherwise, it is not possible for simultaneous
payments to be made on any date on which both parties are required
to make
payments hereunder, either party may at its option and in its sole
discretion notify the other party that payments on that date are
to be
made in escrow. In this case deposit of the payment due earlier on
that
date shall be made by 2:00 p.m. (local time at the place for the
earlier
payment) on that date with an escrow agent selected by the party
giving
the notice, accompanied by irrevocable payment instructions (i) to
release
the deposited payment to the intended recipient upon receipt by the
escrow
agent of the required deposit of the corresponding payment from the
other
party on the same date accompanied by irrevocable payment instructions
to
the same effect or (ii) if the required deposit of the corresponding
payment is not made on that same date, to return the payment deposited
to
the party that paid it into escrow.
|
13.
|
Pari
Passu.
Party
B agrees that at all times its obligations under any Transactions
shall
rank at least pari passu in right of payment and security with all
of
Party B’s Specified Indebtedness other than Specified Indebtedness
preferred by law. In addition, in the event Party B has pledged,
or at any
time hereafter does pledge, collateral as security for any of its
outstanding Specified Indebtedness, then Party B’s obligations to Party A
under any Transaction shall be secured on a pari passu basis with
such
Specified Indebtedness.
|
1. | (a) |
Reference
is made to the 1998 FX and Currency Option Definitions as published
by the
International Swaps and Derivatives Association, Inc., the Emerging
Markets Traders Association and The Foreign Exchange Committee and
as
amended from time to time (the “
FX and Currency Option
Definitions
”), which are hereby incorporated by reference with
respect to “
FX Transactions
”
and
“
Currency Option Transactions
” as defined by the
FX and Currency Option Definitions, except as specifically provided
herein
or in the relevant Confirmation.
|
(b)
|
Confirmations.
Any
FX and Currency Option Transaction into which the parties have or
may
enter will be governed by this Agreement in all circumstances except
when
the parties expressly agree that this provision will not apply. Each
such
transaction will be deemed to be a “
Transaction
”
and each confirmation or other confirming evidence will be deemed
to
constitute a “
Confirmation
”
for the purpose of this Agreement, even where not so specified in
the
confirmation or other confirming evidence for such
transaction.
|
2. |
Payment
of Premium
|
(a)
|
Unless
otherwise agreed in writing by the parties, the Premium related to
a
Currency Option Transaction shall be paid on its Premium Payment
Date in
immediately available funds.
|
(b)
|
If
any Premium is not received on the Premium Payment Date, the Seller
may
elect: (i) to accept a late payment of such Premium; (ii) to give
written
notice of such non-payment and, if such payment shall not be received
within three (3) Local Business Days of such notice, treat the related
Currency Option Transaction as void; or (iii) to give written notice
of
such non-payment and, if such payment shall not be received within
three
(3) Local Business Days of such notice, treat such non-payment as
an Event
of Default under Section 5(a)(i) of this Agreement. If the Seller
elects
to act under either clause (i) or (ii) of the preceding sentence,
the
Buyer shall pay all out-of-pocket costs and actual damages incurred
in
connection with such unpaid or late Premium or void Currency Option
Transaction, including, without limitation, interest on such Premium
from
and including the Premium Payment Date to but excluding the late
payment
date in the same currency as such Premium at overnight LIBOR and
any other
losses, costs or expenses incurred by the Seller in connection with
such
terminated Currency Option Transaction, for the loss of its bargain,
its
cost of funding, or the loss incurred as a result of terminating,
liquidating, obtaining or re-establishing a delta hedge or related
trading
position with respect to such Currency Option
Transaction.
|
3.
|
Payment
Instructions.
All
payments made hereunder in respect of FX Transactions and Currency
Option
Transactions shall be made in accordance with the standing payment
instructions provided by the parties (or as otherwise specified in
the
relevant Confirmation).
|
1. |
FRABBA
Transactions.
|
2. |
For
the avoidance of doubt:
|
(a)
|
the
term “BBA Interest Settlement Rate” as used in the FRABBA Terms or the
term “Settlement Rate” shall be understood to read “Floating Rate” as
determined by the relevant Floating Rate Option as defined in the
ISDA
Definitions;
|
(b)
|
the
terms “Contract Currency” and “FRABBA Currencies” as used in the FRABBA
Terms shall be deemed to include all Currencies as defined in the
ISDA
Definitions;
|
(c)
|
the
term “Fixing Date” as defined in the FRABBA Terms shall be determined
according to the relevant Floating Rate Option as defined in the
ISDA
Definitions; and
|
(d)
|
the
FRABBA Terms outlined in Part 7(1) above which are stated to be
incorporated by reference in this Agreement shall be incorporated
mutatis
mutandis
as
though such terms were expressed in ISDA terminology as used in the
ISDA
Definitions and in this Agreement.
|
Signature
|
|
Signature
|
|
|
Name:
|
|
Name:
|
|
|
Title:
|
|
Title:
|
|
|
Date:
|
|
Date:
|
|
Signature
|
|
||
Name:
|
|
||
Title:
|
|
||
Date:
|
|
Dated
2007
|
PEMER
SHIPPING LTD
|
(1)
|
|
and
|
||
BAYERISCHE
HYPO
-UND VEREINSBANK AKTIENGESELLSCHAFT
|
(2)
|
Clause
|
Page
|
|
1
|
Definitions
|
1
|
2
|
Restrictions
|
2
|
3
|
First
fixed charge
|
3
|
4
|
Further
documentation etc
|
3
|
5
|
Representations
|
4
|
6
|
Notices
|
4
|
7
|
Supplemental
|
4
|
8
|
Law
and jurisdiction
|
5
|
(1)
|
PEMER
SHIPPING LTD,
a
corporation incorporated in the Republic of Liberia having its registered
office at 80 Broad Street, Monrovia, Liberia (the “
Owner
”);
and
|
(2)
|
BAYERISCHE
HYPO -UND VEREINSBANK AKTIENGESELLSCHAFT,
a
company incorporated in Germany whose registered office is at Am
Tucherpark 16, D-80538 Munich, Germany, acting for the purposes of
this
Deed through its office at 7 Heraklitou Street, 106 73 Athens, Greece
(the
“
Bank
”).
|
(A)
|
By
a loan agreement dated March 2007 and
made between (i) the Owner as borrower and (ii) the Bank as lender
(the
“
Loan
Agreement
”),
the Bank agreed to make available to the Owner upon the terms and
conditions therein described a multicurrency loan of up to Thirty
six
million Dollars ($36,000,000) or the Equivalent Amount in an Optional
Currency or Optional Currencies;
|
(B)
|
The
Owner has entered into or may enter into one or more Transactions
(as such
term is defined in the 1992 ISDA Master Agreement dated
March 2007 between the Owner and the
Bank (the “
Master
Swap Agreement
”))
as evidenced by one or more Confirmations (as such term is defined
in the
Master Swap Agreement) which are governed by the Master Agreement;
and
|
(C)
|
It
is a condition precedent to the Bank advancing the loan under the
Loan
Agreement that the Owner as security for, inter alia, its obligations
under the Loan Agreement shall execute this
Deed.
|
1 |
Definitions
|
1.1
|
In
this Deed, unless the context otherwise requires, the following
expressions shall have the following
meanings:
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature suffered, incurred or paid by the Bank in connection
with
the exercise of the powers referred to in or granted by the Loan
Agreement, the Master Swap Agreement, this Deed or any of the other
Security Documents or otherwise payable by the Owner;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Bank until the date of receipt or recovery thereof (whether
before
or after judgment) at a rate per annum calculated in accordance with
clause 3.4 of the Loan Agreement (as conclusively certified by the
Bank);
|
1.2
|
For
the purposes of this Deed an amount shall be deemed to be outstanding
and
to be due and payable to the Bank if the Bank is then entitled to
demand
payment of that amount, notwithstanding that it has not yet served
a
demand.
|
1.3
|
Clause
1.1 (Purpose) and clause 1.2 (Definitions) of the Loan Agreement
shall
apply with any necessary modifications for the purposes of this
Deed.
|
2 |
Restrictions
|
2.1
|
In
this clause references to assignment includes the creation, or permitting
to arise, of any form of beneficial interest or Security Interest
and
every other kind of disposition.
|
2.2
|
An
act or transaction which is contrary to, or inconsistent with, this
clause
shall be void as regards the Bank.
|
3 |
First
fixed charge
|
3.1
|
The
Owner with full title guarantee, hereby charges and agrees to charge
and
releases and agrees to release
.
to
the Bank as a continuing security for payment of the Outstanding
Indebtedness, by way of first fixed charge, the Secured
Property.
|
3.2
|
Upon
the occurrence of a Default the charge shall become enforceable and
the
Bank shall be entitled then or at any later time or times to appropriate
all or any part of the Secured Property in or towards discharge of
the
then Outstanding Indebtedness or any part thereof, and may do so
notwithstanding that any maturity date attached to any part or parts
of
the Secured Property may not yet have
arrived.
|
3.3
|
A
certificate signed by a director or other senior officer of the Bank
and
which states that on a specified date and (if the certificate also
states
this) at a specified time the Bank exercised its rights under this
clause
to appropriate a specified amount of Secured Property in the discharge
of
a specified amount of the Outstanding Indebtedness shall be conclusive
evidence that:
|
3.3.1 |
the
Bank’s liabilities in respect of the specified amount of Secured Property;
and
|
3.3.2 |
the
specified amount of Outstanding Indebtedness,
|
4
|
Further
documentation etc.
|
4.1
|
The
Owner shall execute forthwith any document which the Bank may specify
for
the purpose of:
|
4.1.1 |
supplementing
the rights which this Deed confers on the Bank in relation to the
Secured
Property; or
|
4.1.2 |
creating
a mortgage of the Secured Property to replace or supplement the charge
created in clause 3 above; or
|
4.1.3 |
registering
or otherwise perfecting this Deed or any mortgage created under clause
4.1.2 above; or
|
4.1.4 |
ensuring
or confirming the validity of anything done or to be done under this
Deed.
|
4.2
|
Any
such document shall be in the terms specified by the Bank and, in
the case
of a mortgage of the Secured Property, those terms may include a
provision
entitling the Bank, on or after a Default, to appropriate, or otherwise
deal with, the Secured Property for the purpose of discharging the
Outstanding Indebtedness.
|
4.3
|
The
Owner shall also forthwith do any act and execute any document (including
a document which amends or replaces this Deed) which the Bank specifies
for the purpose of enabling or assisting the Bank to comply, in relation
to the Secured Property and/or the Outstanding Indebtedness, with
any
requirement (legally binding or not) applicable to the Bank and,
in
particular, the requirements of any banking supervisory authority
with
regard to netting of cash
collateral.
|
4.4
|
For
the purpose of securing performance of the Owner’s obligations under
clauses 4.1 to 4.3, the Owner irrevocably appoints the Bank as its
attorney, on its behalf and in its name or otherwise to sign or execute
any document which, in the opinion of the Bank, the Owner is obliged,
or
could be required, to sign or execute under any of the said clauses,
which
the Bank considers necessary
|
4.5
|
The
Bank may appoint any person or persons as its substitute under that
power
of attorney referred to in clause 4.4 and may also delegate that
power of
attorney to any person or persons.
|
5 |
Representations
|
5.1
|
The
Owner represents and warrants to the Bank as
follows:
|
5.1.1 |
the
Owner is the sole legal and beneficial owner of the Secured Property
and
has good marketable title to it;
|
5.1.2 |
no
third party has or will have any interest, right or claim of any
kind in
relation to any of the Secured
Property;
|
5.1.3 |
the
Owner has the corporate power, and has taken all necessary corporate
action to authorise the execution of this Deed, the Loan Agreement
and the
Master Swap Agreement; and
|
5.1.4 |
nothing
in this Deed will or might result in the Owner contravening any law
or
regulation which is now in force or which has been published but
not yet
brought into force or any contractual or other obligation which the
Owner
now has to a third party.
|
6 |
Notices
|
6.1
|
Clause
17 (Notices and other matters) of the Loan Agreement will apply to
this
Deed mutatis mutandis as if references to the Loan Agreement were
references to this Deed save that references therein to the “Borrower”
shall be construed as references to the
Owner.
|
7
|
Supplemental
|
7.1
|
This
Deed, including the charge created by clause 3, shall remain in force
as a
continuing security until the Security Period has
ended.
|
7.2
|
The
rights of the Bank under this Deed will not be discharged or prejudiced
by:
|
7.2.1 |
any
kind of amendment or supplement to the other Security
Documents;
|
7.2.2 |
any
arrangement or concession, including a rescheduling, which the Bank
may
make in relation to any of the Loan Agreement, the Master Swap Agreement
and the other Security Documents, or any action by the Bank and/or
the
Owner and/or any other party thereto which is contrary to the terms
of the
Loan Agreement, the Master Swap Agreement and the other Security
Documents;
|
7.2.3 |
any
release or discharge, whether granted by the Bank or effected by
the
operation of any law, of all or any of the obligations of the Owner
and/or
any other party thereto under any of the Loan Agreement, the Master
Swap
Agreement and the other Security
Documents;
|
7.2.4 |
any
change in the ownership and/or control of the Owner and/or any other
party
thereto and/or merger, demerger or reorganisation involving the Owner
and/or any other party thereto;
|
7.2.5 |
any
event or matter which is similar to, or connected with, any of the
foregoing;
|
7.3
|
Nothing
in this Deed excludes or restricts any right of counterclaim, set-off,
right to net payments, or any other right or remedy which the Bank
would
have had other than under the general law, the Loan Agreement, the Master
Swap Agreement and the other Security
Documents.
|
8 |
Law
and jurisdiction
|
8.1 |
Law
|
8.2
|
Submission
to jurisdiction
|
8.3
|
Contracts
(Rights of Third Parties) Act
1999
|
EXECUTED
as a DEED
|
)
|
by
|
)
|
the
duly authorised attorney of
|
)
|
PEMER
SHIPPING LTD
|
)
|
for
it and on its behalf
|
)
|
in
the presence of:
|
)
|
)
|
|
by
|
)
|
and
|
)
|
by
|
)
|
the
duly authorised signatories of
|
)
|
BAYERISCHE
HYPO -UND VEREINSBANK AKTIENGESELLSCHAFT
|
)
|
for
it and on its behalf
|
)
|
)
|
1
|
The
Additional Cost is an addition to the interest rate to compensate
the Bank
for the cost of compliance with (a) the requirements of the Bank
of
England and/or the Financial Services Authority (or, in either case,
any
other authority which replaces all or any of its functions) or (b)
the
requirements of the European Central
Bank.
|
2
|
On,
or as soon as possible after, the first day of each Interest Period,
the
Bank shall calculate, as a percentage rate, its Additional Cost in
accordance with the following paragraphs. The Additional Cost will
be
expressed as a percentage rate per annum and will be rounded up to
four
decimal places.
|
3
|
The
Additional Cost when the Bank lends from an office in any member
state of
the European Union that has adopted or adopts the Euro as its lawful
currency in accordance with legislation of the European Union relating
to
Economic and Monetary Union will be the percentage (expressed as
a per
annum rate) which is its reasonable determination of the cost of
complying
with the minimum reserve requirements of the European Central Bank
in
respect of loans made from that
office.
|
4
|
The
Additional Cost for the Bank lending from an office in the United
Kingdom
will be calculated as follows:
|
(a)
|
in
relation to a sterling Loan:
|
(b)
|
in
relation to a Loan in any currency other than
sterling:
|
Ex0.01 |
per
cent per annum
|
300 |
A
|
is
the percentage of Eligible Liabilities (assuming these to be in excess
of
any stated minimum) which that Lender is from time to time required
to
maintain as an interest free cash ratio deposit with the Bank of
England
to comply with cash ratio
requirements.
|
B
|
is
the percentage rate of interest (excluding the Margin and the Additional
Cost and, if any part of the Loan has not been paid on its due date,
the
additional rate of interest specified in clause 3.4 payable for the
relevant Interest Period on the
Loan.
|
C
|
is
the percentage (if any) of Eligible Liabilities which that Lender
is
required from time to time to maintain as interest bearing Special
Deposits with the Bank of England.
|
D
|
is
the percentage rate per annum payable by the Bank of England to the
Agent
on interest bearing Special
Deposits.
|
E
|
is
designed to compensate the Bank for amounts payable under the Fees
Rules
and is calculated by the Bank as being the most recent rate of charge
payable by it to the Financial Services Authority under the Fees
Rules in
respect of the relevant financial year of the Financial Services
Authority
(calculated for this purpose by the Bank as being the
|
5
|
For
the purposes of this schedule:
|
(a)
|
“Eligible
Liabilities”
and “
Special
Deposits
”
have the meanings given to them from time to time under or pursuant
to the
Bank of England Act 1998 or (as may be appropriate) by the Bank of
England;
|
(b)
|
“Fees
Rules”
means the rules on periodic fees contained in the Supervision manual
of
the Financial Services Authority’s Handbook of rules and guidance or such
other law or regulation as may be in force from time to time in respect
of
the payment of fees for the acceptance of
deposits;
|
(c)
|
“Fee
Tariffs”
means the fee tariffs specified in the Fees Rules under the activity
group
A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee
required
pursuant to the Fees Rules but taking into account any applicable
discount
rate);
|
(d)
|
“Tariff
Base”
has the meaning given to it in, and will be calculated in accordance
with,
the Fees Rules; and
|
(e)
|
“pounds”
and
“£”
means the lawful currency of the United
Kingdom.
|
6
|
In
application of the above formulae, A, B, C and D will be included
in the
formulae as figures and not as percentages (i.e. 5 per cent will
be
included in the formula as 5 and not a 0.05). A negative result obtained
by subtracting D from B shall be taken as zero. The resulting figures
shall be rounded to four decimal
places.
|
7
|
Any
determination by the Bank in accordance with this schedule in relation
to
a formula, the Additional Cost or any amount payable to it shall,
in the
absence of manifest error, be conclusive and binding on the
Borrower.
|
8
|
The
Bank may from time to time, after consultation with the Borrowers,
determine and notify the Borrowers of any amendments which need to
be made
to this schedule to comply with any change in law, regulation or
any
requirements from time to time imposed by the Bank of England, the
Financial Services Authority or the European Central Bank (or, in
any
case, any other authority which replaces all or any of its functions)
and
any such determination shall, in the absence of manifest error, be
conclusive and binding on the
Borrowers.
|
SIGNED
|
)
|
|
by
GEORGE PAPDOPOULOS
|
)
|
|
for
and on behalf of
|
)
|
/s/
George Papdopoulos
|
PEMER
SHIPPING LTD
|
)
|
Attorney-in-fact
|
SIGNED
|
)
|
|
by
PEIKLIS LYKOUDIS
|
)
|
/s/
Peiklis Lykoudis
|
and
by VASILEIOS ZAVINOS
|
)
|
Authorized
Signatory
|
for
and on behalf of
|
)
|
|
BAYERISCHE
HYPO- UND VEREINSBANK
|
)
|
/s/
Vasileios Zavinos
|
AKTIENGESELLSCHAFT
|
)
|
Authorized
Signatory
|
EXHIBIT 10.20
To: | Pemer Shipping Ltd |
32 Karamanli Avenue | |
166 05 Voula | |
Greece | |
Fax no: +30 210 895 6900 | |
Attention: Mr. George Papadopoulos |
5th March 2008
Dear Sirs
Loan Agreement dated 7 th March 2007 for a multi-currency loan of $36,000,000 to Pemer Shipping Ltd (the Loan Agreement)
We refer to the Loan Agreement and to the conversion request you have sent us dated 5 th March 2008 (the New Conversion Request). Please note that, pursuant to the New Conversion Request, Three Billion Nine Hundred Fifty Seven Million Six Hundred Thousand Japanese Yen (JPY3,957,600,000) (the Funds) have been converted with value 7 th March 2008 to Thirty Eight Million One Hundred Sixty Seven Thousand Six Hundred Fifteen United States Dollars and One Cent (USD38,167,615.01) at an exchange rate of 103.69 $/JPY.
We note your acknowledgment of the excess amount of Four Million One Hundred Sixty Seven Thousand Six Hundred Fifteen United States Dollars and One Cent (USD4,167,615.01) and agree to your request of waiving the requirement for additional cash collateral to be deposited to the Multicurrency Cash Collateral Account pursuant to clause 4.6 of Loan Agreement. Such waiver shall not in any way prejudice or affect the powers conferred upon the Bank under the Loan Agreement and the other Security Documents or the right of the Bank thereafter to act strictly in accordance with the terms of the Loan Agreement and the other Security Documents.
In consideration of the above, we also hereby agree to your request that repayment of aforementioned excess amount be applied to the remaining repayment instalments and the balloon repayment so that the current balance of the Loan being Thirty Eight Million One Hundred Sixty Seven Thousand Six Hundred Fifteen United States Dollars and One
Bayerische Hypo- und Vereinsbank
Aktiengesellschaft
Global Shipping - Piraeus Office
62, Notara str.
GR - 185 35 Piraeus, Greece
Telephone: (0030) 210 4100506-8
Fax: (0030) 210 4126597
Cent (USD38,167,615.01) be repayable in twenty-one instalments of One Million One Hundred Thousand United States Dollars (USD1,100,000) each plus a final repayment of Fifteen Million Sixty Seven Thousand Six Hundred Fifteen United States Dollars and One Cents (USD15,067,615.01), all repayable on each of the Repayment Dates.
Finally, it is also hereby agreed that no further conversion of the Loan, currently denominated in United States Dollars, will be effected until the final maturity date of the Loan and hence the multicurrency option is hereby cancelled and the Loan will remain in United States Dollars until the final maturity date.
We further designate account number 117684 USD 2811 04 held with us in the name of Safety Management Overseas S.A. to be a Cash Collateral Account for the purposes of the Loan Agreement.
Words and expressions defined in the Loan Agreement shall have the same meaning when used herein.
This letter shall be governed by English law.
Please confirm your agreement to this letter by countersigning a duplicate copy of this letter.
Yours sincerely
/s/
For and on behalf of
Bayerische Hypo-und Vereinsbank Aktiengesellschaft
We acknowledge and agree to the above
/s/
for and on behalf Pemer Shipping Ltd
DATED
12th JUNE, 2007
|
|
Page
|
||
1
|
Definitions
and Interpretation
|
1
|
2
|
The
Loan and its Purpose
|
10
|
3
|
Conditions
of Utilisation
|
10
|
4
|
Advance
|
12
|
5
|
Currency
|
12
|
6
|
Repayment
|
13
|
7
|
Prepayment
|
14
|
8
|
Interest
|
15
|
9
|
Indemnities
|
18
|
10
|
Fees
|
21
|
11
|
Security
and Application of Moneys
|
22
|
12
|
Representations
|
26
|
13
|
Undertakings
and Covenants
|
29
|
14
|
Events
of Default
|
36
|
15
|
Assignment
and Sub-Participation
|
40
|
16
|
Set-Off
|
41
|
17
|
Payments
|
41
|
18
|
Notices
|
43
|
19
|
Partial
Invalidity
|
44
|
20
|
Remedies
and Waivers
|
44
|
21
|
Miscellaneous
|
44
|
22
|
Law
and Jurisdiction
|
45
|
SCHEDULE 1: Conditions Precedent and Subsequent |
47
|
|
|
Part
I: Conditions precedent
|
47
|
Part
II: Conditions subsequent
|
51
|
SCHEDULE 2: Calculation of Mandatory Cost |
52
|
|
SCHEDULE 3: Form of Drawdown Notice |
54
|
(1)
|
PELEA
SHIPPING LTD,
a
company incorporated under the laws of the Republic of Liberia whose
registered office is at 80 Broad Street, Monrovia, Liberia (the
“
Borrower
”);
and
|
(2)
|
DnB
NOR BANK ASA,
acting
through its office at 20 St. Dunstan’s Hill, London EC3R 8HY, England (the
“
Lender
”
).
|
(A)
|
The
Borrower is the registered owner of the Vessel which is registered
under
the flag of Cyprus.
|
(B)
|
The
Lender has agreed to advance to the Borrower a secured multi-currency
reducing revolving credit facility of up to forty two million Dollars
($42,000,000) to assist the Borrower in re-financing the post-delivery
cost of the Vessel.
|
1
|
Definitions
and Interpretation
|
1.1
|
In
this Agreement:
|
(a) |
moneys
borrowed;
|
(b) |
any
acceptance credit;
|
(c) |
any
bond, note, debenture, loan stock or similar
instrument;
|
(d) |
any
finance or capital lease;
|
(e) |
receivables
sold or discounted (other than on a non-recourse
basis);
|
(f) |
deferred
payments for assets or services;
|
(g)
|
any
derivative transaction protecting against or benefiting from fluctuations
in any rate or price (and, when calculating the value of any derivative
transaction, only the marked to market value shall be taken into
account);
|
(h)
|
any
amount raised under any other transaction (including any forward
sale or
purchase agreement) having the commercial effect of a
borrowing;
|
(i)
|
any
counter-indemnity obligation in respect of a guarantee, indemnity,
bond,
standby or documentary letter of credit or any other instrument issued
by
a bank or financial institution;
and
|
(j)
|
the
amount of any liability in respect of any guarantee or indemnity
for any
of the items referred to in paragraphs (a) to (i)
above.
|
(a) |
the
applicable Screen Rate: or
|
(b)
|
(if
no Screen Rate is available for any Interest Period) the arithmetic
mean
of the rates (rounded upwards to four decimal places) quoted to the
Lender
in the London interbank market,
|
(a)
|
an
actual, constructive, arranged, agreed or compromised total loss
of the
Vessel; or
|
(b)
|
the
requisition for title or compulsory acquisition of the Vessel by
any
government or other competent authority (other than by way of requisition
for hire); or
|
(c)
|
the
capture, seizure, arrest, detention or confiscation of the Vessel
by any
government or by persons acting or purporting to act on behalf of
any
government, unless the Vessel is released and returned to the possession
of the Borrower within one month after the capture, seizure, arrest,
detention or confiscation in
question.
|
1.2
|
in
this Agreement:
|
1.2.1
|
words
denoting the plural number include the singular and vice
versa;
|
1.2.2
|
words
denoting persons include corporations, partnerships, associations
of
persons (whether incorporated or not or governmental or quasi-governmental
bodies or authorities and vice
versa;
|
1.2.3
|
references
to Recitals, Clauses and Schedules are references to recitals, clauses
and
schedules to or of this Agreement;
|
1.2.4
|
references
to this Agreement include the Recitals and the
Schedules;
|
1.2.5
|
the
headings and contents page(s) are for the purpose of reference only,
have
no legal or other significance, and shall be ignored in the interpretation
of this Agreement;
|
1.2.6
|
references
to any document (including, without limitation, to all or any of
the
Relevant Documents) are, unless the context otherwise requires, references
to that document as amended, supplemented, novated or replaced from
time
to time;
|
1.2.7
|
references
to statutes or provisions of statutes are references to those statutes,
or
those provisions, as from time to time amended, replaced or
re-enacted;
|
1.2.8
|
references
to the Lender include its successors, transferees and assignees;
and
|
1.2.9
|
a
time of day (unless otherwise specified) is a reference to London
time.
|
1.3
|
Offer
letter
|
2
|
The
Loan and its Purpose
|
2.1
|
Amount
Subject to the terms of this Agreement, the Lender agrees to make
available to the Borrower a revolving credit in an aggregate amount
not
exceeding the Maximum Amount at any one
time.
|
2.2
|
Purpose
The Borrower shall apply the Loan for the purpose referred to in
Recital
(B).
|
2.3
|
Monitoring
The Lender shall not be bound to monitor or verify the application
of any
amount borrowed under this
Agreement.
|
3
|
Conditions
of Utilisation
|
3.1
|
Conditions
precedent
The Borrower is not entitled to have any Drawing advanced unless
the
Lender has received all of the documents and other evidence listed
in Part
I of Schedule 1,
|
3.2
|
Further
conditions precedent
The Lender will only be obliged to advance a Drawing if on the date
of the
Drawdown Notice and on the proposed Drawdown
Date:
|
3.2.1
|
no
Default is continuing or would result from the advance of that Drawing;
and
|
3.2.2
|
the
representations made by the Borrower under Clause 12 are true in
all
material respects.
|
3.3
|
Drawing
limit
The Lender will only be obliged to advance a Drawing
if:
|
3.3.1
|
no
other Drawing has been made on the same Business
Day;
|
3.3.2
|
that
Drawing is not less than one million Dollars (S1,000,000) or, if
in excess
of one
million
Dollars ($1,000,000), integral multiples of five hundred thousand
Dollars
($500,000); and
|
3.3.3
|
that
Drawing will not increase the outstanding amount of the Loan to a
sum in
excess of the Maximum Amount.
|
3.4
|
Reduction
of Maximum Amount
The Maximum Amount:
|
3.4.1
|
shall
be reduced by twenty four (24) reduction amounts, the first six (6)
reduction amounts on each of the Reduction Dates, each reduction
amount in
the amount of six hundred and fifty thousand Dollars ($650,000),
the
following six (6) reduction amounts each in the amount of seven hundred
and fifty thousand Dollars ($750,000), the following eleven (11)
reduction
amounts each in the amount of one million one hundred and ninety
thousand
Dollars ($1,190,000) and the final reduction amount in the amount
of
twenty million five hundred and ten thousand Dollars ($20,510,000)
(comprising of a reduction amount of one million and one hundred
and
ninety thousand Dollars ($1,190,000) and a balloon reduction of nineteen
million three hundred and twenty thousand Dollars ($19,320,000)),
the
first Reduction Date being the date which is six calendar months
after the
first Drawdown Date and subsequent Reduction Dates being at consecutive
intervals of six calendar months thereafter, with the last Reduction
Date
being on the Final Maturity Date;
and
|
3.4.2
|
may
(in addition to any reduction required under Clause 3.4.1) be reduced
by
the Borrower by five hundred thousand Dollars ($500,000) or an integral
multiple of that amount with effect from any Business Day by written
notice to the Lender given not fewer than fourteen (14) days prior
to that
Business Day, which notice shall be irrevocable. Any voluntary reduction
in the Maximum Amount shall be in addition to, and without prejudice
to,
the mandatory reductions in the Maximum Amount made pursuant to Clause
3.4.1 and may not be reversed. Any reduction under this Clause 3.4.2
shall
satisfy the obligations under Clause 3.4.1 in order of maturity.
Amounts
repaid by the Borrower pursuant to this Clause shall not be available
for
reborrowing.
|
3.5
|
Conditions
subsequent
The Borrower undertakes to deliver or to cause to be delivered to
the
Lender on, or as soon as practicable after, the first Drawdown Date
the
additional documents and other evidence listed in Part II of Schedule
1.
|
3.6
|
No
Waiver
If
the Lender in its sole discretion agrees to advance a Drawing to
the
Borrower before all of the documents and evidence required by Clause
3.1
have been delivered to or to the order of the Lender, the Borrower
undertakes to deliver all outstanding documents and evidence to or
to the
order of the Lender no later than the date specified by the
Lender.
|
3.7
|
Form
and content
All documents and evidence delivered to the Lender under this
Clause 3 shall:
|
3.7.1
|
be
in form and substance acceptable to the
Lender;
|
3.7.2
|
if
required by the Lender, be certified, notarised, legalised or attested
in
a manner acceptable to the Lender;
and
|
3.7.3
|
if
copies, be certified as true and complete copies by a director or
the
secretary or the legal advisor or a duly authorised attorney-in-fact
of
the Borrower.
|
4
|
Advance
|
5
|
Currency
|
5.1
|
Conversion
The Borrower may Convert all or any part of the Loan into a Permitted
Currency not later than five (5) Business Days before the Drawdown
Date or
at any time during the Facility Period, subject to there being no
Event of
Default which is continuing and subject to the Permitted Currency
being
available to the Lender. Upon conversion, that part of the Loan shall
remain denominated in, and shall be repayable in, the Permitted Currency
until the end of the relevant Interest Payment Date. Clause 3.4 shall
be
amended so that the
|
Maximum
Amount of the Loan shall be reduced in the Permitted Currency or
Permitted
Currencies selected under this Clause, provided that the Reduction
Dates
specified in Clause 3.4 shall not be
changed.
|
5.2
|
Indemnity
The Borrower shall indemnify the Lender from time to time on demand
against all Break Costs, other losses, costs, claims, damages and
expenses
which the Lender may from time to time suffer, incur or sustain by
reason
of the Lender agreeing to and/or implementing the terms of this Clause
(including, without limitation, all costs and expenses incurred by
the
Lender in effecting any
conversion).
|
6
|
Repayment
|
6.1
|
Repayment
of each Drawing
The Borrower agrees to repay each Drawing to the Lender on the last
day of
the Interest Period in respect of that Drawing. On the Final Maturity
Date
the Borrower shall repay to the Lender all amounts then outstanding
under
or pursuant to this Agreement. Without limitation to the repayments
required by Clause 3.4, in addition the Borrower may repay any
Drawing in whole or in part in integral multiples of five hundred
thousand
Dollars ($500,000) (or the equivalent in the Permitted Currency in
which
the Drawing in question is then denominated) and no repayment shall
be
made in an amount which is less than one million Dollars ($1,000,000)
(or
the equivalent in the Permitted Currency in which the Drawing in
question
is then denominated) (or as otherwise may be agreed by the Lender)
provided that it has first given to the Lender not fewer than two
(2)
Business Days’ prior written notice expiring on a Business Day of its
intention to do so. Any notice pursuant to this Clause once given
shall be
irrevocable and shall oblige the Borrower to make the repayment referred
to in the notice on the Business Day specified in the notice, together
with all interest accrued on the amount repaid up to and including
that
Business Day.
|
6.2
|
Reborrowing
Amounts of the Loan which are repaid or prepaid shall be available
for
reborrowing in accordance with Clause 3 prior to the Availability
Termination Date.
|
7
|
Prepayment
|
7.1
|
Illegality
If
it becomes unlawful in any jurisdiction for the Lender to perform
any of
its obligations as contemplated by this Agreement or to fund or maintain
the Loan:
|
7.1.1
|
the
Lender shall promptly notify the Borrower of that event;
and
|
7.1.2
|
the
Borrower shall repay any Drawing on the last day of its current Interest
Period or, if earlier, the date specified by the Lender in the notice
delivered to the Borrower (being no earlier than the last day of
any
applicable grace period permitted by
law).
|
7.2
|
Voluntary
prepayment of Loan
The Borrower may prepay the whole or any part of a Drawing (but,
if in
part, being an amount that reduces that Drawing by a minimum amount
of
five hundred thousand Dollars ($500,000) or an integral multiple
of that
amount (or as otherwise may be agreed by the Lender) provided that
it
gives the Lender not less than fourteen (14) Business Days’ (or such
shorter period of the notice as the Lender may agree) prior notice.
Amounts prepaid by the Borrower pursuant to this Clause shall be
available
for reborrowing. Any prepayment under this Clause 7.2 shall satisfy
the
obligations under Clause 6.1 in order of
maturity.
|
7.3
|
Mandatory
prepayment on sale or Total Loss
Upon the sale or Total Loss of the Vessel the Maximum Amount shall
reduce
to zero and the Borrower shall repay the Indebtedness in full, in
the case
of a sale of the Vessel, not later than the date of the sale of the
Vessel
or, in the case of a Total Loss, not later than the date falling
one
hundred and eighty (180) days from the date of the casualty giving
rise to
the Total Loss (or such longer period as the Lender may in its discretion
agree). Amounts prepaid by the Borrower pursuant to this Clause shall
not
be available for reborrowing.
|
7.4
|
Mandatory
prepayment on reduction of Maximum Amount
If
the Maximum Amount is reduced in accordance with Clause 3.4 to an
amount
which is less than the aggregate amount of the Drawings then outstanding,
the Borrower shall, simultaneously with that reduction, prepay one
or more
outstanding
|
Drawings
to the extent required to ensure that the aggregate amount of the
Drawings
outstanding does not exceed the reduced Maximum
Amount.
|
7.5
|
Restrictions
Any notice of prepayment given under this Clause 7 shall be irrevocable
and, unless a contrary indication appears in this Agreement, shall
specify
the date or dates upon which the relevant prepayment is to be made
and the
amount of that prepayment.
|
8
|
Interest
|
8.1
|
Interest
Periods
The period during which each Drawing shall be outstanding under this
Agreement shall be an Interest Period of one, three, six, nine or
twelve
months’ duration, as selected by the Borrower in the Drawdown Notice in
respect of the Drawing in question, or such other duration as may
be
agreed by the Lender.
|
8.2
|
Beginning
and end of Interest Periods
Each Interest Period shall start on the Drawdown Date of the Drawing
in
question and end on the date which numerically corresponds to that
Drawdown Date in the relevant calendar month except that, if there
is no
numerically corresponding date in that calendar month, the Interest
Period
shall end on the last Business Day in that
month.
|
8.3
|
Interest
Periods to meet Maturity Date
If
an Interest Period for a Drawing would otherwise expire after the
Maturity
Date, the Interest Period for that Drawing shall expire on the Maturity
Date.
|
8.4
|
Non-Business
Days
If
an Interest Period would otherwise end on a day which is not a Business
Day, that Interest Period will instead end on the next Business Day
in
that calendar month (if there is one) or the preceding Business Day
(if
there is not).
|
8.5
|
Interest
rate
During each Interest Period interest shall accrue on the relevant
Drawing
at the rate determined by the Lender to be the aggregate of (a) the
Margin, (b)
LIBOR
and (c) the Mandatory Cost, if any.
|
8.6
|
Failure
to select Interest Period
If
the Borrower at any time fails to select or agree an Interest Period
in
accordance with Clause 8.1, the interest rate applicable shall be
the rate
determined by the Lender in accordance with Clause 8.5 for an Interest
Period of such duration (not exceeding six months) as the Lender
may
select.
|
8.7
|
Accrual
and payment of interest
Interest shall accrue from day to day, shall be calculated on the
basis of
a 360 day year and the actual number of days elapsed (or, in any
circumstance where market practice differs, in accordance with the
prevailing market practice) and shall be paid by the Borrower to
the
Lender on the last day of each Interest Period and, if the Interest
Period
is longer than six months, on the dates falling at six monthly intervals
after the first day of that Interest
Period.
|
8.8
|
Default
interest
If
the Borrower fails to pay any amount payable by it under a Finance
Document on its due date, interest shall accrue on the overdue amount
from
the due date up to the date of actual payment (both before and after
judgment) at a rate which is one per cent (1%) higher than the rate
which
would have been payable if the overdue amount had, during the period
of
non-payment, constituted a Drawing in the currency of the overdue
amount
for successive Interest Periods, each selected by the Lender (acting
reasonably). Any interest accruing under this Clause 8.8 shall be
immediately payable by the Borrower on demand by the Lender. If unpaid,
any such interest will be compounded with the overdue amount at the
end of
each Interest Period applicable to that overdue amount but will remain
immediately due and payable.
|
8.9
|
Changes
in market circumstances
If
at any time the Lender determines (which determination shall be final
and
conclusive and binding on the Borrower) that, by reason of changes
affecting the London interbank market, adequate and fair means do
not
exist for determining the rate of interest on a Drawing for any Interest
Period:
|
8.9.1
|
the
Lender shall give notice to the Borrower of the occurrence of such
event;
and
|
8.9.2
|
the
rate of interest on the relevant Drawing for that Interest Period
shall be
the rate per annum which is the sum
of:
|
(a)
|
the
Margin; and
|
(b)
|
the
rate which expresses as a percentage rate per annum the cost to the
Lender
of funding the relevant Drawing from whatever source it may reasonably
select; and
|
(c)
|
the
Mandatory Cost, if any,
|
8.9.3
|
the
Lender will negotiate with the Borrower in good faith with a view
to
modifying this Agreement to provide a substitute basis for determining
the
rate of interest which is financially a substantial equivalent to
the
basis provided for in this
Agreement;
|
8.9.4
|
any
substitute basis agreed pursuant to Clause 8.9.3 shall be binding
on the
parties to this Agreement; and
|
8.9.5
|
if,
within thirty (30) days of the giving of the notice referred to in
Clause
8.9.1, the Borrower and the Lender fail to agree in writing on a
substitute basis for determining the rate of interest in respect
of the
relevant Drawing, the Lender shall cease to be obliged to advance
that
Drawing, but, if it has already been advanced, the Borrower will
immediately prepay it, together with any Break Costs, and the Maximum
Amount shall be reduced by the amount of that
Drawing.
|
8.10
|
Determinations
conclusive
The Lender shall promptly notify the Borrower of the determination
of a
rate of interest under this Clause 8 and each such determination
shall
(save in the case of manifest error) be final and
conclusive.
|
9
|
Indemnities
|
9.1
|
Transaction
expenses
The Borrower will, within fourteen (14) days of the Lender’s written
demand, pay the Lender the amount of all costs and expenses (including
legal fees and Value Added Tax or any similar or replacement tax
if
applicable) incurred by the Lender in connection
with:
|
9.1.1
|
the
negotiation, preparation, printing, execution and registration of
the
Finance Documents (whether or not any Finance Document is actually
executed or registered and whether or not a Drawing is
advanced);
|
9.1.2
|
any
amendment, addendum or supplement to any Finance Document (whether
or not
completed); and
|
9.1.3
|
any
other document which may at any time be required by the Lender to
give
effect to any Finance Document or which the Lender is entitled to
call for
or obtain under any Finance
Document.
|
9.2
|
Funding
costs
The Borrower shall indemnify the Lender on the Lender’s written demand
against all losses and costs incurred or sustained by the Lender
if, for
any reason, a Drawing is not advanced to the Borrower after the relevant
Drawdown Notice has been given to the Lender, or is advanced on a
date
other than that requested in the Drawdown Notice (unless, in either
case,
as a result of any default by the
Lender).
|
9.3
|
Break
Costs
The Borrower shall indemnify the Lender on the Lender’s written demand
against all costs, losses, premiums or penalties incurred by the
Lender as
a result of its receiving any prepayment of all or any part of a
Drawing
(whether pursuant to Clause 7 or otherwise) on a day other than the
last
day of an Interest Period for that Drawing, or any other payment
under or
in relation to the Finance Documents on a day other than the due
date for
payment of the sum in question, including (without limitation) any
losses
or costs incurred in liquidating or re-employing deposits from third
parties acquired to effect or maintain all or any part of a Drawing,
and
any liabilities, expenses or losses incurred by the Lender in terminating
or reversing, or otherwise in connection with, any interest rate
and/or
currency swap, transaction or arrangement entered into by the Lender
to
|
hedge
any exposure arising under this Agreement, or in terminating or reversing,
or otherwise in connection with, any open position arising under
this
Agreement.
|
9.4
|
Currency
indemnity
In
the event of the Lender receiving or recovering any amount payable
under a
Finance Document in a currency other than the Currency of Account,
and if
the amount received or recovered is insufficient when Converted into
the
Currency of Account at the date of receipt to satisfy in full the
amount
due, the Borrower shall, on the Lender’s written demand, pay to the Lender
such further amount in the Currency of Account as is sufficient to
satisfy
in full the amount due and that further amount shall be due to the
Lender
as a separate debt under this
Agreement.
|
9.5
|
Increased
costs (subject to Clause 9.6)
If, by reason of the introduction of any law, or any change in any
law, or
any change in the interpretation or administration of any law, or
compliance with any request or requirement from any central bank
or any
fiscal, monetary or other authority occurring after the date of this
Agreement:
|
9.5.1
|
the
Lender (or the holding company of the Lender) shall be subject to
any Tax
with respect to payment of all or any part of the Indebtedness (other
than
Tax on overall net income); or
|
9.5.2
|
the
basis of Taxation of payments to the Lender in respect of all or
any part
of the Indebtedness shall be changed;
or
|
9.5.3
|
any
reserve requirements shall be imposed, modified or deemed applicable
against assets held by or deposits in or for the account of or loans
by
any branch of the Lender; or
|
9.5.4
|
the
manner in which the Lender allocates capital resources to its obligations
under this Agreement or any ratio (whether cash, capital adequacy,
liquidity or otherwise) which the Lender is required or requested
to
maintain shall be affected; or
|
9.5.5
|
there
is imposed on the Lender (or on the holding company of the Lender)
any
other condition in relation to the Indebtedness or the Finance
Documents;
|
9.6
|
Exceptions
to increased costs
Clause 9.5 does not apply to the extent any additional cost or reduced
return referred to in that Clause
is:
|
9.6.1
|
compensated
for by a payment made under Clause 9.10;
or
|
9.6.2
|
compensated
for by a payment made under Clause 17.3;
or
|
9.6.3
|
compensated
for by the payment of the Mandatory Cost;
or
|
9.6.4
|
attributable
to the wilful breach by the Lender (or the holding company of the
Lender)
of any law or regulation.
|
9.7
|
Events
of Default
The Borrower shall indemnify the Lender from time to time on the
Lender’s
written demand against all losses, costs and liabilities incurred
or
sustained by the Lender as a consequence of any Event of
Default.
|
9.8
|
Enforcement
costs
The Borrower shall pay to the Lender on the Lender’s written demand the
amount of all costs and expenses (including legal fees) incurred
by the
Lender in connection with the enforcement of, or the preservation
of any
rights under, any Finance Document including (without limitation)
any
losses, costs and expenses which the Lender may from time to time
sustain,
incur or become liable for by reason of the Lender being mortgagee
of the
Vessel and/or a lender to the Borrower, or by reason of the Lender
being
deemed by any
|
court
or authority to be an operator or controller, or in any way concerned
in
the operation or control, of the
Vessel.
|
9.9
|
Other
costs
The Borrower shall pay to the Lender on the Lender’s written demand the
amount of all sums which the Lender may pay or become actually or
contingently liable for on account of the Borrower in connection
with the
Vessel (whether alone or jointly or jointly and severally with any
other
person) including (without limitation) all sums which the Lender
may pay
or guarantees which it may give in respect of the Insurances, any
expenses
incurred by the Lender in connection with the maintenance or repair
of the
Vessel or in discharging any lien, bond or other claim relating in
any way
to the Vessel, and any sums which the Lender may pay or guarantees
which
it may give to procure the release of the Vessel from arrest or
detention.
|
9.10
|
Taxes
The Borrower shall pay all Taxes to which all or any part of the
Indebtedness or any Finance Document may be at any time subject (other
than Tax on the Lender’s overall net income) and shall indemnify the
Lender on the Lender’s written demand against all liabilities, costs,
claims and expenses resulting from any omission to pay or delay in
paying
any such Taxes.
|
10
|
Fees
|
10.1
|
Commitment
fee
The Borrower shall pay to the Lender a fee computed at the rate of:-
(a)
zero point one five per cent (0.15%) per annum on the agreed amount
of
thirty four million Dollars ($34,000,000) from time to time from
2 October
2006 until the date of this Agreement and (b) zero point one five per
cent (0.15%) per annum on the undrawn Maximum Amount from time to
time
from the date of this Agreement until the Availability Termination
Date.
The accrued commitment fee is payable on the last day of each successive
period of three months from the date of this Agreement and on the
Availability Termination Date.
|
10.2
|
Arrangement
fee
The Borrower shall pay to the Lender on the date of this Agreement
an
arrangement fee in the amount of sixty thousand Dollars
($60,000).
|
11
|
Security
and Application of Moneys
|
11.1
|
Security
Documents
As
security for the payment of the Indebtedness, the Borrower shall
execute
and deliver to the Lender or cause to be executed and delivered to
the
Lender the following documents in such forms and containing such
terms and
conditions as the Lender shall
require:
|
11.1.1
|
a
first priority statutory mortgage over the Vessel together with a
collateral deed of covenants;
|
11.1.2
|
a
first priority deed of assignment of the Insurances, Earnings and
Requisition Compensation of the Vessel;
and
|
11.1.3
|
a
first priority deed of charge over the Cash Collateral Account and
all
amounts from time to time standing to the credit of the Cash Collateral
Account.
|
11.2
|
Accounts
The Borrower shall maintain the Accounts with the Lender for the
duration
of the Facility Period free of Encumbrances and rights of set off
other
than those created by or under the Finance
Documents.
|
11.3
|
Earnings
The Borrower shall procure that all Earnings and any Requisition
Compensation are credited to the Operating
Account.
|
11.4
|
Application
of Operating Account
The Borrower shall procure that there is transferred from the Operating
Account to the Lender:
|
11.4.1
|
on
the due date for repayment of each Drawing, the amount of that Drawing;
and
|
11.4.2
|
on
each interest Payment Date in respect of a Drawing, the amount of
interest
due in respect of that Drawing,
|
11.5
|
Borrower’s
obligations not affected
If
for any reason the amount standing to the credit of the Operating
Account
is insufficient to repay any Drawing or to make any payment of interest
when due, the Borrower’s obligation to repay that Drawing or to make that
payment of interest shall not be
affected.
|
11.6
|
Release
of surplus
Any amount remaining to the credit of the Operating Account following
the
making of any transfer required by Clause 11.4 shall (unless a Default
shall have occurred and be continuing) be released to or to the order
of
the Borrower, subject to an amount of one hundred and fifty thousand
Dollars ($150,000), remaining credited to the Operating Account at
all
times during the Facility Period.
|
11.7
|
Relocation
of Accounts
At
any time following the occurrence and during the continuation of
a
Default, the Lender may without the consent of the Borrower relocate
either or both of the Accounts to any other branch of the Lender,
without
prejudice to the continued application of this Clause 11 and the
rights of the Lender under the Finance
Documents.
|
11.8
|
Application
after acceleration
From and after the giving of notice to the Borrower by the Lender
under
Clause 14.2. the Borrower shall procure that all sums from time to
time
standing to the credit of either of the Accounts are immediately
transferred to the Lender for application in accordance with Clause
11.14
and the Borrower irrevocably authorises the Lender to make those
transfers.
|
11.9
|
General
application of moneys
The Borrower, subject to Clause 11.10, irrevocably authorises the
Lender
to apply all sums which the Lender may
receive:
|
11.9.1
|
pursuant
to a sale or other disposition of the Vessel or any right, title
or
interest in the Vessel; or
|
11.9.2
|
by
way of payment of any sum in respect of the Insurances, Earnings
or
Requisition Compensation; or
|
11.9.3
|
by
way of transfer of any sum from either of the Accounts;
or
|
11.9.4
|
otherwise
arising under or in connection with any Security
Document,
|
11.10
|
Application
of moneys on sale or Total Loss
The Borrower irrevocably authorises the Lender to apply all sums
which the
Lender may receive pursuant to a sale by the Borrower of the Vessel
or a
Total Loss in or towards satisfaction of the prepayment due and payable
by
virtue of that sale or Total Loss under Clause 7.3, but the Borrower’s
obligation to make that prepayment shall not be affected if those
sums are
insufficient to satisfy that
obligation.
|
11.11
|
Determination
of market value
For the purpose of the Security Documents, the market value of the
Vessel
shall be the average value certified by the Brokers, who shall report
directly to the Lender and shall be appointed by the Borrower not
later
than five (5) days after the Lender’s request for the Borrower to appoint
such Brokers. In the event that the Borrower fails to appoint such
Brokers
within five (5) days after the Lender’s request so to do or if a Broker
appointed by the Borrower is not approved by the Lender and the Borrower
fails to appoint an alternative Broker who is approved by the Lender
within such five (5) day period, the Borrower irrevocably authorises
the
Lender to appoint a Broker in its discretion to conduct such valuations.
All valuations pursuant to this Clause shall be made on the basis
of a
sale of the Vessel for prompt delivery for cash at arm’s length on normal
commercial terms by a willing seller to a willing buyer and free
of any
existing charter or other contract of employment. The Borrower agrees
to
accept each valuation obtained pursuant to this Clause as conclusive
evidence of the Vessel’s market value at the date of such
valuation.
|
11.12
|
Cost
of valuation
The Borrower shall be liable for all costs and expenses incurred
by the
Lender in obtaining up to two valuations in each year of the Facility
Period one upon each anniversary of the date of this Agreement and
the
other 6 months after every calendar year unless there is an Event
of
Default in which case the Borrower shall be liable for all costs
and
expenses incurred by the Lender in obtaining any number of valuations
required by it pursuant to Clause 11.11 and shall reimburse the Lender
in
respect of all such costs and expenses on
demand.
|
11.13
|
Provision
of information
The Borrower undertakes promptly to supply the Lender with such
information concerning the Vessel’s condition, location and employment as
the Lender may reasonably require.
|
11.14
|
Additional
security
If
and so often as the aggregate of the market value of the Vessel
(determined in accordance with Clause 11.11) plus the value of any
additional security for the time being provided to the Lender pursuant
to
this Clause shall be less than (a) one hundred per cent (100%) of the
amount of the Loan, for the period commencing on the first Drawdown
Date
and ending on the third anniversary of the first Drawdown Date, (b)
one
hundred and ten per cent (110%) of the amount of the Loan from the
third
anniversary of the first Drawdown Date until the sixth anniversary
of the
first Drawdown Date and (c) one hundred and twenty per cent (120%)
of the
amount of the Loan thereafter, the Borrower will, within fourteen
(14)
days of the request of the Lender to do so, at the Borrower’s
option:-
|
(a)
|
pay
to the credit of the Cash Collateral Account such amount as shall
be
necessary to establish that the aggregate of the market value of
the
Vessel (determined in accordance with Clause 11.11) plus the value
of any
additional security for the time being provided to the Lender pursuant
to
this Clause shall be no less than (a) one hundred per cent (100%) of
the amount of the Loan, for the period commencing on the first Drawdown
Date and ending on the third anniversary of the first Drawdown Date,
(b) one hundred and ten per cent (110%) of the amount of the Loan
from the third anniversary of the first Drawdown Date until the sixth
anniversary of the first Drawdown Date and (c) one hundred and twenty
per cent (120%) of the amount of the Loan thereafter;
or
|
(b)
|
give
to the Lender other security in amount and form acceptable to the
Lender
in its discretion; or
|
(c)
|
repay
such amount of the Loan as shall be necessary to establish that the
aggregate of the market value of the Vessel (determined in accordance
with
Clause 11.11) plus the value of any additional security for the time
being
provided to the Lender pursuant to this Clause shall be no less than
(a)
one hundred per cent (100%) of the amount of the Loan, for the period
commencing on the first Drawdown Date and ending on the third anniversary
of the first Drawdown Date, (b) one hundred and ten per cent (110%)
of the
amount of the Loan from the third anniversary of the first
|
Drawdown
Date until the sixth anniversary of the first Drawdown Date and (c)
one
hundred and twenty per cent (120%) of the amount of the Loan
thereafter.
|
11.15
|
Return
of additional security
If
and so often as the aggregate of the market value of the Vessel
(determined in accordance with Clause 11.11) plus the value of any
additional security for the time being provided to the Lender pursuant
to
Clause 11.14 shall exceed (a) one hundred per cent (100%) of the
amount of
the Loan, for the period commencing on the first Drawdown Date and
ending
on the third anniversary of the first Drawdown Date, (b) one hundred
and
ten per cent (110%) of the amount of the Loan from the third anniversary
of the first Drawdown Date until the sixth anniversary of the first
Drawdown Date and (c) one hundred and twenty per cent (120%) of the
amount
of the Loan thereafter. then the Lender shall, within fourteen (14)
days
of the request of the Borrower to do so, release to the Borrower
such
portion of the amount standing to the credit of the Cash Collateral
Account in accordance with Clause 11.14 and/or such amount of the
security
referred to in Clause 11.14(b) as shall be required to ensure that
the
aggregate of the market value of the Vessel (determined as aforesaid)
plus
the value of any additional security for the time being provided
to the
Lender pursuant to Clause 11.14 is equal to, but not less than (a)
one
hundred per cent (100%) of the amount of the Loan, for the period
commencing on the first Drawdown Date and ending on the third anniversary
of the first Drawdown Date, (b) one hundred and ten per cent (110%)
of the
amount of the Loan from the third anniversary of the first Drawdown
Date
until the sixth anniversary of the first Drawdown Date and (c) one
hundred
and twenty per cent (120%) of the amount of the Loan
thereafter.
|
12
|
Representations
|
12.1
|
Representations
The
Borrower makes the representations and warranties set out in this
Clause
12.1 to the Lender on the date of this
Agreement.
|
12.1.1
|
Status
Each
Security Party (which is not an individual) is a corporation, duly
incorporated and validly existing under the law of its jurisdiction
of
incorporation and has the power to own its assets and carry on its
business as it is being conducted.
|
12.1.2
|
Binding
obligations
The
obligations expressed to be assumed by each Security Party in each
Finance
Document to which it is a party are legal, valid, binding and enforceable
obligations.
|
12.1.3
|
Non-conflict
with other obligations
The
entry into and performance by each Security Party of and the transactions
contemplated by, the Finance Documents do not conflict
with:
|
(a)
|
any
law or regulation applicable to that Security
Party;
|
(b)
|
the
constitutional documents of that Security Party;
or
|
(c) |
any
document binding on that Security Party or any of its assets, and
in
borrowing the Loan, the Borrower is acting for its own
account.
|
12.1.4
|
Power
and authority
Each Security Party has the power to enter into, perform and deliver,
and
has taken all necessary action to authorise its entry into, performance
and delivery of, the Finance Documents to which it is a party and
the
transactions contemplated by those Finance
Documents.
|
12.1.5
|
Validity
and admissibility in evidence
All consents, licences, approvals, authorisations, filings and
registrations required or
desirable:
|
(a)
|
to
enable each Security Party lawfully to enter into, exercise its rights
and
comply with its obligations in the Finance Documents to which it
is a
party or to enable the Lender to enforce and exercise all its rights
under
the Finance Documents; and
|
(b)
|
to
make the Finance Documents to which any Security Party is a party
admissible in evidence in its jurisdiction of incorporation,
|
12.1.6
|
Governing
law and enforcement
The choice of English law as the governing law of any Finance Document
expressed to be governed by English law will be recognised and enforced
in
the jurisdiction of incorporation of each relevant Security Party,
and any
judgment obtained in England in relation to any such Finance Document
will
be recognised and enforced in the jurisdiction of incorporation of
each
relevant Security Party.
|
12.1.7
|
Deduction
of Tax
No
Security Party is required under the law of its jurisdiction of
incorporation to make any deduction for or on account of Tax from
any
payment it may make under any Finance
Document.
|
12.1.8
|
No
filing or stamp taxes
Under the law of jurisdiction of incorporation of each relevant Security
Party it is not necessary that the Finance Documents be filed, recorded
or
enrolled with any court or other authority in that jurisdiction or
that
any stamp, registration or similar tax be paid on or in relation
to the
Finance Documents or the transactions contemplated by the Finance
Documents.
|
12.1.9
|
No
default
No
Event of Default is continuing or might reasonably he expected to
result
from the advance of a Drawing.
|
12.1.10
|
No
misleading information
Any factual information provided by any Security Party to the Lender
was
true and accurate in all material respects as at the date is was
provided.
|
12.1.11
|
Pari
passu ranking
The payment obligations of each Security Party under the Finance
Documents
to which it is a party rank at least pari passu with the claims of
all its
other unsecured and unsubordinated creditors, except for obligations
mandatorily preferred by law applying to companies
generally.
|
12.1.12
|
No
proceedings pending or threatened
No
litigation, arbitration or administrative proceedings of or before
any
court, arbitral body or
|
agency
have been started or (to the best of the Borrower’s knowledge threatened)
which, if adversely determined, might reasonably be expected to have
a
materially adverse effect on the business, assets, financial condition
or
credit worthiness of any Security
Party.
|
12.1.13
|
Disclosure
of material facts
The Borrower is not aware of any material facts or circumstances
which
have not been disclosed to the Lender and which might, if disclosed,
have
adversely affected the decision of a person considering whether or
not to
make loan facilities of the nature contemplated by this Agreement
available to the Borrower.
|
12.1.14
|
No
established place of business in the UK or US
No
Security Party has an established place of business in the United
Kingdom
or the United States of America.
|
12.1.15
|
Completeness
of Relevant Documents
The copies of any Relevant Documents provided or to be provided by
the
Borrower to the Lender in accordance with Clause 3 are, or will be,
true
and accurate copies of the originals and represent, or will represent,
the
full agreement between the parties to those Relevant Documents in
relation
to the subject matter of those Relevant Documents and there are no
commissions, rebates, premiums or other payments due or to become
due in
connection with the subject matter of those Relevant Documents other
than
in the ordinary course of business or as disclosed to, and approved
in
writing by, the Lender.
|
12.2
|
Repetition
Each
representation and warranty in Clause 12.1 is deemed to be repeated
by the
Borrower by reference to the facts and circumstances then existing
on the
date of each Drawdown Notice and the first day of each Interest
Period.
|
13
|
Undertakings
and Covenants
|
13.1
|
Information
Undertakings
|
13.1.1
|
Financial
statements
The
Borrower or the Managers will supply to the Lender, on request within
sixty days of the end of each calendar year during the Facility Period
the
unaudited management accounts for the Vessel prepared by the Managers
showing the income and expenditure for the Vessel for such calendar
year,
with the first such accounts to be supplied by not later than sixty
days
of the end of 2007.
|
13.1.2
|
Information:
miscellaneous
The
Borrower shall supply to the
Lender:
|
(a)
|
promptly
upon becoming aware of them, details of any litigation, arbitration
or
administrative proceedings which are current, threatened or pending
against any Security Party, and which might, if adversely determined,
have
a materially adverse effect on the business, assets, financial condition
or credit worthiness of that Security Party;
and
|
(b)
|
promptly,
such further information regarding the financial condition, business
and
operations of any Security Party as the Lender may reasonably request
including, without limitation, cash flow analyses and details of
the
operating costs of the Vessel.
|
13.1.3
|
Notification
of default
|
(a)
|
The
Borrower shall notify the Lender of any Default (and the steps, if
any,
being taken to remedy it) promptly upon becoming aware of its
occurrence.
|
(b)
|
Promptly
upon a request by the Lender, the Borrower shall supply to the Lender
a
certificate signed by two of its directors or senior officers on
its
behalf certifying that no Default is continuing (or if a Default
is
continuing, specifying the Default and the steps, if any, being taken
to
remedy it).
|
13.1.4
|
“Know
your customer” checks
If:
|
(a)
|
the
introduction of or any change in (or in the interpretation, administration
or application of) any law or regulation made after the date of this
Agreement;
|
(b)
|
any
change in the status of the Borrower after the date of this Agreement;
or
|
(c)
|
a
proposed assignment or transfer by the Lender of any of its rights
and
obligations under this Agreement,
|
13.2
|
General
undertakings
|
13.2.1
|
Authorisations
The Borrower shall promptly:
|
(a)
|
obtain,
comply with and do all that is necessary to maintain in full force
and
effect: and
|
(b)
|
supply
certified copies to the Lender of,
|
13.2.2
|
Compliance
with laws
The Borrower shall comply in all respects with all laws to which
it may be
subject, if failure so to comply would materially impair its ability
to
perform its obligations under the Finance
Documents.
|
13.2.3
|
Conduct
of business
The Borrower shall carry on and conduct its business in a proper
and
efficient manner, file all requisite tax returns and pay all tax
which
becomes due and payable (except where contested in good
faith).
|
13.2.4
|
Evidence
of good standing
The Borrower will from time to time if requested by the Lender provide
the
Lender with evidence in form and substance satisfactory to the Lender
that
the Security Parties and all corporate shareholders of any Security
Party
remain in good standing.
|
13.2.5
|
Liquidity
The Borrower will throughout the Facility Period, maintain or procure
that
the Managers, maintain in the Operating Account at all times a minimum
positive account balance free of any Encumbrances (other than in
favour of
the Lender) of not less than one hundred and fifty thousand Dollars
($150,000). Any undrawn amounts under this Agreement may be included
for
the purpose of this calculation.
|
13.2.6
|
Negative
pledge and no disposals
The Borrower shall not create nor permit to subsist any Encumbrance
or
other third party rights over any of its present or future assets
or
undertaking nor dispose of any those assets or of all or part of
that
undertaking.
|
13.2.7
|
Merger
The Borrower shall not without the prior written consent of the Lender
enter into any amalgamation, demerger, merger or corporate
reconstruction.
|
13.2.8
|
Change
of business
The Borrower shall not without the prior written consent of the Lender
make any substantial change to the general nature of its business
from
that carried on at the date of this
Agreement.
|
13.2.9
|
No
other business
The Borrower shall not without the prior written consent of the Lender
engage in any business other than the ownership, operation, chartering
and
management of the Vessel.
|
13.2.10
|
No
place of business in UK or US
The Borrower shall not have an established place of business in the
United
Kingdom or the United States of America at any time during the Facility
Period.
|
13.2.11
|
No
borrowings
The Borrower shall not without the prior written consent of the Lender
borrow any money (except for the Loan and unsecured Financial Indebtedness
subordinated to the Loan) nor incur any obligations under
leases.
|
13.2.12
|
No
substantial liabilities
Except in the ordinary course of business, the Borrower shall not
without
the prior written consent of the Lender incur any liability to any
third
party which is in the Lender’s opinion of a substantial
nature.
|
13.2.13
|
No
loans or other financial commitments
The Borrower shall not without the prior written consent of the Lender
make any loan nor enter into any guarantee or indemnity or otherwise
voluntarily assume any actual or contingent liability in respect
of any
obligation of any other person.
|
13.2.14
|
No
dividends
The Borrower shall not without the prior written consent of the Lender
pay
any dividends or make any other distributions to shareholders or
issue any
new shares.
|
13.2.15
|
Inspection
of records
The
Borrower will permit the inspection of its financial records and
accounts
from time to time by the Lender or its
nominee.
|
13.2.16
|
No
change in Relevant Documents
The
Borrower shall procure that, without the prior written consent of
the
Lender, there shall be no termination of, alteration to, or waiver
of any
term of, any of the Relevant
Documents.
|
13.2.17
|
No
change in ownership or control of the Borrower or the Managers
The
Borrowers shall not permit any change in its beneficial ownership
and
control and the beneficial ownership and control of the Managers
from that
advised to the Lender at the date of this
Agreement.
|
13.2.18
|
No
purchase of a vessel
The
Borrower shall not purchase any vessel or any shares in any
vessel.
|
13.3
|
Vessel
undertakings
|
13.3.1
|
No
sale of Vessel
The
Borrower shall not sell or otherwise dispose of the Vessel or any
shares
in the Vessel nor agree to do so without the prior written consent
of the
Lender.
|
13.3.2
|
No
chartering after Event of Default
Following
the occurrence and during the continuation of an Event of Default
the
Borrower shall not without the prior written consent of the Lender
let the
Vessel on charter or renew or extend any charter or other contract
of
employment of the Vessel (nor agree to do
so).
|
13.3.3
|
No
change in management
The
Borrower shall procure that, without the prior written consent of
the
Lender, there shall be no termination of, alteration to, or waiver
of any
term of, the Management Agreement and the Borrower shall not without
the
prior written consent of the Lender permit the Managers to sub-contract
or
delegate the commercial or technical management of the Vessel to
any third
party.
|
13.3.4
|
Registration
of Vessel
The
Borrower undertakes to maintain the registration of the Vessel under
the
flag stated in Recital (A) for the duration of the Facility Period
unless
the Lender agrees otherwise in
writing.
|
13.3.5
|
Evidence
of current COFR
The Borrower will, if and for so long as the Vessel trades in the
United
States of America and Exclusive Economic Zone (as defined in the
United
States Oil Pollution Act 1990). obtain, retain and provide the Lender
with
a copy of, a valid Certificate
|
of
Financial Responsibility for the Vessel under that Act and will comply
strictly with the requirements of that
Act.
|
13.3.6
|
ISM
Code compliance
The Borrower will:
|
(a)
|
procure
that the Vessel remains for the duration of the Facility Period subject
to
a SMS;
|
(b)
|
maintain
a valid and current SMC for the Vessel throughout the Facility Period
and
provide a copy to the Lender;
|
(c)
|
procure
that the ISM Company maintains a valid and current DOC throughout
the
Facility Period and provide a copy to the Lender;
and
|
(d)
|
immediately
notify the Lender in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the SMC of the Vessel
or of
the DOC of the ISM Company.
|
13.3.7
|
ISPS
Code compliance
The Borrower will:
|
(a)
|
for
the duration of the Facility Period comply with the ISPS Code in
relation
to the Vessel and procure that the Vessel and the ISPS Company comply
with
the ISPS Code;
|
(b)
|
maintain
a valid and current ISSC for the Vessel throughout the Facility Period
and
provide a copy to the Lender; and
|
(c)
|
immediately
notify the Lender in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the
ISSC.
|
13.3.8
|
Annex
VI compliance
The
Borrower will:
|
(a)
|
for
the duration of the Facility Period comply with Annex VI in relation
to
the Vessel and procure that the Vessel’s master and crew are familiar
with, and that the Vessel complies with, Annex
VI;
|
(b)
|
maintain
a valid and current IAPPC for the Vessel throughout the Facility
Period
and provide a copy to the Lender;
and
|
(c)
|
immediately
notify the Lender in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the
IAPPC.
|
14
|
Events
of Default
|
14.1
|
Events
of Default
Each
of the events or circumstances set out in this Clause 14.1 is an
Event of
Default.
|
14.1.1
|
Non-payment
The
Borrower does not pay on the due date any amount payable by it under
a
Finance Document at the place at and in the currency in which it
is
expressed to be payable.
|
14.1.2
|
Other
obligations
A
Security Party or any other person (except the Lender) does not comply
with any provision of any of the Relevant Documents to which that
Security
Party or person is a party (other than as referred to in
Clause 14.1.1).
|
14.1.3
|
Misrepresentation
Any
representation, warranty or statement made or deemed to be repeated
by a
Security Party in any Finance Document or any other document delivered
by
or on behalf of a Security Party under or in connection with any
Finance
Document is or proves to have been incorrect or misleading in any
material
respect when made or deemed to be
repeated.
|
14.1.4
|
Cross
default
Any
Financial Indebtedness of a Security
Party:
|
(a)
|
is
not paid when due or within any originally applicable grace period;
or
|
(b)
|
is
declared to be, or otherwise becomes, due and payable before its
specified
maturity as a result of an event of default (however described);
or
|
(c)
|
is
declared by a creditor to be due and payable before its specified
maturity
as a result of such an event.
|
14.1.5
|
Insolvency
|
(a)
|
A
Security Party is unable or admits inability to pay its debts as
they fall
due, suspends making payments on any of its debts or, by reason of
actual
or anticipated financial difficulties, commences negotiations with
one or
more of its creditors with a view to rescheduling any of its Financial
Indebtedness.
|
(b)
|
The
value of the assets of a Security Party is less than its liabilities
(taking into account contingent and prospective
liabilities).
|
(c)
|
A
moratorium is declared in respect of any Financial Indebtedness of
a
Security Party.
|
14.1.6
|
Insolvency
proceedings
Any corporate action, legal proceedings or other procedure or step
is
taken for:
|
(a)
|
the
suspension of payments, a moratorium of any Financial Indebtedness,
winding-up, dissolution, administration, bankruptcy or reorganisation
(by
way of voluntary arrangement, scheme of arrangement or otherwise)
of a
Security Party;
|
(b)
|
a
composition, compromise, assignment or arrangement with any creditor
of a
Security Party;
|
(c)
|
the
appointment of a liquidator, receiver, administrative receiver,
administrator, compulsory manager, or trustee or other similar officer
in
respect of any Security Party or any of its assets;
or
|
(d)
|
enforcement
of any Encumbrance over any assets of a Security
Party.
|
14.1.7
|
Creditors’
process
Any expropriation, attachment, sequestration, distress or execution
affects any asset or assets of a Security
Party.
|
14.1.8
|
Change
in ownership or control of the Borrower or the
Managers
There is any change in the beneficial ownership or control of the
Borrower
or the Managers from that advised to the Lender by the Borrower at
the
date of this Agreement.
|
14.1.9
|
Repudiation
A
Security Party or any other person (except the Lender) repudiates
any of
the Relevant Documents to which that Security Party or person is
a party
or evidences an intention to do so.
|
14.1.10
|
Impossibility
or illegality
Any event occurs which would, or would with the passage of time,
render
performance of any of the Relevant Documents by a Security Party
or any
other party to any such document impossible, unlawful or unenforceable
by
the Lender or a Security Party.
|
14.1.11
|
Conditions
subsequent
Any of the conditions referred to in Clause 3.5 is not satisfied
within the time reasonably required by the
Lender.
|
14.1.12
|
Revocation
or modification of authorisation
Any consent, licence, approval, authorisation, filing, registration
or
other requirement of any governmental, judicial or other public body
or
authority which is now, or which at any time during the Facility
Period
becomes, necessary to enable a Security Party or any other person
(except
the Lender) to comply with any of its obligations under any of the
Relevant Documents is not obtained, is revoked, suspended, withdrawn
or
withheld, or is modified in a manner which the Lender considers is,
or may
be, prejudicial to the interests of the Lender, or ceases to remain
in
full force and effect.
|
14.1.13
|
Curtailment
of business
A
Security Party ceases, or threatens to cease, to carry on all or
a
substantial part of its business or, as a result of intervention
by or
under the authority of any government, the business of a Security
Party is
wholly or partially curtailed or suspended, or all or a substantial
part
of the assets or undertaking of a Security Party is seized, nationalised,
expropriated or compulsorily
acquired.
|
14.1.14
|
Reduction
of capital
A
Security Party reduces its authorised or issued or subscribed
capital.
|
14.1.15
|
Loss
of Vessel
The Vessel suffers a Total Loss or is otherwise destroyed, abandoned,
confiscated, forfeited or condemned as prize, or a similar event
occurs in
relation to any other vessel which may from time to time be mortgaged
to
the Lender as security for the payment of all or any part of the
Indebtedness, except that a Total Loss, or event similar to a Total
Loss
in relation to any other vessel, shall not be an Event of Default
if:
|
(a)
|
the
Vessel or other vessel is insured in accordance with the Security
Documents; and
|
(b)
|
no
insurer has refused to meet or has disputed the claim for Total Loss
and
it is not apparent to the Lender in its discretion that any such
refusal
or dispute is likely to occur; and
|
(c)
|
payment
of all insurance proceeds in respect of the Total Loss is made in
full to
the Lender within one hundred and eighty (180) days of the occurrence
of
the casualty giving rise to the Total Loss in question or such longer
period as the Lender may in its discretion
agree.
|
14.1.16
|
Challenge
to registration
The registration of the Vessel or the Mortgage is contested or becomes
void or voidable or liable to cancellation or termination, or the
validity
or priority of the Mortgage is
contested.
|
14.1.17
|
War
The country of registration of the Vessel becomes involved in war
(whether
or not declared) or civil war or is occupied by any other power and
the
Lender in its discretion considers that, as a result, the security
conferred by the Security Documents is materially
prejudiced.
|
14.1.18
|
Material
adverse change
Any event or series of events occurs which, in the opinion of the
Lender,
is likely to have a materially adverse
effect
|
on
the business, assets, financial condition or credit worthiness of
a
Security Party.
|
14.2
|
Acceleration
If
an Event of Default is continuing the Lender may by notice to the
Borrower
cancel any part of the Maximum Amount not then advanced
and:
|
14.2.1
|
declare
that the Loan, together with accrued interest, and all other amounts
accrued or outstanding under the Finance Documents are immediately
due and
payable, whereupon they shall become immediately due and payable:
and/or
|
14.2.2
|
declare
that the Loan is payable on demand, whereupon it shall immediately
become
payable on demand by the Lender.
|
15
|
Assignment
and Sub-Participation
|
15.1
|
Right
to assign
The Lender may, subject to the prior approval of the Borrower (such
approval not to be unreasonably withheld) and subject to the Lender
giving
prior notice of such intention to the Borrower, and without additional
costs to the Borrower, assign or transfer all or any of its rights
under
or pursuant to the Security Documents to any other bank or financial
institution, and may grant sub-participations in all or any part
of the
Loan. The Lender may, without the prior approval of the Borrower,
assign
or transfer all or any of its rights under or pursuant to the Security
Documents to any other branch of the Lender, and may grant
sub-participations in all or any part of the
Loan.
|
15.2
|
Borrower’s
co-operation
The Borrower will co-operate fully with the Lender in connection
with any
assignment, transfer or sub-participation; will execute and procure
the
execution of such documents as the Lender may require in that connection;
and irrevocably authorises the Lender to disclose to any proposed
assignee, transferee or sub-participant (whether before or after
any
assignment, transfer or sub-participation and whether or not any
assignment, transfer or sub-participation shall take place) all
information relating to the Security Parties, the Loan, the Relevant
Documents and the Vessel which the Lender may in its discretion consider
necessary or desirable.
|
15.3
|
Rights
of assignee or transferee
Any assignee or transferee of the Lender shall (unless limited by
the
express terms of the assignment or novation) take the full benefit
of
every provision of the Finance Documents benefitting the
Lender.
|
15.4
|
No
assignment or transfer by the Borrower
The Borrower may not assign any of its rights or transfer any of
its
rights or obligations under the Finance
Documents.
|
16
|
Set-Off
|
17
|
Payments
|
17.1
|
Payments
Each amount payable by the Borrower under a Finance Document shall
be paid
to such account at such bank as the Lender may from time to time
direct to
the Borrower in the Currency of Account and in such funds as are
customary
at the time for settlement of transactions in the relevant currency
in the
place of payment. Payment shall be deemed to have been received by
the
Lender on the date on which the Lender receives authenticated advice
of
receipt, unless that advice is received by the Lender on a day other
than
a Business Day or at a time of day (whether on a Business Day or
not) when
the Lender in its discretion considers that it is impossible or
impracticable for the Lender to utilise the amount received for value
that
same day, in which event the payment in question shall be deemed
to have
been received by the Lender on the Business Day next following the
date of
receipt of advice by the Lender.
|
17.2
|
No
deductions or withholdings
Each payment (whether of principal or interest or otherwise) to be
made by
the Borrower under a Finance Document shall, subject only to Clause
17.3,
be made free and clear of and without deduction for or on account
of any
Taxes or other deductions, withholdings, restrictions, conditions
or
counterclaims of any nature.
|
17.3
|
Grossing-up
If
at any time any law requires the Borrower to make any deduction or
withholding from any payment, or to change the rate or manner in
which any
required deduction or withholding is made, the Borrower will promptly
notify the Lender and, simultaneously with making that payment, will
pay
to the Lender whatever additional amount (after taking into account
any
additional Taxes on, or deductions or withholdings from, or restrictions
or conditions on, that additional amount) is necessary to ensure
that,
after making the deduction or withholding, the Lender receives a
net sum
equal to the sum which the Lender would have received had no deduction
or
withholding been made.
|
17.4
|
Evidence
of deductions
If
at any time the Borrower is required by law to make any deduction
or
withholding from any payment to be made by it under a Finance Document,
the Borrower will pay the amount required to be deducted or withheld
to
the relevant authority within the time allowed under the applicable
law
and will, no later than thirty (30) days after making that payment,
deliver to the Lender an original receipt issued by the relevant
authority, or other evidence acceptable to the Lender, evidencing
the
payment to that authority of all amounts required to be deducted
or
withheld.
|
17.5
|
Adjustment
of due dates
If
any payment or transfer of funds to be made under a Finance Document,
other than a payment of interest on a Drawing, shall be due on a
day which
is not a Business Day, that payment shall be made on the next succeeding
Business Day (unless the next succeeding Business Day falls in the
next
calendar month in which event the payment shall be made on the next
preceding Business Day). Any such variation of time shall be taken
into
account in computing any interest in respect of that
payment.
|
17.6
|
Control
Account
The Lender shall open and maintain on its books a control account
in the
name of the Borrower showing the advance of the Loan and the computation
and payment of interest and all other sums due under this Agreement.
The
Borrower’s obligations to repay the Loan and to pay interest and all other
sums due under this Agreement shall be evidenced by the entries from
time
to time made in the control account opened and maintained under this
|
Clause
17.6 and those entries will, in the absence of manifest error, be
conclusive and binding.
|
18
|
Notices
|
18.1
|
Communications
in writing
Any communication to be made under or in connection with this Agreement
shall be made in writing and, unless otherwise stated, may be made
by fax
or letter.
|
18.2
|
Addresses
The address and fax number (and the department or officer, if any,
for
whose attention the communication is to be made) of each party to
this
Agreement for any communication or document to be made or delivered
under
or in connection with this Agreement
are:
|
18.2.1
|
in
the case of the Borrower, c/o Safety Management Overseas S.A., 32
Avenue
Karamanli, GR-166 05 Voula, Athens, Greece (telex no: 215050 answerback:
SAFE GR, fax no: +30 210 895 6900) marked for the attention of Mr
George
Papadopoulos; and
|
18.2.2
|
in
the case of the Lender, to the Lender at its address at the head
of this
Agreement (fax no: +44 207 626 5956 tel no: +44 207 621 6045) marked
for
the attention of: Shipping
Department;
|
18.3
|
Delivery
Any communication or document made or delivered by one party to this
Agreement to the other under or in connection this Agreement will
only be
effective:
|
18.3.1
|
if
by way of fax, when received in legible form;
or
|
18.3.2
|
if
by way of letter, when it has been left at the relevant address or
five
(5) Business Days after being deposited in the post postage prepaid
in an
envelope addressed to it at that
address;
|
18.4
|
English
language
Any notice given under or in connection with this Agreement must
be in
English. All other documents provided under or in connection with
this
Agreement must be:
|
18.4.1
|
in
English; or
|
18.4.2
|
if
not in English, and if so required by the Lender, accompanied by
a
certified English translation and, in this case, the English translation
will prevail unless the document is a constitutional, statutory or
other
official document.
|
19
|
Partial
Invalidity
|
20
|
Remedies
and Waivers
|
21
|
Miscellaneous
|
21.1
|
No
oral variations
No
variation or amendment of a Finance Document shall be valid unless
in
writing and signed on behalf of the
Lender.
|
21.2
|
Further
Assurance
If
an provision of a Finance Document shall be invalid or unenforceable
in
whole or in part by reason of any present or future law or any decision
of
any court, or if the documents at any time held by or on behalf of
the
|
Lender
are considered by the Lender for any reason insufficient to carry
out the
terms of this Agreement, then from time to time the Borrower promptly,
on
demand by the Lender, execute or procure the execution of such further
documents as in the opinion of the Lender are necessary to provide
adequate security for the repayment of the
Indebtedness.
|
21.3
|
Rescission
of payments etc.
Any discharge, release or reassignment by the Lender of any of the
security constituted by, or any of the obligations of a Security
Party
contained in, a Finance Document shall be (and be deemed always to
have
been) void if any act (including, without limitation, any payment)
as a
result of which such discharge, release or reassignment was given
or made
is subsequently wholly or partially rescinded or avoided by operation
of
any law.
|
21.4
|
Certificates
Any certificate or statement signed by an authorised signatory of
the
Lender purporting to show the amount of the Indebtedness (or any
part of
the Indebtedness) or any other amount referred to in any Finance
Document
shall, save for manifest error or on any question of law, be conclusive
evidence as against the Borrower of that
amount.
|
21.5
|
Counterparts
This Agreement may be executed in any number of counterparts each
of which
shall be original but which shall together constitute the same
instrument.
|
21.6
|
Contracts
(Rights of Third Parties) Act 1999
A
person who is not a party to this Agreement has no right under the
Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy
the
benefit of any term of this
Agreement.
|
22
|
Law
and Jurisdiction
|
22.1
|
Governing
law
This Agreement shall in all respects be governed by and interpreted
in
accordance with English law.
|
22.2
|
Jurisdiction
For the exclusive benefit of the Lender, the parties to this Agreement
irrevocably agree that the courts of England are to have jurisdiction
to
settle any disputes which may arise out of or in connection with
this
Agreement and that any proceedings may be brought in those
courts.
|
22.3
|
Alternative
jurisdictions
Nothing contained in this Clause 22 shall limit the right of the
Lender to
commence any proceedings against the Borrower in any other court
of
competent jurisdiction nor shall the commencement of any proceedings
against the Borrower in one or more jurisdictions preclude the
commencement of any proceedings in any other jurisdiction, whether
concurrently or not.
|
22.4
|
Waiver
of objections
The Borrower irrevocably waives any objection which it may now or
in the
future have to the laying of the venue of any proceedings in any
court
referred to in this Clause 22, and any claim that those proceedings
have
been brought in an inconvenient or inappropriate forum, and irrevocably
agrees that a judgment in any proceedings commenced in any such court
shall be conclusive and binding on it and may be enforced in the
courts of
any other jurisdiction.
|
22.5
|
Service
of process
Without prejudice to any other mode of service allowed under any
relevant
law, the Borrower:
|
22.5.1
|
irrevocably
appoints Cheeswrights Notaries Public, 10 Philpot Lane, London EC3M
8AA,
United Kingdom as its agent for service of process in relation to
any
proceedings before the English courts in connection with this Agreement;
and
|
22.5.2
|
agrees
that failure by a process agent to notify the Borrower of the process
will
not invalidate the proceedings
concerned.
|
1
|
Security
Parties
|
(a)
|
Constitutional
Documents
Copies
of the constitutional documents of each Security Party together with
such
other evidence as the Lender may reasonably require that each Security
Party is duly incorporated in its country of incorporation and remains
in
existence with power to enter into, and perform its obligations under,
the
Relevant Documents to which it is or is to become a
party.
|
(b)
|
Certificates
of good standing
A
certificate of good standing in respect of each Security Party (if
such a
certificate can be obtained).
|
(c)
|
Board
resolutions
A
copy of a resolution of the board of directors of each Security
Party:
|
(i)
|
approving
the terms of, and the transactions contemplated by, the Relevant
Documents
to which it is a party and resolving that it execute those Relevant
Documents; and
|
(ii)
|
authorising
a specified person or persons to execute those Relevant Documents
(and all
documents and notices to be signed and/or despatched under those
documents) on its behalf.
|
(d)
|
Officer’s
certificates
A
certificate of a duly authorised officer of each Security Party certifying
that each copy document relating to it specified in this Part
I
of
Schedule 1
is
correct, complete and in full force and effect as at a date no earlier
than the date of this Agreement and setting out the names of the
directors
and officers of that Security
Party.
|
(e)
|
Powers
of attorney
The
notarially attested and legalised power of attorney of each Security
Party
under which any documents are to be executed or transactions undertaken
by
that Security Party.
|
2
|
Security
and related documents
|
(a)
|
Vessel
documents
Photocopies,
certified as true by a director or the secretary or the duly authorised
attorney of the Borrower, of:
|
(i)
|
the
Management Agreement;
|
(ii)
|
the
Vessel’s current Safety Construction, Safety Equipment, Safety Radio, Oil
Pollution Prevention and Load Line
Certificates;
|
(iii)
|
the
Vessel’s current Certificate of Financial Responsibility issued pursuant
to the United States Oil Pollution Act 1990 (if required for the
Vessel);
|
(iv)
|
the
Vessel’s current SMC;
|
(v)
|
the
ISM Company’s current DOC;
|
(vi)
|
the
Vessel’s current ISSC;
|
(vii)
|
the
Vessel’s current IAPPC;
|
(viii)
|
the
Vessel’s current Tonnage
Certificate;
|
(b)
|
Evidence
of Borrower’s title
Evidence that on the Drawdown Date (i) the Vessel will be at least
provisionally registered under the flag stated in Recital (A) in
the
ownership of the Borrower and (ii) the Mortgage will be capable of
being
registered against the Vessel with first
priority.
|
(c)
|
Evidence
of insurance
Evidence that the Vessel is insured in the manner required by the
Security
Documents and that letters of undertaking will be issued in the manner
required by the Security Documents, together with (if required by
the
Lender) the written approval of the Insurances by an insurance adviser
appointed by the Lender.
|
(d)
|
Confirmation
of class
A
Certificate of Confirmation of Class for hull and machinery confirming
that the Vessel is classed with the highest class applicable to vessels
of
her type with Lloyd’s Register of Shipping or such other classification
society as may be acceptable to the Lender free of recommendations
affecting class.
|
(e)
|
Security
Documents
The Security Documents, together with all other documents required
by any
of them, including, without limitation, all notices of assignment
and/or
charge and evidence that those notices will be duly acknowledged
by the
recipients.
|
(f)
|
Mandates
Such duly signed forms of mandate, and/or other evidence of the opening
of
the Accounts as the Lender may
require.
|
(g)
|
Managers’
confirmation
The written confirmation of the Managers that, throughout the Facility
Period unless otherwise agreed by the Lender, they will remain the
commercial and technical managers of the Vessel and that they will
not,
without the prior written consent of the Lender, sub-contract or
delegate
the commercial or technical management of the Vessel to any third
party
and confirming in terms acceptable to the Lender that, following
the
occurrence of an Event of Default, all claims of the Managers against
the
Borrower shall be subordinated to the claims of the Lender under
the
Finance Documents.
|
(h)
|
No
disputes
The written confirmation of the Borrower that there is no dispute
under
any of the Relevant Documents as between the parties to any such
document.
|
3
|
Legal
opinions
|
(a)
|
If
a Security Party is incorporated in a jurisdiction other than England
and
Wales or if any Finance Document is governed by the laws of a jurisdiction
other than England and Wales, a legal opinion of the legal advisers
to the
Lender in each relevant jurisdiction, substantially in the form or
forms
provided to the Lender prior to signing this Agreement or confirmation
satisfactory to the Lender that such an opinion will be
given.
|
4
|
Other
documents and evidence
|
(a)
|
Drawdown
Notice
A
duly completed Drawdown Notice.
|
(b)
|
Process
agent
Evidence that any process agent referred to in Clause 22.5 and any
process
agent appointed under any other Finance Document has accepted its
appointment.
|
(c)
|
Other
authorisations
A
copy of any other consent, licence, approval, authorisation or other
document, opinion or assurance which the Lender considers to be necessary
or desirable (if it has notified the Borrower accordingly) in connection
with the entry into and performance of the transactions contemplated
by
any of the Relevant Documents or for the validity and enforceability
of
any of the Relevant Documents.
|
(d)
|
Fees
Evidence that the fees, costs and expenses then due from the Borrower
under Clause 9 and Clause 10 have been paid or will be paid by the
Drawdown Date.
|
(e)
|
“Know
your customer” documents
Such documentation and other evidence as is reasonably requested
by the
Lender in order for the Lender to comply with all necessary “know your
customer” or similar identification procedures in relation to the
transactions contemplated in the Finance
Documents.
|
1
|
Evidence
of Borrower’s title
Certificate
of ownership and encumbrance (or equivalent) issued by the Registrar
of
Ships or equivalent official) of the flag stated in Recital (A) confirming
that (a) the Vessel is permanently registered under that flag in
the
ownership of the Borrower, (b) the Mortgage has been registered with
first
priority against the Vessel and (c) there are no further Encumbrances
registered against the Vessel
.
|
2
|
Letters
of undertaking
Letters of undertaking in respect of the Insurances as required by
the
Security Documents together with copies of the relevant policies
or cover
notes or entry certificates duly endorsed with the interest of the
Lender.
|
3
|
Acknowledgements
of notices
Acknowledgements of all notices of assignment and/or charge given
pursuant
to the Security Documents.
|
4
|
Legal
opinions
Such of the legal opinions specified in Part I of this Schedule 1
as have
not already been provided to the
Lender.
|
5
|
Companies
Act registrations
Evidence
that the prescribed particulars of the Security Documents have been
delivered to the Registrar of Companies of Cyprus within the statutory
time limit.
|
1
|
The
Mandatory Cost is an addition to the interest rate to compensate
the
Lender for the cost of compliance with (a) the requirements of the
Bank of
England and/or the Financial Services Authority (or, in either case,
any
other authority which replaces all or any of its functions) or (b)
the
requirements of the European Central
Bank.
|
(a)
|
On
the first day of each Interest Period (or as soon as possible thereafter)
the Lender shall calculate, as a percentage rate, a rate (the
“
Additional
Cost Rate
”)
in accordance with the paragraphs set out
below.
|
(b)
|
The
Additional Cost Rate for the Lender if lending from an office in
the
euro-zone will be the percentage notified by the Lender to the Borrower
to
be its reasonable determination of the cost (expressed as a percentage
of
the Loan) of complying with the minimum reserve requirements of the
European Central Bank as a result of making the Loan from that
office.
|
(c)
|
The
Additional Cost Rate for the Lender if lending from an office in
the
United Kingdom will be calculated by the Lender as
follows:
|
(d) |
where
the Loan is denominated in
sterling:
|
BY
+ S(Y - Z) + F x 0.01
per cent per annum
100
- (B + S)
|
(e) |
where
the Loan is denominated in any currency other than
sterling:
|
F
x 0.01
per cent per annum
300
|
B
|
is
the percentage of eligible liabilities (assuming these to be in excess
of
any stated minimum) which the Lender is from time to time required
to
maintain as an interest free cash ratio deposit with the Bank of
England
to comply with cash ratio
requirements;
|
Y
|
is
the percentage rate of interest (excluding the Margin and the Mandatory
Cost and, if the Loan is an overdue amount, the additional rate of
interest specified in Clause 7.8) payable for the relevant Interest
Period
on the Loan;
|
S
|
is
the percentage (if any) of eligible liabilities which the Lender
is
required from time to time to maintain as interest bearing special
deposits with the Bank of England;
|
Z
|
is
the interest rate per annum payable by the Bank of England to the
Lender
on special deposits; and
|
F
|
is
the charge payable by the Lender to the Financial Services Authority
under
paragraph 2.02 or 2.03 (as appropriate) of the Fees Regulations or
the
equivalent provisions in any replacement regulations (with, for this
purpose, the figure for the minimum amount in paragraph 2.02b or
such
equivalent provision deemed to be zero), expressed in pounds per
£ 1
million of the fee base of the
Lender.
|
2 |
For
the purpose of this Schedule:
|
(a)
|
“
eligible
liabilities
”
and “
special
deposits
”
have the meanings given to them at the time of application of the
formula
by the Bank of England;
|
(b)
|
“
fee
base
”
has the meaning given to it in the Fees
Regulations;
|
(c)
|
“
Fees
Regulations
”
means the regulations governing periodic fees contained in the FSA
Supervision Manual or such other law or regulation as may be in force
from
time to time in respect of the payment of fees for the acceptance
of
deposits.
|
3
|
In
the application of the formula B, Y, S and Z are included in the
formula
as figures and not as percentages, e.g. if B = 0.5% and Y = 15%,
BY is
calculated as 0.5. x 15. Each rate calculated in accordance with
the
formula is, if necessary, rounded upward to four decimal
places.
|
4
|
If
a change in circumstances has rendered, or will render, the formula
inappropriate, the Lender shall notify the Borrower of the manner
in which
the Mandatory Cost will subsequently be calculated. The manner of
calculation so notified by the Lender shall, in the absence of manifest
error, be binding on the Borrower.
|
SIGNED
by
duly
authorised for and on behalf
of
PELEA
SHIPPING LTD
|
)
)
)
|
|
SIGNED
by
duly
authorised for and on behalf
of
DnB
NOR BANK ASA
|
)
)
)
|
|
Clause
|
Page
|
|
1
|
Purpose
and definitions
|
1
|
2
|
The
Commitment and the Loan
|
9
|
3
|
Interest
and Interest Periods
|
10
|
4
|
Currencies
|
12
|
5
|
Repayment
and prepayment
|
14
|
6
|
Commitment
commission, fees and expenses
|
16
|
7
|
Payments
and taxes; accounts and calculations
|
18
|
8
|
Representations
and warranties
|
19
|
9
|
Undertakings
|
23
|
10
|
Conditions
|
28
|
11
|
Events
of Default
|
29
|
12
|
Indemnities
|
32
|
13
|
Unlawfulness
and increased costs
|
33
|
14
|
Security
and set-off
|
34
|
15
|
Accounts
|
36
|
16
|
Assignment,
transfer and lending office
|
36
|
17
|
Notices
and other matters
|
37
|
18
|
Governing
law and jurisdiction
|
38
|
Schedule
1 Form of Drawdown Notice
|
40
|
|
Schedule
2 Documents and evidence required as conditions precedent
|
41
|
|
Schedule
3 Calculation of Additional Cost
|
45
|
|
Schedule
4 Form of Interest Period Letter
|
47
|
|
Schedule
5 Form of Mortgage
|
48
|
|
Schedule
6 Form of Deed of Covenant
|
49
|
|
Schedule
7 Form of General Assignment
|
50
|
Schedule
8 Form of Manager’s Undertaking
|
51
|
Schedule
9 Form of Master Swap Agreement
|
52
|
Schedule
10 Form of Master Agreement Security Deed
|
53
|
1 |
Purpose
and
definitions
|
1.1
|
Purpose
|
1.2 |
Definitions
|
(a)
|
for
interest rate fixing purposes:
|
(i)
|
in
relation to a rate fixing in respect of euro, a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer
system (TARGET) is operating; and
|
(ii)
|
in
relation to a rate fixing in respect of any Optional Currency or
Dollars,
a day on which banks are open for business in the principal financial
centre in, respectively, the jurisdiction of the relevant Optional
Currency or New York City; and
|
(b)
|
for
all other purposes (including, but not limited to, payments and receiving
notices):
|
(i)
|
a
day on which banks are open for business in London;
and
|
(ii)
|
in
relation to payments in euros, a day on which banks are open for
business
in such other principal financial centre or centres of relevant
Participating Member States as the Bank may nominate;
and
|
(iii)
|
in
relation to payments in any Optional Currency or Dollars, a day on
which
banks are open for business in the principal financial centre in,
respectively, the jurisdiction of the relevant Optional Currency
or New
York City;
|
(a)
|
the
rate of interest for such period which appears on page EURIBOR 01
of the
Reuters screen (or such other page on the Reuters screen as may
customarily be used from time to time to display EURIBOR rates) at
or
about 11:00 a.m. (Brussels time) on the Quotation Date for such period;
or
|
(b)
|
if
the relevant rate of EURIBOR cannot be determined in accordance with
paragraph (a) above, the rate (rounded upwards if necessary to the
nearest
one sixteenth of one per cent) the Bank offers for deposits in an
amount
approximately equal to the amount in relation to which EURIBOR is
to be
determined for a period equivalent to such period to prime banks
in the
London Interbank Market at or about 11:00 a.m. (London time) on the
Quotation Date for such period;
|
(a)
|
for
the period commencing on the Drawdown Date and ending on the date
falling
thirty-six (36) months thereafter, equal to one hundred per cent
(100%) of
(i) the Loan (or the Equivalent Amount in Dollars when the Loan or
part
thereof is denominated in an Optional Currency) and (ii) the cost
(if any)
(as certified by the Bank whose certificate shall, in the absence
of
manifest error, be conclusive and binding on the Borrower and the
Bank) of
terminating any Transaction entered into pursuant to the Master Swap
Agreement;
|
(b)
|
for
the period commencing one day after the date falling thirty-six (36)
months after the Drawdown Date and ending on the date falling seventy-two
(72) months after the Drawdown Date, equal to one hundred and ten
per cent
(110%) of (i) the Loan (or the Equivalent Amount in Dollars when
the Loan
or part thereof is denominated in an Optional Currency) and (ii)
the cost
(if any) (as certified by the Bank whose certificate shall, in the
absence
of manifest error, be conclusive and binding on the Borrower and
the Bank)
of terminating any Transaction entered into pursuant to the Master
Swap
Agreement; and
|
(c)
|
for
the period commencing one day after the date falling seventy-two
(72)
months after the Drawdown Date and ending on the last day of the
Security
Period (as defined in the Deed of Covenant), equal to one hundred
and
twenty per cent (120%) of (i) the Loan (or the Equivalent Amount
in
Dollars when the Loan or part thereof is denominated in an Optional
Currency) and (ii) the cost (if any) (as certified by the Bank whose
certificate shall, in the absence of manifest error, be conclusive
and
binding on the Borrower and the Bank) of terminating any Transaction
entered into pursuant to the Master Swap
Agreement;
|
(a)
|
the
actual, constructive, compromised or arranged total loss of the Ship;
or
|
(b)
|
the
Compulsory Acquisition of the Ship;
or
|
(c)
|
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Borrower from such
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation within thirty (30) days after the occurrence
thereof;
|
1.3
|
Headings
|
1.4
|
Construction
of certain terms
|
1.4.1
|
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Agreement and references to this Agreement
include
its schedules;
|
1.4.2
|
references
to (or to any specified provision of) this Agreement or any other
document
shall be construed as references to this Agreement, that provision
or that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.4.3
|
references
to a “regulation” include any present or future regulation, rule,
directive, requirement, request or guideline (whether or not having
the
force of law) of any agency, authority, central bank or government
department or any self-regulatory or other national or supra-national
authority;
|
1.4.4
|
words
importing the plural shall include the singular and vice
versa;
|
1.4.5
|
references
to a time of day are to London
time;
|
1.4.6
|
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.7
|
references
to a
“guarantee”
include
references to an indemnity or other assurance against financial loss
including, without limitation, an obligation to purchase assets or
services as a consequence of a default by any other person to pay
any
Indebtedness and
“guaranteed”
shall
be construed accordingly; and
|
1.4.8
|
references
to any enactment shall be deemed to include references to such enactment
as re-enacted, amended or extended.
|
2
|
The
Commitment and the Loan
|
2.1
|
Agreement
to lend
|
2.2
|
Drawdown
|
2.3
|
Amount
|
2.4
|
Availability
|
2.5
|
Termination
of Commitment
|
2.6
|
Application
of Proceeds
|
3
|
Interest
and Interest Periods
|
3.1
|
Normal
interest rate
|
3.2
|
Selection
of Interest Periods
|
3.3
|
Determination
of Interest Periods
|
3.3.1
|
the
first Interest Period in respect of a Tranche shall commence on the
Drawdown Date and each subsequent Interest Period in respect of a
Tranche
shall commence on the last day of the previous Interest Period in
respect
of such Tranche;
|
3.3.2
|
Interest
Periods in respect of different Tranches shall end on the same
day;
|
3.3.3
|
if
any Interest Period would otherwise overrun a Repayment Date, then,
in the
case of the last Repayment Date, such Interest Period shall end on
such
Repayment Date, and in the case of any other Repayment Date or Repayment
Dates the Loan or, if the Loan is divided into Tranches, the aggregate
of
the Tranches, shall be divided into parts so that there is
one
|
3.3.4
|
if
the Borrower fails to specify the duration of an Interest Period
in
accordance with the provisions of clause 3.2 and this clause 3.3
such
Interest Period shall have a duration of six (6) months or such other
period as shall comply with this clause
3.3.
|
3.4
|
Default
interest
|
3.5
|
Notification
of Interest Periods and interest
rate
|
3.6 |
Market
disruption;
non-availability
|
3.6.1
|
If
and whenever, at any time prior to the commencement of any Interest
Period, the Bank shall have determined (which determination shall,
in the
absence of manifest error, be
conclusive):
|
(a) |
that
adequate and fair means do not exist for ascertaining LIBOR or, as
the
case may be, EURIBOR during such Interest Period;
or
|
(b) |
that
deposits in Dollars are not available to the Bank in the London Interbank
Market in the ordinary course of business in sufficient amounts to
fund
the Loan for such
Interest
|
3.6.2
|
During
the period of ten (10) days after any Determination Notice has been
given
by the Bank under clause 3.6.1, the Bank shall certify an alternative
basis (the
“Substitute
Basis”)
for
maintaining the Loan. The Substitute Basis may (without limitation)
include alternative interest periods, alternative currencies or
alternative rates of interest but shall include a margin above the
cost of
funds including Additional Cost, if any, to the Bank equivalent to
the
Margin. Each Substitute Basis so certified shall be binding upon
the
Borrower and shall take effect in accordance with its terms from
the date
specified in the Determination Notice until such time as the Bank
notifies
the Borrower that none of the circumstances specified in clause 3.6.1
continues to exist whereupon the normal interest rate fixing provisions
of
this Agreement shall apply.
|
4
|
Currencies
|
4.1
|
Selection
of currencies
|
4.2
|
Limit
on currencies;
non-availability
|
4.2.1
|
The
Loan or any part thereof may not be drawn down in, and the Loan or
a
Tranche may not be, converted into or remain outstanding in an Optional
Currency if:
|
(a) |
in
consequence thereof there would be more than two (2) currencies
outstanding at any time; or
|
(b) |
the
amount to be converted is less than $1,000,000 or an integral multiple
of
$1,000,000; or
|
(c) |
the
Bank notifies the Borrower not later than 3 p.m. on the fourth Banking
Day
before the date on which the Loan or the relevant part thereof is
to be
drawn down or the beginning of the relevant Interest Period that
deposits
of such Optional Currency are not readily available to the Bank in
an
amount comparable with the Loan or the relevant part thereof;
or
|
(d) |
the
Bank determines (which determination shall be conclusive) at any
time
prior to 10 a.m. (local time in the place of payment) on the first
day of
the relevant Interest Period that by reason of any change in currency
availability, currency exchange rates or exchange controls it is
or will
be impracticable for the Loan or the relevant part thereof to be
drawn
down in, converted into or remain outstanding in that Optional Currency;
or
|
(e) |
a
Default has occurred and is continuing;
or
|
(f) |
a
Transaction is outstanding under the Master Swap
Agreement,
|
4.2.2
|
The
Borrower shall not be allowed to convert the Loan or any part thereof
on
more than four (4) occasions in any twelve month period. The first
twelve-month period shall commence on the Drawdown Date and each
subsequent twelve-month period shall commence on the expiry of the
previous such period.
|
4.3
|
Currency
amounts on drawdown
|
4.3.1
|
Drawdown
in Optional Currency
|
4.3.2
|
Drawdown
in Dollars
|
4.4
|
Currency
amount on conversion
|
4.5
|
Notional
obligations
|
4.6
|
Currency
Correction
|
4.7
|
Release
of moneys in Cash Collateral
Account
|
4.8
|
Incidental
costs and expenses
|
5
|
Repayment
and prepayment
|
5.1
|
Repayment
|
5.2
|
Voluntary
prepayment
|
5.2.1
|
without
premium or penalty, on any Interest Payment Date relating to the
part of
the Loan or as the case may be, a Tranche thereof being prepaid together
with any amounts payable under clause 12 and accrued interest to
the date
of prepayment and any other sums then payable under this Agreement
and/or
the Master Swap Agreement and/or the other Security Documents or
any of
them in respect of the Loan or a Tranche thereof calculated in accordance
with clause 5.7; and
|
5.2.2
|
at
any other time upon payment to the Bank of accrued interest to the
date of
prepayment and such sum as the Bank in its absolute discretion shall
determine to be the loss (excluding loss of Margin on the amount
prepaid
to the end of the then current Interest Period), cost and expense
incurred
by the Bank as a result of the prepayment not being made on an Interest
Payment Date for any part of the Loan being prepaid and any other
sums
then payable under
|
5.3
|
Master
Swap Agreement, Repayments and
Prepayments
|
5.3.1
|
Notwithstanding
any provision of the Master Swap Agreement to the contrary, in the
case of
a prepayment of all or part of the Loan (including, without limit,
upon a
Total Loss in accordance with clause 5.4 and under clause 9.2) then,
subject to clause 5.3.2, the Bank shall be entitled but not obliged
(and,
where relevant, may do without the consent of the Borrower, where
it would
otherwise be required whether under the Master Swap Agreement or
otherwise) to amend, re-book, supplement, cancel, close out, net
out,
terminate, liquidate, transfer or assign all or any part of the rights,
benefits and obligations created by any Transaction and/or the Master
Swap
Agreement and/or to obtain or re-establish any hedge or related trading
position in any manner and with any person the Bank in its absolute
discretion may determine and both the Bank’s and the Borrower’s continuing
obligations under any Transaction and/or Master Swap Agreement shall,
unless agreed otherwise by the Bank, be calculated so far as the
Bank
considers it practicable by reference to the amended repayment schedule
for the Loan taking into account the fact that less than the full
amount
of the Loan remains outstanding.
|
5.3.2
|
If
less than the full amount of the Loan remains outstanding, following
a
prepayment under this Agreement and the Bank in its absolute discretion
agrees, following a written request of the Borrower, that the Borrower
may
be permitted to maintain all or part of a Transaction in an amount
not
wholly matched with or linked to all or part of the Loan, the Borrower
shall within ten (10) days of being notified by the Bank of such
requirement, provide the Bank with, or procure the provision to the
Bank
of, such additional security as shall in the opinion of the Bank
be
adequate to secure the performance of such Transaction, which additional
security shall take such form, be constituted by such documentation
and be
entered into between such parties, as the Bank in its absolute discretion
may approve or require, and each document comprising such additional
security shall constitute a Credit Support
Document.
|
5.3.3
|
The
Borrower shall on the first written demand of the Bank indemnify
the Bank
in respect of all losses, costs and expenses (including, but not
limited
to, legal costs and expenses) incurred or sustained by the Bank as
a
consequence of or in relation to the effecting of any matter or
Transactions referred to in this clause
5.3.
|
5.3.4
|
Notwithstanding
any provision of the Master Swap Agreement to the contrary, if for
any
reason a Transaction has been entered into but the Loan is not drawn
down
under this Agreement then, subject to clause 5.3.5, the Bank shall
be
entitled but not obliged (and, where relevant, may do so without
the
consent of the Borrower where it would otherwise be required whether
under
the Master Swap Agreement or otherwise) to amend, re-book, supplement,
cancel, close out, net out, terminate, liquidate, transfer or assign
all
or any part of the rights, benefits and obligations created by such
Transaction and/or the Master Swap Agreement and/or to obtain or
re-establish any hedge or related trading position in any manner
and with
any person the Bank in its absolute discretion may
determine.
|
5.3.5
|
If
a Transaction has been entered into but the Loan is not drawn down
under
this Agreement and the Bank in its absolute discretion agrees, following
a
written request of the Borrower, that the Borrower may be permitted
to
maintain all or part of a Transaction, the Borrower shall within
ten (10)
days of being notified by the Bank of such requirement, provide the
Bank
with, or procure the provision to the Bank of, such additional security
as
shall in the opinion of the Bank be adequate to secure the performance
of
such Transaction, which additional security shall take such form,
be
constituted by such documentation and be entered into between such
parties, as the Bank in its absolute discretion may approve or require,
and each document comprising such additional security shall constitute
a
Credit Support Document for the purposes of the Master Swap Agreement
and/or otherwise.
|
5.3.6
|
Without
prejudice to or limitation of the obligations of the Borrower under
clause
5.3.3, in the event that the Bank exercises any of its rights under
clauses 5.3.1, 5.3.2, 5.3.3 or 5.3.4 and such exercise results in
all or
part of a Transaction being terminated such Transaction or the part
thereof terminated (which shall for the purposes hereof be treated
as a
separate Transaction) in each case shall be treated under the Master
Swap
Agreement in the same manner as if it were a Terminated Transaction
(as
defined in Section 14 of the Master Swap Agreement) pursuant to an Event
of Default (as so defined in that Section 14) by the Borrower and,
accordingly, the Bank shall be permitted to recover from the Borrower
a
payment for early termination calculated in accordance with the provisions
of section 6(e)(i) of the Master Swap Agreement in respect of such
Transaction.
|
5.4
|
Prepayment
on Total Loss
|
5.4.1
|
in
the case of an actual total loss of the Ship on the actual date and
at the
time the Ship was lost or, if such date is not known, on the date
on which
the Ship was last reported;
|
5.4.2
|
in
the case of a constructive total loss of the Ship, upon the date
and at
the time notice of abandonment of the Ship is given to the insurers
of the
Ship for the time being (provided a claim for total loss is admitted
by
such insurers) or, if such insurers do not forthwith admit such a
claim,
at the date and at the time at which either a total loss is subsequently
admitted by the insurers or a total loss is subsequently adjudged
by a
competent court of law or arbitration tribunal to have
occurred;
|
5.4.3
|
in
the case of a compromised or arranged total loss, on the date upon
which a
binding agreement as to such compromised or arranged total loss has
been
entered into by the insurers of the
Ship;
|
5.4.4
|
in
the case of Compulsory Acquisition, on the date upon which the relevant
requisition of title or other compulsory acquisition occurs;
and
|
5.4.5
|
in
the case of hijacking, theft, condemnation, capture, seizure, arrest,
detention or confiscation of the Ship (other than where the same
amounts
to Compulsory Acquisition of the Ship) by any Government Entity,
or by
persons purporting to act on behalf of any Government Entity, which
deprives the Borrower of the use of the Ship for more than thirty
(30)
days, upon the expiry of the period of thirty (30) days after the
date
upon which the relevant hijacking, theft, condemnation, capture,
seizure,
arrest, detention or confiscation
occurred.
|
5.5
|
Amounts
payable on prepayment
|
5.6
|
Notice
of prepayment; reduction of repayment
instalments
|
5.7
|
Currency
amounts repayable
|
6
|
Commitment
commission, fees and
expenses
|
6.1
|
Fees
|
6.1.1
|
A
fee of Forty five thousand Dollars ($45,000) on the Drawdown
Date;
|
6.1.2
|
commitment
commission computed from 8 June 2007 payable on the earlier of (i)
the
Drawdown Date and (ii) the Termination Date, at the rate of 0.15%
per
annum on the daily undrawn amount of Commitment and payable on the
date of
this Agreement and at three (3) monthly intervals (in arrears) thereafter;
and
|
6.1.3
|
The
fee referred to in clause 6.1.1 and the commitment commission referred
to
in clause shall be payable in full by the Borrower to the Bank whether
or
not any part of the Commitment is ever advanced and shall, in either
case,
be non-refundable.
|
6.2
|
Expenses
|
6.2.1
|
in
connection with the negotiation, preparation, execution and, where
relevant, registration of the Security Documents and of any amendment
or
extension of or the granting of any waiver or consent under, any
of the
Security Documents (including, for the avoidance of doubt, the Master
Swap
Agreement); and
|
6.2.2
|
in
contemplation of, or otherwise in connection with, the enforcement
of, or
preservation of any rights under, any of the Security Documents (including
for the avoidance of doubt the Master Swap Agreement), or otherwise
in
respect of the moneys owing under any of the Security Documents
(including, for the avoidance of doubt, expenses incurred in connection
with the Bank obtaining any further insurance opinion(s) in respect
of the
Insurances for the Ship as may be required by the Bank during the
Security
Period (as such term is defined in the Deed of Covenant)), together
with
interest at the rate referred to in clause 3.4 from the
|
6.3
|
Value
Added Tax
|
6.4
|
Stamp
and other duties
|
7
|
Payments
and taxes; accounts and
calculations
|
7.1
|
No
set-off or counterclaim
|
7.2
|
Payment
by the Bank
|
7.3
|
Non
-Banking
Days
|
7.4
|
Calculations
|
7.5
|
Certificates
conclusive
|
7.6
|
Grossing
-up
for Taxes
|
7.7
|
Loan
account
|
8
|
Representations
and warranties
|
8.1 |
Continuing
representations and
warranties
|
8.1.1
|
Due
incorporation
|
8.1.2
|
Corporate
power
|
8.1.3
|
Binding
obligations
|
8.1.4
|
No
conflict with other obligations
|
8.1.5
|
No
litigation
|
8.1.6
|
No
filings required
|
8.1.7
|
Choice
of law
|
8.1.8
|
No
immunity
|
8.1.9
|
Consents
obtained
|
8.2
|
Initial
representations and
warranties
|
8.2.1
|
Pari
passu
|
8.2.2
|
No
default under other Indebtedness
|
8.2.3
|
Information
|
8.2.4
|
No
withholding Taxes
|
8.2.5
|
No
Default
|
8.2.6
|
the
Ship
|
(a) |
in
the absolute ownership of the Borrower who will on and after the
Drawdown
Date be the sole, legal and beneficial owner of the
Ship;
|
(b) |
registered
in the name of the Borrower through the Registry as a ship under
the laws
and flag of the Flag State;
|
(c) |
operationally
seaworthy and in every way fit for service;
and
|
(d) |
classed
with the Classification free of all requirements and recommendations
of
the Classification Society;
|
8.2.7
|
Ship’s
employment
|
8.2.8
|
Freedom
from Encumbrances
|
8.2.9
|
Compliance
with Environmental Laws and
Approvals
|
(a) |
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have complied with
the
provisions of all Environmental
Laws;
|
(b) |
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have obtained all
Environmental Approvals and are in compliance with all such Environmental
Approvals; and
|
(c) |
neither
the Borrower nor to the best of the Borrower’s knowledge and belief
(having made due enquiry) any of its Environmental Affiliates has
received
notice of any Environmental Claim that the Borrower or any such
Environmental Affiliate is not in compliance with any Environmental
Law or
any Environmental Approval;
|
8.2.10
|
No
Environmental Claims
|
8.2.11
|
No
potential Environmental Claims
|
8.2.12
|
No
material adverse change
|
8.2.13
|
Copies
true and complete
|
8.3
|
Repetition
of representations and
warranties
|
9
|
Undertakings
|
9.1
|
General
|
9.1.1
|
Notice
of Default
|
9.1.2
|
Consents
and licences
|
9.1.3
|
Use
of proceeds
|
9.1.4
|
Pari
passu
|
9.1.5
|
Financial
statements
|
9.1.6
|
Delivery
of reports
|
9.1.7
|
Provision
of further information
|
9.1.8
|
Obligations
under Security Documents
|
9.1.9
|
Compliance
with Code
|
9.1.10
|
Withdrawal
of DOC and SMC
|
9.1.11
|
Issuance
of DOC and SMC
|
9.1.12
|
ISPS
Code compliance
|
9.1.13
|
Know
your customer information
|
9.2
|
Security
value maintenance
|
9.2.1
|
Security
shortfall
|
(a) |
prepay
such sum in Dollars as will result in the Security Requirement after
such
prepayment (taking into account any other repayment of the Loan made
between the date of the notice and the date of such prepayment) being
equal to the Security Value; or
|
(b) |
constitute
to the satisfaction of the Bank such further security for the Loan
as
shall be acceptable to the Bank having a value for security purposes
(as
determined by the Bank in its absolute discretion) at the date upon
which
such further security shall be constituted which, when added to the
Security Value, shall not be less than the Security Requirement as
at such
date; or
|
(c) |
pay
such additional amount to the credit of the Cash Collateral Account
as
will result in the Security Value after such payment being not less
than
the Security Requirement as at the date of such
payment.
|
9.2.2
|
Valuation
of Ship
|
9.2.3
|
Information
|
9.2.4
|
Costs
|
9.2.5
|
Valuation
of additional security
|
9.2.6
|
Documents
and evidence
|
9.2.7
|
Security
release
|
9.3
|
Negative
undertakings
|
9.3.1
|
Negative
pledge
|
9.3.2
|
No
merger
|
9.3.3
|
Disposals
|
9.3.4
|
Other
business
|
9.3.5
|
Acquisitions
|
9.3.6
|
Other
obligations
|
9.3.7
|
No
borrowing
|
9.3.8
|
Repayment
of borrowings
|
9.3.9
|
Guarantees
|
9.3.10
|
Loans
|
9.3.11
|
Sureties
|
9.3.12
|
Share
capital and distribution
|
9.3.13
|
Change
of Ownership
|
9.3.14
|
Subsidiaries
|
9.3.15
|
Manager
|
9.4
|
Cash
Collateral Account
Undertaking
|
10
|
Conditions
|
10.1
|
Documents
and evidence
|
10.1.1
|
the
Bank, or its duly authorised representative, shall have received,
not
later than two (2) Banking Days before the day on which the Drawdown
Notice for the Loan is given, the documents and evidence specified
in Part
1 of schedule 2 in form and substance satisfactory to the Bank;
and
|
10.1.2
|
the
Bank, or its duly authorised representative, shall have received,
on or
prior to the Drawdown Date, the documents and evidence specified
in Part 2
of schedule 2 in form and substance satisfactory to the
Bank.
|
10.2
|
General
conditions precedent
|
10.2.1
|
the
representations and warranties contained in clauses 8.1 and 8.2 are
true
and correct on and as of each such time as if each was made with
respect
to the facts and circumstances existing at such time;
and
|
10.2.2
|
no
Default shall have occurred and be continuing or would result from
the
making of the Loan.
|
10.3
|
Waiver
of conditions precedent
|
10.4
|
Further
conditions precedent
|
11
|
Events
of Default
|
11.1
|
Events
|
11.1.1
|
Non-payment
:
any Security Party fails to pay any sum payable by it under any of
the
Security Documents at the time, in the currency and in the manner
stipulated in the Security Documents (and so that, for this purpose,
sums
payable on demand shall be treated as having been paid at the stipulated
time if paid within three (3) Banking Days of demand);
or
|
11.1.2
|
Master
Swap Agreement
:
(i) an Event of Default or Potential Event of Default (in each case
as
defined in the Master Swap Agreement) has occurred and is continuing
under
the Master Swap Agreement or (ii) an Early Termination Date (as defined
in
the Master Swap Agreement) has occurred or been or become capable
of being
effectively designated under the Master Swap Agreement or (iii) a
person
entitled to do so gives notice of an Early Termination Date under
section
6(b)(iv) of the Master Swap Agreement or (iv) the Master Swap Agreement
is
terminated, cancelled, suspended, rescinded or revoked or otherwise
ceases
to remain in full force and effect for any reason;
or
|
11.1.3
|
Breach
of Insurance and certain other obligations
:
the Borrower fails to obtain and/or maintain the Insurances (as defined
in, and in accordance with the requirements of, the Security Documents)
or
if any insurer in respect of such Insurances cancels the Insurances
or
disclaims liability by reason, in either case, of mis-statement in
any
proposal for the Insurances or for any other failure or default on
the
part of the Borrower or any other person or the Borrower commits
any
breach of or omits to observe any of the obligations or undertakings
expressed to be assumed by it under clauses 9.2, 9.3 or 9.4;
or
|
11.1.4
|
Breach
of other obligations
:
any Security Party commits any breach of or omits to observe any
of its
obligations or undertakings expressed to be assumed by it under any
of the
Security Documents (other than those referred to in clauses 11.1.1,
11.1.2
and 11.1.3 above) and, in respect of any such breach or omission
which in
the opinion of the Bank is capable of remedy, such action as the
Bank may
require shall not have been taken within fourteen (14) days of the
Bank
notifying the relevant Security Party of such default and of such
required
action; or
|
11.1.5
|
Misrepresentation
:
any representation or warranty made or deemed to be made or repeated
by or
in respect of any Security Party in or pursuant to any of the Security
Documents or in any notice, certificate or statement referred to
in or
delivered under any of the Security Documents is or proves to have
been
incorrect or misleading in any material respect;
or
|
11.1.6
|
Cross-default
:
any Indebtedness of the Borrower is not paid when due or any Indebtedness
of the Borrower becomes (whether by declaration or automatically
in
accordance with the relevant agreement or instrument constituting
the
same) due and payable prior to the date when it would otherwise have
become due (unless as a result of the exercise by the Borrower of
a
voluntary right of prepayment), or any creditor of the Borrower becomes
entitled to declare any such Indebtedness due and payable or any
facility
or commitment available to the Borrower relating to Indebtedness
is
withdrawn, suspended or cancelled by reason of any
|
11.1.7
|
Legal
process
:
any judgment or order made against the Borrower is not stayed or
complied
with within seven (7) days or a creditor attaches or takes possession
of,
or a distress, execution, sequestration or other process is levied
or
enforced upon or sued out against, any of the undertakings, assets,
rights
or revenues of the Borrower and is not discharged within seven (7)
days;
or
|
11.1.8
|
Insolvency
:
the Borrower is unable or admits inability to pay its debts as they
fall
due; suspends making payments on any of its debts or announces an
intention to do so; becomes insolvent; has assets the value of which
is
less than the value of its liabilities (taking into account contingent
and
prospective liabilities); or suffers the declaration of a moratorium
in
respect of any of its Indebtedness;
or
|
11.1.9
|
Reduction
or loss of capital
:
a
meeting is convened by the Borrower for the purpose of passing any
resolution to purchase, reduce or redeem any of its shares;
or
|
11.1.10
|
Winding
up
:
any corporate action, legal proceedings or other procedure or step
is
taken for the purpose of winding up or an order is made or resolution
passed for the winding up of the Borrower or a notice is issued convening
a meeting for the purpose of passing any such resolution;
or
|
11.1.11
|
Administration
:
any petition is presented, notice is given or other step is taken
for the
purpose of the appointment of an administrator of the Borrower or
the Bank
believes that any such petition or other step is imminent or an
administration order is made in relation to the Borrower;
or
|
11.1.12
|
Appointment
of receivers and managers
:
any administrative or other receiver is appointed of the Borrower
or any
part of its assets and/or undertaking or any other steps are taken
to
enforce any Encumbrance over all or any part of the assets of the
Borrower; or
|
11.1.13
|
Compositions
:
any corporate action, legal proceedings or other procedures or steps
are
taken, or negotiations commenced, by the Borrower or by any of its
creditors with a view to the general readjustment or rescheduling
of all
or part of its indebtedness or to proposing any kind of composition,
compromise or arrangement involving such company and any of its creditors;
or
|
11.1.14
|
Analogous
proceedings
:
there occurs, in relation to the Borrower in any country or territory
in
which it carries on business or to the jurisdiction of whose courts
any
part of its assets is subject, any event which, in the reasonable
opinion
of the Bank, appears in that country or territory to correspond with,
or
have an effect equivalent or similar to, any of those mentioned in
clauses
11.1.7 to 11.1.13 (inclusive) or any Security Party otherwise becomes
subject, in any such country or territory, to the operation of any
law
relating to insolvency, bankruptcy or liquidation;
or
|
11.1.15
|
Cessation
of business
:
the Borrower suspends or ceases or threatens to suspend or cease
to carry
on its business; or
|
11.1.16
|
Seizure
:
all or a material part of the undertaking, assets, rights or revenues
of,
or shares or other ownership interests in the Borrower are seized,
nationalised, expropriated or compulsorily acquired by or under the
authority of any government; or
|
11.1.17
|
Invalidity
:
any of the Security Documents shall at any time and for any reason
become
invalid or unenforceable or otherwise cease to remain in full force
and
effect, or if the validity or enforceability of any of the Security
Documents shall at any time and for any reason be contested by any
Security Party which is a party thereto, or if any such Security
Party
shall deny that it has any, or any further, liability thereunder;
or
|
11.1.18
|
Unlawfulness
:
it becomes impossible or unlawful at any time for any Security Party,
to
fulfil any of the covenants and obligations expressed to be assumed
by it
in any of the Security Documents or for the Bank to exercise the
rights or
any of them vested in it under any of the Security Documents or otherwise;
or
|
11.1.19
|
Repudiation
:
any Security Party repudiates any of the Security Documents or does
or
causes or permits to be done any act or thing evidencing an intention
to
repudiate any of the Security Documents;
or
|
11.1.20
|
Encumbrances
enforceable
:
any Encumbrance (other than Permitted Liens) in respect of any of
the
property (or part thereof) which is the subject of any of the Security
Documents becomes enforceable; or
|
11.1.21
|
Material
adverse change
:
there occurs, in the opinion of the Bank, a material adverse change
in the
financial condition of the Borrower by reference to the financial
position
of the Borrower as described by the Borrower to the Bank in the
negotiation of this Agreement; or
|
11.1.22
|
Arrest
:
the Ship is arrested, confiscated, seized, taken in execution, impounded,
forfeited, detained in exercise or purported exercise of any possessory
lien or other claim or otherwise taken from the possession of the
Borrower
and the Borrower shall fail to procure the release of the Ship within
a
period of fourteen (14) days thereafter;
or
|
11.1.23
|
Registration
:
the registration of the Ship under the laws and flag of the Flag
State is
cancelled or terminated without the prior written consent of the
Bank;
or
|
11.1.24
|
Unrest
:
the Flag State becomes involved in hostilities or civil war or there
is a
seizure of power in the Flag State by unconstitutional means if,
in any
such case, such event could in the opinion of the Bank reasonably
be
expected to have a material adverse effect on the security constituted
by
any of the Security Documents; or
|
11.1.25
|
Environment
:
the Borrower and/or any of its Environmental Affiliates fails to
comply
with any Environmental Law or any Environmental Approval or the Ship
is
involved in any incident which gives rise or may give rise to an
Environmental Claim if, in any such case, such non-compliance or
incident
or the consequences thereof could, in the opinion of the Bank, reasonably
be expected to have a material adverse effect on the business, assets,
operations, property or financial condition of the Borrower or any
other
Security Party or on the security constituted by any of the Security
Documents; or
|
11.1.26
|
P&I
:
the Borrower or any other person fails or omits to comply with any
requirements of the protection and indemnity association or other
insurer
with which the Ship is entered for insurance or insured against protection
and indemnity risks (including oil pollution risks) to the effect
that any
cover (including, without limitation, any cover in respect of liability
for Environmental Claims arising in jurisdictions where the Ship
operates
or trades) is or may be liable to cancellation, qualification or
exclusion
at any time; or
|
11.1.27
|
Ownership
:
there is any change in the legal ownership of the shares in the Borrower
from that existing at the date of this Agreement;
or
|
11.1.28
|
Material
events
:
any other event occurs or circumstance arises which, in the opinion
of the
Bank, is likely materially and adversely to affect either (i) the
ability
of any Security Party to perform all or any of its obligations under
or
otherwise to comply with the terms of any of the Security Documents
(including, for the avoidance of doubt, the Master Swap Agreement)
or (ii)
the security created by any of the Security
Documents.
|
11.2
|
Acceleration
|
11.2.1
|
the
obligation of the Bank to make the Commitment available shall be
terminated, whereupon the Commitment shall be reduced to zero forthwith;
and/or
|
11.2.2
|
the
Loan and all interest and commitment commission accrued and all other
sums
payable under the Security Documents have become due and payable,
whereupon the same shall, immediately or in accordance with the terms
of
such notice, become due and
payable.
|
11.3
|
Demand
basis
|
12
|
Indemnities
|
12.1
|
Miscellaneous
indemnities
|
12.1.1
|
any
default in payment by the Borrower of any sum under any of the Security
Documents when due;
|
12.1.2
|
the
occurrence of any other Event of
Default;
|
12.1.3
|
any
prepayment of the Loan or part thereof being made under clauses 5.2,
5.3,
9.2.1 or 13.1, or any other repayment or prepayment of the Loan or
part
thereof being made otherwise than on an Interest Payment Date relating
to
the part of the Loan prepaid or repaid;
or
|
12.1.4
|
the
Loan or part thereof not being made for any reason (excluding any
default
by the Bank) after the Drawdown Notice has been
given,
|
12.2
|
Currency
indemnity
|
12.3
|
Environmental
indemnity
|
13
|
Unlawfulness
and increased costs
|
13.1
|
Unlawfulness
|
13.2
|
Increased
costs
|
13.2.1
|
subject
the Bank to Taxes or change the basis of Taxation of the Bank with
respect
to any payment under any of the Security Documents (other than Taxes
or
Taxation on the overall
|
13.2.2
|
increase
the cost to, or impose an additional cost on, the Bank or its holding
company in making or keeping the Commitment available or maintaining
or
funding all or part of the Loan;
and/or
|
13.2.3
|
reduce
the amount payable or the effective return to the Bank under any
of the
Security Documents; and/or
|
13.2.4
|
reduce
the Bank’s or its holding company’s rate of return on its overall capital
by reason of a change in the manner in which it is required to allocate
capital resources to the Bank’s obligations under any of the Security
Documents; and/or
|
13.2.5
|
require
the Bank or its holding company to make a payment or forego a return
on or
calculated by reference to any amount received or receivable by the
Bank
under any of the Security Documents;
and/or
|
13.2.6
|
require
the Bank or its holding company to incur or sustain a loss (including
a
loss of future potential profits) by reason of being obliged to deduct
all
or part of the Commitment or the Loan from its capital for regulatory
purposes,
|
(a) |
the
Bank shall notify the Borrower in writing of such event promptly
upon its
becoming aware of the same; and
|
(b) |
the
Borrower shall on demand pay to the Bank the amount which the Bank
specifies (in a certificate setting forth the basis of the computation
of
such amount but not including any matters which the Bank or its holding
company regards as confidential) is required to compensate the Bank
and/or
(as the case may be) its holding company for such liability to Taxes,
cost, reduction, payment, foregone return or
loss.
|
13.3
|
Exception
|
14
|
Security
and set-off
|
14.1
|
Application
of moneys
|
14.1.1
|
first
in or towards payment of all unpaid fees and expenses which may be
owing
to the Bank under any of the Security Documents and/or the Master
Swap
Agreement;
|
14.1.2
|
secondly
in or towards payment of any arrears of interest owing in respect
of the
Loan or any part thereof;
|
14.1.3
|
thirdly
in or towards repayment of the Loan (whether the same is due and
payable
or not);
|
14.1.4
|
fourthly
in or towards payment to the Bank for any loss suffered by reason
of any
such payment in respect of principal not being effected on an Interest
Payment Date relating to the part of the Loan
repaid;
|
14.1.5
|
fifthly,
in or towards payment to the Bank of any sum owing to the Bank under
the
Master Swap Agreement;
|
14.1.6
|
sixthly
in or towards payment to the Bank of any other sums owing to it under
any
of the other Security Documents;
and
|
14.1.7
|
seventhly
the surplus (if any) shall be paid to the Borrower or to whomsoever
else
may be entitled to receive such
surplus.
|
14.2
|
Set-off
|
14.2.1
|
The
Borrower authorises the Bank (without prejudice to any of the Bank’s
rights at law, in equity or otherwise), at any time and without notice
to
the Borrower, to apply any credit balance to which the Borrower is
then
entitled standing upon any account of the Borrower with any branch
of the
Bank in or towards satisfaction of any sum due and payable from the
Borrower to the Bank under any of the Security Documents. For this
purpose, the Bank is authorised to purchase with the moneys standing
to
the credit of such account such other currencies as may be necessary
to
effect such application.
|
14.2.2
|
Without
prejudice to its rights hereunder and/or under the Master Swap Agreement,
the Bank may at the same time as, or at any time after, any Default
under
this Agreement or the Borrower’s default under the Master Swap Agreement,
set-off any amount due now or in the future from the Borrower to
the Bank
under this Agreement against any amount due from the Bank to the
Borrower
under the Master Swap Agreement and apply the first amount in discharging
the second amount. The effect of any set-off under this clause 14.2.2
shall be effective to extinguish or, as the case may require, reduce
the
liabilities of the Bank under the Master Swap
Agreement.
|
14.2.3
|
The
Bank shall not be obliged to exercise any right given to it by this
clause
14.2. The Bank shall notify the Borrower forthwith upon the exercise
or
purported exercise of any right of set-off giving full details in
relation
thereto.
|
14.3
|
Further
assurance
|
14.4
|
Conflicts
|
15
|
Accounts
|
15.1
|
Safety
Account
|
15.2
|
Cash
Collateral Account:
withdrawals
|
15.3
|
Application
of accounts
|
15.4
|
Charging
of Cash Collateral Account
|
16
|
Assignment,
transfer and lending
office
|
16.1
|
Benefit
and burden
|
16.2
|
No
assignment by Borrower
|
16.3
|
Assignment
by Bank
|
16.4
|
Transfer
|
16.5
|
Documenting
assignments and transfers
|
16.6
|
Lending
office
|
16.7
|
Disclosure
of information
|
17
|
Notices
and other matters
|
17.1
|
Notices
|
17.1.1
|
be
in writing delivered personally or by first-class prepaid letter
(airmail
if available) or facsimile transmission or other means of
telecommunication in permanent written
form;
|
17.1.2
|
be
deemed to have been received, subject as otherwise provided in the
relevant Security Document, in the case of a letter, when delivered
personally or three (3) days after it has been put in to the post
and, in
the case of a facsimile transmission or other means of telecommunication
in permanent written form, at the time of despatch (provided that
if the
date of despatch is not a business day in the country of the addressee
or
if the time of despatch is after the close of business in the country
of
the addressee it shall be deemed to have been received at the opening
of
business on the next such business day);
and
|
17.1.3
|
be
sent.
|
17.2
|
No
implied waivers, remedies
cumulative
|
17.3
|
English
language
|
18
|
Governing
law and jurisdiction
|
18.1
|
Law
|
18.2
|
Submission
to jurisdiction
|
18.3
|
Contracts
(Rights of Third Parties) Act
1999
|
To:
|
The
Royal Bank of Scotland plc
|
Shipping
Business Centre
|
|
5-10
Great Tower Street
|
|
London
EC3P 3H
|
|
England
|
Dollar
Amount
|
Currency
in which Tranche
interest
Period is to be
outstanding
|
Interest
Period
|
Please
credit the funds
to:
|
|||
(a) |
no
event or circumstance has occurred and is continuing which constitutes
a
Default;
|
(b) |
the
representations and warranties contained in clauses 8.1 and 8.2 of
the
Loan Agreement are true and correct at the date hereof as if made
with
respect to the facts and circumstances existing at such
date;
|
(c) |
the
borrowing to be effected by the drawdown of the Loan will be within
our
corporate powers, has been validly authorised by appropriate corporate
action and will not cause any limit on our borrowings (whether imposed
by
statute, regulation, agreement or otherwise) to be exceeded;
and
|
(d) |
there
has been no material adverse change in our financial position from
that
described by us to the Bank in the negotiation of the Loan
Agreement.
|
|
For
and on behalf of
|
SOFFIVE
SHIPPING CORPORATION
|
1 |
Ship
conditions
|
1.1 |
Registration
and Encumbrances
|
1.2 |
Classification
|
1.3 |
Insurance
|
2 |
Constitutional
documents
|
3 |
Corporate
authorisations
|
(a) |
being
true and correct;
|
(b) |
being
duly passed at meetings of the directors of such Security Party and
of the
shareholders of such Security Party each duly convened and
held;
|
(c) |
not
having been amended, modified or revoked;
and
|
(d) |
being
in full force and effect,
|
4 |
Specimen
signatures
|
5 |
Certificate
of incumbency
|
6 |
Borrower’s
consents and approvals
|
7 |
Other
consents and approvals
|
8 |
Certified
Management Agreement
|
9 |
Insurance
opinion
|
1 |
Security
Documents, letters and other
documents
|
2 |
Mortgage
registration
|
3 |
Notices
of assignment
|
4 |
Cyprus
opinion
|
5 |
Liberian
legal opinion
|
6 |
Further
opinions
|
7 |
Borrower’s
process agent
|
8 |
Manager’s
process agent
|
9 |
Registration
forms
|
10 |
Manager’s
confirmation
|
11 |
SMC/DOC
|
12 |
ISPS
Code
|
12.1 |
evidence
satisfactory to the Bank that the Ship is subject to a ship security
plan
which complies with the ISPS Code;
and
|
12.2 |
a
copy certified (in a certificate dated no earlier than five (5) Banking
Days prior to the Drawdown Date) as a true and complete copy by an
officer
of the Borrower of the ISSC for the Ship and the continuous synopsis
record required by the ISPS Code in respect of the
Ship;
|
13 |
Fee
|
14 |
Due
Diligence
|
1 |
The
Additional Cost is an addition to the interest rate to compensate
the Bank
for the cost of compliance with (a) the requirements of the Bank
of
England and/or the Financial Services Authority (or, in either case,
any
other authority which replaces all or any of its functions) or (b)
the
requirements of the European Central
Bank.
|
2 |
On,
or as soon as possible after, the first day of each Interest Period,
the
Bank shall calculate, as a percentage rate, its Additional Cost in
accordance with the following paragraphs. The Additional Cost will
be
expressed as a percentage rate per annum and will be rounded up to
four
decimal places.
|
3. |
The
Additional Cost when the Bank lends from an office in any member
state of
the European Union that has adopted or adopts the Euro as its lawful
currency in accordance with legislation of the European Union relating
to
Economic and Monetary Union will be the percentage (expressed as
a per
annum rate) which is its reasonable determination of the cost of
complying
with the minimum reserve requirements of the European Central Bank
in
respect of loans made from that
office.
|
4. |
The
Additional Cost for the Bank lending from an office in the United
Kingdom
will be calculated as follows:
|
(a) |
in
relation to a sterling Loan:
|
AB
+ C(B - D) + Ex 0.01
|
per
cent per annum
|
|
100
- (A + C)
|
Ex0.01
|
per
cent. per annum
|
|
300
|
A
|
is
the percentage of Eligible Liabilities (assuming these to be in excess
of
any stated minimum) which that Lender is from time to time required
to
maintain as an interest free cash ratio deposit with the Bank of
England
to comply with cash ratio
requirements.
|
B
|
is
the percentage rate of interest (excluding the Margin and the Additional
Cost and, if any part of the Loan has not been paid on its due date,
the
additional rate of interest specified in clause 3.4 payable for the
relevant Interest Period on the
Loan.
|
C
|
is
the percentage (if any) of Eligible Liabilities which that Lender
is
required from time to time to maintain as interest bearing Special
Deposits with the Bank of England.
|
D
|
is
the percentage rate per annum payable by the Bank of England to the
Agent
on interest bearing Special
Deposits.
|
E
|
is
designed to compensate the Bank for amounts payable under the Fees
Rules
and is calculated by the Bank as being the most recent rate of charge
payable by it to the Financial Services Authority under the Fees
Rules in
respect of the relevant financial year of the Financial Services
Authority
(calculated for this purpose by the Bank as being the average of
the Fee
Tariffs applicable to the Bank for that financial year) and expressed
in
pounds per £1,000,000 of the Tariff Base of the
Bank.
|
5. |
For
the purposes of this schedule:
|
(a)
|
“Eligible
Liabilities”
and
“Special
Deposits”
have
the meanings given to them from time to time under or pursuant to
the Bank
of England Act 1998 or (as may be appropriate) by the Bank of
England;
|
(b)
|
“Fees
Rules”
means
the rules on periodic fees contained in the Supervision manual of
the
Financial Services Authority’s Handbook of rules and guidance or such
other law or regulation as may be in force from time to time in respect
of
the payment of fees for the acceptance of
deposits;
|
(c)
|
“Fee
Tariffs”
means
the fee tariffs specified in the Fees Rules under the activity group
A.1
Deposit acceptors (ignoring any minimum fee or zero rated fee required
pursuant to the Fees Rules but taking into account any applicable
discount
rate);
|
(d)
|
“Tariff
Base”
has
the meaning given to it in, and will be calculated in accordance
with, the
Fees Rules; and
|
(e)
|
“pounds”
and
“E” means the lawful currency of the United
Kingdom.
|
6. |
In
application of the above formulae, A, B, C and D will be included
in the
formulae as figures and not as percentages (i.e. 5 per cent. will
be
included in the formula as 5 and not a 0.05). A negative result obtained
by subtracting D from B shall be taken as zero. The resulting figures
shall be rounded to four decimal
places.
|
7. |
Any
determination by the Bank in accordance with this schedule in relation
to
a formula, the Additional Cost or any amount payable to it shall,
in the
absence of manifest error, be conclusive and binding on the
Borrower.
|
8. |
The
Bank may from time to time, after consultation with the Borrower,
determine and notify the Borrower of any amendments which need to
be made
to this schedule to comply with any change in law, regulation or
any
requirements from time to time imposed by the Bank of England, the
Financial Services Authority or the European Central Bank (or, in
any
case, any other authority which replaces all or any of its functions)
and
any such determination shall, in the absence of manifest error, be
conclusive and binding on the
Borrower.
|
|
For
and on behalf of
|
SOFFIVE
SHIPPING CORPORATION
|
I.M.O.
No.
CALL
SIGN
|
Name
of Ship
|
Year
of Registry or Date of
Provisional
Registry/ Port of
Registry
|
||
9323912
C4VZ2
|
Sophia
|
2007,
Limassol, Cyprus
|
||
Whether
a Sailing,
Steam
or Motor Ship
|
Horse
Power of Engines, if any
|
|||
Motor
Ship
|
10,300
kw
|
Metres
|
|
Length
(Article 2(8))
|
221,07
|
Breadth
(Regulation 2(3))
|
36,50
|
Moulded
depth amidships to Upper Deck (Regulation 2(2))
|
19.90
|
Number
of Tons
|
|
Gross:
46,982
|
Net:
26,950
|
SIGNED,
SEALED AND DELIVERED
as
a
DEED
|
)
|
||
by
|
)
|
||
as
the duly authorised attorney-in-fact
|
)
|
||
of
|
)
|
||
SOFFIVE
SHIPPING CORPORATION
|
)
|
||
in
the presence of:-
|
)
|
||
|
(Seal)
|
|
Registrar
of Cyprus Ships
|
SIGNED,
SEALED AND DELIVERED
|
)
|
|
by
|
)
|
|
as
the duly authorised Attorney of
|
)
|
|
)
|
||
pursuant
to a Power of Attorney
|
)
|
|
dated
|
)
|
|
in
the presence of:-
|
)
|
|
|
||
Name:
|
||
Title:
|
||
Seat.
|
||
of
Consular Officer/Notary Public/Certifying Officer
|
|
(Seal)
|
|
Registrar
of Cyprus Ships
|
Clause
|
Page
|
||
1
|
Definitions
|
1
|
|
2
|
Representations
and warranties
|
5
|
|
3
|
Mortgage
of the Ship
|
6
|
|
4
|
Covenant
to pay
|
6
|
|
5
|
Continuing
security and other matters
|
6
|
|
6
|
Covenants
|
7
|
|
7
|
Powers
of Mortgagee to protect security and remedy defaults
|
14
|
|
8
|
Powers
of Mortgagee on Event of Default
|
15
|
|
9
|
Application
of moneys
|
16
|
|
10
|
Remedies
cumulative and other provisions
|
17
|
|
11
|
Costs
and indemnity
|
17
|
|
12
|
Attorney
|
18
|
|
13
|
Further
assurance
|
18
|
|
14
|
Notices
|
19
|
|
15
|
Counterparts
|
19
|
|
16
|
Severability
of provisions
|
19
|
|
17
|
Law,
jurisdiction and language
|
19
|
(1)
|
SOFFIVE
SHIPPING CORPORATION
whose
registered office is at 80 Broad Street,
Monrovia,
|
(2)
|
THE
ROYAL BANK OF SCOTLAND plc
whose
registered office is at 36 St. Andrew Square, Edinburgh EH2 2YB,
Scotland,
acting for the purposes of this Deed through its branch at The Shipping
Business Centre, 5-10 Great Tower Street, London EC3P 3HX, England
(the
“Mortgagee”).
|
(A) |
the
Owner is the sole, absolute and unencumbered, legal and beneficial
owner
of one hundred one hundredth (100/100th) shares in the Ship described
in
clause 1.2;
|
(B) |
by
a Loan Agreement dated 19 November 2007 and made between (1) the
Owner
(therein referred to as the
“Borrower”)
and
(2) the Mortgagee (therein referred to as the
“Bank”),
the
Mortgagee agreed (inter alia) to advance by way of a multicurrency
loan to
the Owner, upon the terms and conditions therein contained, a sum
of up to
Forty five million Dollars ($45,000,000) or the Equivalent Amount
in an
Optional Currency or Optional
Currencies;
|
(C) |
by
a Master Swap Agreement dated 19 November 2007 and made between (1)
the
Owner and (2) the Mortgagee, the Mortgagee agreed the terms and conditions
upon which it would enter into an interest rate swap transaction
or
transactions with the Owner in respect of the Loan (whether in whole
or in
part as the case may be from time to
time);
|
(D) |
the
Owner has executed in favour of the Mortgagee a statutory mortgage
of even
date herewith in account current form constituting a first priority
Cyprus
mortgage of one hundred one hundredth (100/100th) shares in the said
Ship;
and
|
(E) |
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the Deed
of
Covenant referred to in the Loan Agreement but shall nonetheless
continue
in full force and effect notwithstanding any discharge of the
Mortgage.
|
1 |
Definitions
|
1.1 |
Defined
expressions
|
1.2 |
Definitions
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including, without limitation, Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee or any Receiver in connection with the exercise of
the
powers referred to in or granted by this Deed or otherwise payable
by the
Owner in accordance with clause 11;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee or any Receiver until the date of receipt or recovery
thereof (whether before or after judgment) at a rate per annum calculated
in accordance with clause 3.4 of the Loan Agreement (as conclusively
certified by the Mortgagee or such Receiver, as the case may
be);
|
(a) |
the
Ship;
|
(b) |
the
Insurances;
|
(c) |
the
Earnings; and
|
(d) |
any
Requisition Compensation;
|
(a)
|
the
actual, constructive, compromised or arranged total loss of the Ship;
or
|
(b)
|
the
Compulsory Acquisition of the Ship;
or
|
(c)
|
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Owner from such hijacking,
theft, condemnation, capture, seizure, arrest, detention or confiscation
within thirty (30) days after the occurrence thereof;
and
|
1.3 |
Insurance
terms
|
1.3.1 |
“excess
risks”
means
the proportion (if any) of claims for general average, salvage and
salvage
charges and under the ordinary collision clause not recoverable in
consequence of the value at which the Ship is assessed for the purpose
of
such claims exceeding her insured
value;
|
1.3.2 |
“protection
and indemnity risks”
means
the usual risks (including oil pollution and freight, demurrage and
defence cover) covered by a United Kingdom protection and indemnity
association or a protection and indemnity association which is managed
in
London (including, without limitation, 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 8 of the Institute Time Clauses (Hulls)
(1/11/95) or the Institute Amended Running Down Clause (1/11/95)
or any
equivalent provision); and
|
1.3.3 |
“war
risks”
includes
those risks covered by the standard form of English marine policy
with
Institute War and Strikes Clauses (Time) (1/10/83) attached or similar
cover.
|
1.4 |
Construction
of Mortgage terms
|
1.4.1 |
references
to “interest” shall be construed as references to interest covenanted to
be paid in accordance with clause 4.1.2 and any interest specified
in
paragraph (b) of the definition of “Expenses” in clause
1.2;
|
1.4.2 |
references
to “principal” shall be construed as references to all moneys (other than
interest) for the time being comprised in the Outstanding
Indebtedness;
|
1.4.3 |
the
expression “all sums for the time being owing to the Mortgagee” means the
whole of the Outstanding Indebtedness;
and
|
1.4.4 |
the
expression “Account Current” means an account or accounts which shall be
kept by the Owner with the Mortgagee and from which the Mortgagee
may
(without giving notice or making any demand) debit any part of the
Outstanding Indebtedness.
|
1.5 |
Headings
|
1.6 |
Construction
of certain terms
|
1.6.1 |
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Deed and references to this Deed include its
schedules;
|
1.6.2 |
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.6.3 |
words
importing the plural shall include the singular and vice
versa;
|
1.6.4 |
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.6.5 |
references
to a “
guarantee
”
shall include references to an indemnity or other assurance against
financial loss including, without limitation, an obligation to purchase
assets or services as a consequence of a default by any other person
to
pay any Indebtedness and
“guaranteed”
shall
be construed accordingly; and
|
1.6.6 |
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.7 |
Conflict
with Loan Agreement
|
2 |
Representations
and warranties
|
2.1 |
The
Owner hereby represents and warrants to the Mortgagee
that:
|
2.1.1 |
it
is the sole, absolute, legal and beneficial owner of the
Ship;
|
2.1.2 |
the
Ship is not subject to any charter which, if entered into after the
date
of this Deed, would have required the consent of the Mortgagee under
clause 6.1.15, and there is no existing or intended agreement or
arrangement whereby the Earnings may be shared with any person other
than
the Mortgagee as provided in the General
Assignment;
|
2.1.3 |
neither
the Mortgaged Property nor any part thereof is subject to any Encumbrance
save as constituted by the Mortgage and this Deed and the General
Assignment or otherwise permitted by the terms of this Deed;
and
|
2.1.4 |
it
has power and is entitled to register the Ship under the laws and
flag of
Cyprus.
|
3 |
Mortgage
of the Ship
|
4 |
Covenant
to pay
|
4.1 |
In
consideration of the advance by the Mortgagee to the Owner on or
before
the date hereof of the total principal sum of Forty five million
Dollars
($45,000,000) or the Equivalent Amount in an Optional Currency
or Optional
Currencies (receipt of which sum the Owner hereby acknowledges)
in
accordance with the provisions of the Loan Agreement, the Owner
hereby
covenants with the Mortgagee:
|
4.1.1 |
to
repay the Loan by the instalments and on the dates referred to and
otherwise in the manner and upon the terms set out in the Loan
Agreement;
|
4.1.2 |
to
pay interest on the Loan, and on any overdue interest or other moneys
payable under the Loan Agreement, at the rate or rates from time
to time
applicable thereto in the manner and upon the terms set out in the
Loan
Agreement;
|
4.1.3 |
to
pay all other moneys payable by the Owner under the Security Documents
or
any of them at the times and in the manner therein specified;
and
|
4.1.4 |
to
pay and discharge to the Mortgagee the Master Swap Agreement Liabilities
on their due date.
|
5 |
Continuing
security and other matters
|
5.1 |
Continuing
Security
|
5.1.1 |
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance by the Owner with all of the covenants, terms and conditions
contained in the Security Documents to which the Owner is or is to
be a
party, express or implied and the security so created shall not be
satisfied by any intermediate payment or satisfaction of any part
of the
amount hereby and thereby secured (or by any settlement of accounts
between the Owner or any other person who may be liable to the Mortgagee
in respect of the Outstanding Indebtedness or any part thereof and
the
Mortgagee);
|
5.1.2 |
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any other of the Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
5.1.3 |
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
5.2 |
Rights
additional
|
5.3 |
No
enquiry
|
5.4 |
Obligations
of Owner and Mortgagee
|
5.5 |
Discharge
of Mortgage
|
6 |
Covenants
|
6.1 |
The
Owner hereby covenants with the Mortgagee and undertakes throughout
the
Security Period:
|
6.1.1 |
Insurance
|
(a) |
Insured
risks, amounts and terms
|
(i) |
against
fire and usual marine risks (including excess risks) and war risks,
on an
agreed value basis, in such amounts (but not in any event less than
whichever shall be the greater of the market value of the Ship for
the
time being and One hundred and ten per cent (110%) of the aggregate
of the
Loan and the Master Swap Agreement Liabilities) and upon such terms
as
shall from time to time be approved in writing by the Mortgagee;
and
|
(ii) |
against
protection and indemnity risks (including pollution risks for the
highest
amount in respect of which cover is or may become available for ships
of
the same type, size, age and flag as the Ship and a freight, demurrage
and
defence cover) for the full value and tonnage of the Ship (as approved
in
writing by the Mortgagee) and upon such terms as shall from time
to time
be approved in writing by the Mortgagee;
and
|
(iii) |
in
respect of such other matters of whatsoever nature and howsoever
arising
in respect of which insurance would be maintained by a prudent owner
of
the Ship;
|
(b) |
Approved
brokers, insurers and associations
|
(c) |
Fleet
liens, set-off and cancellation
|
(d) |
Payment
of premiums and calls
|
(e) |
Renewal
|
(f) |
Guarantees
|
(g) |
Hull
policy documents, notices, loss payable clauses and brokers’
undertakings
|
(h) |
Associations’
loss payable clauses, undertakings and
certificates
|
(i) |
Extent
of cover and exclusions
|
(j) |
Correspondence
with brokers and associations
|
(k) |
Independent
report
|
(I) |
Collection
of claims
|
(m) |
Employment
of Ship
|
(n) |
Application
of recoveries
|
(o) |
Assignment
of Insurances
|
6.1.2 |
Ship’s
name and registration
|
6.1.3 |
Repair
|
6.1.4 |
Modification;
removal of parts; equipment owned by third
parties
|
(a) |
make
any modification to the Ship in consequence of which her structure,
type
or performance characteristics could or might be materially altered
or her
value materially reduced; or
|
(b) |
remove
any material part of the Ship or any equipment the value of which is such
that its removal from the Ship would materially reduce the value
of the
Ship without replacing the same with equivalent parts or equipment
which
are owned by the Owner free from Encumbrances;
or
|
(c) |
install
on the Ship any equipment owned by a third party which cannot be
removed
without causing damage to the structure or fabric of the
Ship;
|
6.1.5 |
Maintenance
of class; compliance with
regulations
|
6.1.6 |
Surveys
|
6.1.7 |
Inspection
|
6.1.8 |
Prevention
of and release from arrest
|
6.1.9 |
Employment
|
6.1.10 |
Information
|
6.1.11 |
Notification
of certain events
|
(a) |
any
damage to the Ship requiring repairs the cost of which will or might
exceed the Casualty Amount;
|
(b) |
any
occurrence in consequence of which the Ship has or may become a Total
Loss;
|
(c) |
any
requisition of the Ship for hire;
|
(d) |
any
requirement or recommendation made by any insurer or the Classification
Society or by any competent authority which is not, or cannot be,
complied
with in accordance with its terms;
|
(e) |
any
arrest or detention of the Ship or any exercise or purported exercise
of a
lien or other claim on the Ship or the Earnings or Insurances or
any part
thereof;
|
(f) |
any
petition or notice of meeting to consider any resolution to wind
up the
Owner (or any event analogous thereto under the laws of the place
of its
incorporation);
|
(g) |
the
occurrence of any Default; or
|
(h) |
the
occurrence of any Environmental Claim against the Owner or the Ship
or any
incident, event or circumstances which may give rise to any such
Environmental Claim;
|
6.1.12 |
Payment
of outgoings and evidence of
payments
|
6.1.13 |
Encumbrances
|
6.1.14 |
Sale
or other disposal
|
6.1.15 |
Chartering
|
(a) |
on
demise charter for any period;
|
(b) |
by
any time or consecutive voyage charter for a term which exceeds or
which
by virtue of any optional extensions therein contained may exceed
thirteen
(13) months’ duration;
|
(c) |
on
terms whereby more than two (2) months’ hire (or the equivalent) is
payable in advance; and
|
(d) |
below
the market rate prevailing at the time when the Ship is fixed or
other
than on arms’ length terms;
|
6.1.16 |
Sharing
of Earnings
|
6.1.17 |
Payment
of Earnings
|
6.1.18 |
Repairers’
liens
|
6.1.19 |
Manager
|
6.1.20 |
Registration
of Mortgage
|
6.1.21 |
Notice
of Mortgage
|
6.1.22 |
Conveyance
on default
|
6.1.23 |
Anti-drug
abuse
|
6.1.24 |
Compliance
with Environmental Laws
|
7 |
Powers
of Mortgagee to protect security and remedy
defaults
|
7.1 |
Protective
action
|
7.2 |
Remedy
of defaults
|
7.2.1 |
if
the Owner fails to comply with any of the provisions of clause
6.1.1, the
Mortgagee shall be entitled (but not bound) to effect and thereafter
to
maintain all such insurances upon the Ship as in its discretion
it may
think fit in order to procure the compliance with such provisions
or
alternatively, to require the Ship (at the Owner’s risk) to remain in, or
to proceed to and remain in a port designated by the Mortgagee
until such
provisions are fully complied
with;
|
7.2.2 |
if
the Owner fails to comply with any of the provisions of clauses
6.1.3,
6.1.5 or 6.1.6, the Mortgagee shall be entitled (but not bound)
to arrange
for the carrying out of such repairs, changes or surveys as it
may deem
expedient or necessary in order to procure the compliance with
such
provisions; and
|
7.2.3 |
if
the Owner fails to comply with any of the provisions of clause
6.1.8, the
Mortgagee shall be entitled (but not bound) to pay and discharge
all such
debts, damages, liabilities and outgoings as are therein mentioned
and/or
to take any such measures as it may deem
|
8 |
Powers
of Mortgagee on Event of
Default
|
8.1 |
Powers
|
8.1.1 |
to
take possession of the Ship;
|
8.1.2 |
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
8.1.3 |
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of any other part of the Mortgaged Property, and to
take
over or institute (if necessary using the name of the Owner) all
such
proceedings in connection therewith as the Mortgagee in its absolute
discretion thinks fit, and, in the case of the Insurances, to permit
the
brokers through whom collection or recovery is effected to charge
the
usual brokerage therefor;
|
8.1.4 |
to
discharge, compound, release or compromise claims in respect of the
Ship
or any other part of the Mortgaged Property which have given or may
give
rise to any charge or lien or other claim on the Ship or any other
part of
the Mortgaged Property or which are or may be enforceable by proceedings
against the Ship or any other part of the Mortgaged
Property;
|
8.1.5 |
to
sell the Ship or any share or interest therein with or without prior
notice to the Owner, and with or without the benefit of any charterparty,
and free from any claim by the Owner (whether in admiralty, in equity,
at
law or by statute) by public auction or private contract, at such
place
and upon such terms as the Mortgagee in its absolute discretion may
determine, with power to postpone any such sale, or otherwise to
sell the
Ship pursuant to the Mortgagee’s statutory power of sale under section 35
of the Merchant Shipping (Registration of Ships, Sales and Mortgages)
Law
of 1963 (as amended) and without being answerable for any loss occasioned
by such sale or resulting from postponement thereof and with power,
where
the Mortgagee purchases the Ship, to make payment of the sale price
by
making an equivalent reduction in the amount of the Outstanding
Indebtedness in the manner referred to in clause
9.1;
|
8.1.6 |
to
manage, insure, maintain and repair the Ship, and to employ, sail
or lay
up the Ship in such manner and for such period as the Mortgagee,
in its
absolute discretion, deems expedient accounting only for net profits
arising from any such employment;
and
|
8.1.7 |
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 8.1.
|
8.2 |
Receiver
|
8.2.1 |
Appointment
|
8.2.2 |
Remuneration
|
8.2.3 |
Liability
of mortgagee in possession
|
8.3 |
Dealings
with Mortgagee or Receiver
|
9 |
Application
of moneys
|
9.1 |
Application
|
9.2 |
Shortfalls
|
10 |
Remedies
cumulative and other
provisions
|
10.1 |
No
implied waivers; remedies
cumulative
|
10.2 |
Delegation
|
10.3 |
Incidental
powers
|
11 |
Costs
and indemnity
|
11.1 |
Costs
|
11.2 |
Mortgagee’s
and Receiver’s indemnity
|
12 |
Attorney
|
12.1 |
Power
|
12.2 |
Exercise
of power
|
12.3 |
Filings
|
13 |
Further
assurance
|
14 |
Notices
|
15 |
Counterparts
|
16 |
Severability
of provisions
|
17 |
Law,
jurisdiction and language
|
17.1 |
Law
|
17.2 |
Submission
to jurisdiction
|
SOFFIVE
SHIPPING CORPORATION
|
(1)
|
and
|
|
THE
ROYAL BANK OF SCOTLAND plc
|
(2)
|
Clause
|
Page
|
|||
1
|
Definitions
|
1
|
||
2
|
Assignment
and application of funds
|
4
|
||
3
|
Continuing
security and other matters
|
6
|
||
4
|
Powers
of Mortgagee to protect security and remedy defaults
|
7
|
||
5
|
Powers
of Mortgagee on Event of Default
|
7
|
||
6
|
Attorney
|
8
|
||
7
|
Further
assurance
|
8
|
||
8
|
Costs
and indemnities
|
9
|
||
9
|
Remedies
cumulative and other provisions
|
9
|
||
10
|
Notices
|
10
|
||
11
|
Counterparts
|
10
|
||
12
|
Law
and jurisdiction
|
10
|
||
Schedule
1
Forms
of Loss Payable Clauses
|
11
|
|||
Schedule
2
Form
of Notice of Assignment of Insurances
|
12
|
(1) |
SOFFIVE
SHIPPING CORPORATION
a
corporation incorporated in Liberia whose registered office is at
80 Broad
Street, Monrovia, Republic of Liberia (the
“Owner”);
and
|
(2) |
THE
ROYAL BANK OF SCOTLAND plc
a
company incorporated in Scotland whose registered office is at 36
St.
Andrew Square, Edinburgh EH2 2YB, Scotland, acting for the purposes
of
this Deed through its branch at The Shipping Business Centre, 5-10
Great
Tower Street, London, EC3P 3HX, England (the
“Mortgagee”).
|
(A) |
by
an Agreement (the
“Loan
Agreement”)
dated
19 November 2007 and made between the Owner (1) (therein referred
to as
the
“Borrower”)
and
the Mortgagee (2) (therein referred to as the
“Bank”)
the
Mortgagee agreed (inter alia) to advance by way of a multicurrency
loan to
the Owner, upon the terms and conditions therein contained the sum
of up
to Forty five million Dollars ($45,000,000) or the Equivalent Amount
in an
Optional Currency or Optional Currencies (the
“Loan”);
|
(B) |
by
a Master Swap Agreement dated 19 November 2007 and made between (1)
the
Owner and (2) the Mortgagee, the Mortgagee agreed the terms and conditions
upon which it would enter into an interest rate swap transaction
or
transactions with the Owner in respect of the Loan (whether in whole
or in
part as the case may be from time to
time);
|
(C) |
pursuant
to the Loan Agreement there has been or will be executed by the Owner
in
favour of the Mortgagee a first priority Cyprus statutory ship mortgage
in
account current form and deed of covenant collateral thereto (together
the
“Mortgage”)
on
the motor vessel
Sophia
documented
in the name of the Owner under the laws and flag of the Republic
of Cyprus
under IMO Number 9323912 (the
“Ship”)
and
the Mortgage of even date herewith has been or will be registered
in the
Registry of Cyprus Ships as security for the payment by the Owner
of the
Outstanding Indebtedness (as that expression is defined in the Mortgage);
and
|
(D) |
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the General
Assignment referred to in the Loan Agreement but shall nonetheless
continue in full force and effect notwithstanding any discharge of
the
Mortgage.
|
1 |
Definitions
|
1.1
|
Defined
expressions
|
1.2
|
Definitions
|
(a) |
the
Earnings;
|
(b) |
the
Insurances; and
|
(c) |
any
Requisition Compensation;
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including without limitation Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee in connection with the exercise of the powers referred
to in
or granted by the Loan Agreement, the Mortgage, this Deed or any
other of
the Security Documents or otherwise payable by the Owner in accordance
with clause 11 of the Mortgage or clause 8;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee until the date of receipt or recovery thereof (whether
before or after judgment) at a rate per annum calculated in accordance
with clause 3.4 of the Loan Agreement (as conclusively certified
by the
Mortgagee);
|
1.3
|
Headings
|
1.4
|
Construction
of certain terms
|
1.4.1 |
references
to clauses and schedules are to be construed as references to clauses
of
and schedules to this Deed and references to this Deed include its
schedules;
|
1.4.2 |
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.4.3 |
words
importing the plural shall include the singular and vice
versa;
|
1.4.4 |
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.5 |
references
to a
“guarantee”
include
references to an indemnity or other assurance against financial loss
including, without limitation, an obligation to purchase assets or
services as a
|
1.4.6 |
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.5
|
Conflict
with Loan Agreement
|
2
|
Assignment
and application of funds
|
2.1
|
Assignment
|
2.1.1 |
Earnings
|
2.1.2 |
Insurances
|
(a)
|
any
moneys payable under the Insurances, other than any moneys payable
under
any loss of earnings insurance, shall be payable in accordance with
the
terms of the relevant Loss Payable Clause and the Mortgagee will
not in
the meantime give any notification to the contrary to the insurers
as
contemplated by the Loss Payable
Clauses;
|
(b)
|
any
insurance moneys received by the Mortgagee in respect of any major
casualty (as specified in the relevant Loss Payable Clause) shall,
unless
prior to receipt or whilst such moneys are in the hands of the Mortgagee
there shall have occurred a Default (whereupon such insurance monies
shall
be applied in accordance with clause 2.3 or clause 2.6 (as the case
may
be)), be paid over to the Owner upon the Owner furnishing evidence
satisfactory to the Mortgagee that all loss and damage resulting
from such
casualty has been properly made good and repaired, and that all repair
accounts and other liabilities whatsoever in connection with the
casualty
have been fully paid and discharged by the Owner, provided however
that
the insurers with whom the fire and usual marine risks insurances
are
effected may, in the case of a major casualty, and with the previous
consent in writing of the Mortgagee, make payment on account of repairs
in
the course of being effected; and
|
(c)
|
any
moneys payable under any loss of earnings insurance shall be payable
in
accordance with the terms of the relevant Loss Payable Clause and
shall be
subject to such provisions of this clause 2 as shall apply to Earnings
and
the Mortgagee will not give any notification to the insurers as
contemplated in such Loss Payable Clause unless
|
2.2
|
Notice
|
2.3
|
Application
|
2.3.1 |
recovery
under the Insurances (other than under any loss of earnings insurance
and
any such sum or sums as may have been received by the Mortgagee in
accordance with the relevant Loss Payable Clause in respect of a
major
casualty as therein defined and paid over to the Owner as provided
in
clause 2.1.:2(b) or which fall to be otherwise applied under clause
2.6);
and
|
2.3.2 |
Requisition
Compensation,
|
2.4
|
Shortfalls
|
2.5
|
Application
of Earnings received by
Mortgagee
|
2.5.1 |
if
received by the Mortgagee, or in the hands of the Mortgagee, prior
to the
occurrence of an Event of Default be retained by the Mortgagee and
shall
be paid over by the Mortgagee to the Owner at such times, in such
amounts
and for such purposes and/or shall be applied by the Mortgagee in
or
towards satisfaction of any sums from time to time accruing due and
payable by the Owner under the Security Documents or any of them
or by
virtue of payment demanded thereunder, in each case as the Mortgagee
may
in its absolute discretion determine;
and
|
2.5.2 |
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.5.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.6
|
Application
of Insurances received by
Mortgagee
|
2.6.1 |
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of a Default but prior to the occurrence of an Event of
Default, be retained by the Mortgagee and shall be paid over by the
Mortgagee to the Owner at such times, in such amounts and for such
purposes and/or shall be applied by the Mortgagee in or towards
satisfaction of any sums from time to time accruing due and payable
by the
Owner under the Security Documents or any of them or by virtue of
payment
demanded thereunder, in each case as the Mortgagee may in its absolute
discretion determine; and
|
2.6.2 |
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.6.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.7
|
Use
of Owners name
|
2.8
|
Reassignment
|
3
|
Continuing
security and other matters
|
3.1
|
Continuing
security
|
3.1.1 |
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance with all of the covenants, terms and conditions contained
in
the Security Documents, express or implied, and that the security
so
created shall not be satisfied by any intermediate payment or satisfaction
of any part of the amount hereby and thereby secured (or by any settlement
of accounts between the Owner or any other person who may be liable
to the
Mortgagee in respect of the Outstanding Indebtedness or any part
thereof
and the Mortgagee);
|
3.1.2 |
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any other of the Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
3.1.3 |
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
3.2
|
Rights
additional
|
3.3
|
No
enquiry
|
3.4
|
Obligations
of Owner and Mortgagee
|
3.5
|
Discharge
of Mortgage
|
4
|
Powers
of Mortgagee to protect security and remedy
defaults
|
4.1
|
Protective
action
|
4.2
|
Remedy
of defaults
|
5
|
Powers
of Mortgagee on Event of
Default
|
5.1
|
Powers
|
5.1.1 |
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims)
|
5.1.2 |
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of the Earnings or Requisition Compensation or any
part
thereof, and to take over or institute (if necessary using the name
of the
Owner) all such proceedings in connection therewith as the Mortgagee
in
its absolute discretion thinks fit, and, in the case of the Insurances,
to
permit any brokers through whom collection or recovery is effected
to
charge the usual brokerage
therefor;
|
5.1.3 |
to
discharge, compound, release or compromise claims in respect of the
Earnings, Insurances or Requisition Compensation or any part thereof
which
have given or may give rise to any charge or lien or other claim
on the
Earnings, Insurances or Requisition Compensation or any part thereof
or
which are or may be enforceable by proceedings against the Earnings,
Insurances or Requisition Compensation or any part thereof;
and
|
5.1.4 |
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 5.1.
|
6
|
Attorney
|
6.1
|
Appointment
|
6.2
|
Exercise
of power
|
6.3
|
Filings
|
7
|
Further
assurance
|
8
|
Costs
and indemnities
|
8.1
|
Costs
|
8.2
|
Mortgagee’s
indemnity
|
9
|
Remedies
cumulative and other
provisions
|
9.1
|
No
implied waivers; remedies
cumulative
|
9.2
|
Delegation
|
9.3
|
Incidental
powers
|
10
|
Notices
|
11
|
Counterparts
|
12
|
Law
and jurisdiction
|
12.1
|
Law
|
12.2
|
Submission
to jurisdiction
|
12.3
|
Contracts
(Rights of Third Parties) Act
1999
|
1
|
Hull
and machinery (marine and war
risks)
|
(a)
|
all
claims hereunder in respect of an actual or constructive or compromised
or
arranged total loss, and all claims in respect of a major casualty
(that
is to say any casualty the claim in respect of which exceeds $500,000
(or
the equivalent in any other currency) inclusive of any deductible)
shall
be paid in full to the Mortgagee or to its order;
and
|
(b)
|
all
other claims hereunder shall be paid in full to the Owner or to its
order,
unless and until the Mortgagee shall have notified the insurers hereunder
to the contrary, whereupon all such claims shall be paid to the Mortgagee
or to its order.
|
2
|
Protection
and indemnity risks
|
3
|
War
risks
|
4
|
Loss
of earnings
|
|
|
Signed
|
|
For
and on behalf of
|
|
SOFFIVE
SHIPPING CORPORATION
|
|
Dated:
[•]
|
To:
The
Royal Bank of Scotland plc
|
|
The
Shipping Business Centre
|
|
5-10
Great Tower Street
|
|
London
EC3P 3HX
|
|
England
|
|
From:
|
Safety
Management Overseas S.A.
|
Edificio
Torre Universal
|
|
Piso
12 Avenida Federico Boyd
|
|
P.O.
Box 8807 Panama
|
|
Republic
of Panama
|
1
|
Loan
Agreement
|
2
|
Confirmation
of appointment
|
3
|
Representation
and warranty
|
3.1
|
We
hereby represent and warrant that the copy of the Management Agreement
set
out in Appendix 1 to this Letter is a true and complete copy of the
Management Agreement, that the Management Agreement constitutes valid
and
binding obligations of the Manager enforceable in accordance with
its
terms and that there have been no amendments or variations thereto
or
defaults thereunder by the Manager or, to the best of the Manager’s
knowledge and belief, the Borrower.
|
3.2
|
We
hereby confirm that the representations and warranties set out in
clauses
8.2.9, 8.2.10 and 8.2.11 of the Loan Agreement are true and correct
in all
respects.
|
4
|
Undertakings
|
4.1
|
the
Manager will not agree or purport to agree to any amendment or variation
of the Management Agreement without the prior written consent of
the
Bank;
|
4.2
|
the
Manager will procure that any sub-manager appointed by it pursuant
to the
provisions of the Management Agreement will, on or before the date
of such
appointment, enter into an undertaking in favour of the Bank in
substantially the same form (mutatis mutandis) as this
Letter;
|
4.3
|
the
Manager will not, without the prior written consent of the Bank,
take any
action or institute any proceedings or make or assert any claim on
or in
respect of the Ship or its policies and contracts of insurance (which
expression includes all entries of the Ship in a protection and indemnity
or war risks association) which are from time to time during the
Security
Period (as such term is defined in the General Assignment) in place
or
taken out or entered into by or for the benefit of the Borrower (whether
in the sole name of the Borrower or in the joint names of the Borrower
and
the Bank or otherwise) in respect of the Ship and her Earnings (as
such
term is defined below) or otherwise howsoever in connection with
the Ship
and all benefits thereof (including claims of whatsoever nature and
return
of premiums) (together the “Insurances”) or all moneys whatsoever from
time to time due or payable to the Borrower during the Security Period
(as
such term is defined in the General Assignment) arising out of the
use or
operation of the Ship including (but without limiting the generality
of
the foregoing) all freight, hire and passage moneys, income arising
under
pooling arrangements, 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 (the “
Earnings
”)
or any other property or other assets of the Borrower which the Bank
has
previously advised the Manager are subject to any Encumbrance or
right of
set-off in favour of the Bank by virtue of any of the security documents
executed in favour of the Bank pursuant to the Loan
Agreement;
|
4.4
|
the
Manager does hereby subordinate any claim that it may have against
the
Borrower or otherwise in respect of the Ship and its Earnings, Insurances
and Requisition Compensation (as such term is defined in the General
Assignment) to the claims of the Bank under the Loan Agreement and
the
other Security Documents and undertakes to exercise no right to which
it
may be entitled in respect of the Borrower and/or the Ship and/or
its
Earnings and/or Insurances and/or Requisition Compensation in competition
with the Bank;
|
4.5
|
the
Manager will discontinue any such action or proceedings or claim
which may
have been taken, instituted or made or asserted, promptly upon notice
from
the Bank to do so;
|
4.6
|
the
Manager will promptly notify the Bank if at any time the amount owed
by
the Borrower to the Manager pursuant to the Management Agreement
(whether
in respect of the Manager’s
|
4.7
|
the
Manager will provide the Bank with such information concerning the
Ship as
the Bank may from time to time reasonably
require.
|
5
|
Insurance
assignment
|
5.1
|
By
way of security for the aggregate of the Loan and interest accrued
and
accruing thereon, the Expenses (as such term is defined in the General
Assignment), the Master Swap Agreement Liabilities (as such term
is
defined in the General Assignment) and all other sums of money from
time
to time owing by the Borrower to the Bank, whether actually or
contingently, under the Security Documents, the Master Swap Agreement
or
any of them to which the Borrower is or is to be a party (the
“
Outstanding
Indebtedness
”)
the Manager with full title guarantee hereby irrevocably and
unconditionally assigns and agrees to assign to the Bank all of the
Manager’s rights, title and interest in and to and the benefit of the
Insurances.
|
5.2
|
The
Manager hereby undertakes to procure that a duly completed notice
in the
form set out in Appendix 2 to this Letter is given to all insurers
of the
Ship and to procure that such notice is promptly endorsed on all
policies
and entries in respect of the Insurances and agrees promptly to authorise
and/or instruct any broker, insurer or association with or through
whom
Insurances may be effected to endorse on any policy or entry or otherwise
to give effect to such loss payable clause as may be stipulated by
the
Bank.
|
5.3
|
The
Bank shall, at the Manager’s cost, re-assign to the Manager all the
Manager’s right, title and interest in the Insurances upon the Outstanding
Indebtedness being discharged in full to the satisfaction of the
Bank.
|
5.4
|
Any
moneys in respect of the Insurances which would (but for the assignment
contained in clause 5.1 above) be payable to the Manager shall be
applied
in accordance with clause 2.3 of the General Assignment and/or (as
the
case may be) clause 2.6 of the General
Assignment.
|
6
|
Law
and jurisdiction
|
6.1
|
The
agreement constituted by this Letter shall be governed by and construed
in
accordance with English law.
|
6.2
|
The
Manager agrees, for the benefit of the Bank, that any legal action
or
proceedings arising out of or in connection with this letter against
the
Manager or any of its assets may be brought in the English courts.
The
Manager irrevocably and unconditionally submits to the jurisdiction
of
such courts and whoever irrevocably designates, appoints and empowers
Cheeswrights at present of Bankside House, 107 Leadenhall Street,
London
EC3A 4HA, England to receive, for it and on its behalf, service of
process
issued out of the English courts in any such legal action or proceedings.
The submission to such jurisdiction shall not (and shall not be construed
so as to) limit the rights of the Bank to take any proceedings against
the
Manager in the courts of any other competent jurisdiction nor shall
the
taking of proceedings in any one or more jurisdictions preclude the
taking
of proceedings in any other jurisdiction, whether concurrently or
not.
|
6.3
|
No
term of this Letter is enforceable under the Contracts (Rights of
Third
Parties) Act 1999 by a person who is not a party to this Letter or
to whom
this Letter is not addressed.
|
Yours
faithfully
|
|
|
|
For
and on behalf of
|
|
SAFETY
MANAGEMENT OVERSEAS S.A.
|
|
|
SIGNED
|
|
for
and on behalf of
|
|
SAFETY
MANAGEMENT OVERSEAS S.A.
|
|
Dated:
[•]
|
1. |
Interpretation
|
2. |
Obligations
|
(a) |
General
Conditions
.
|
3. |
Representations
|
(a) |
Basic
Representations
.
|
4. |
Agreements
|
5. |
Events
of Default and Termination
Events
|
6. |
Early
Termination
|
(b) |
Right
to Terminate Following Termination Event
.
|
(c) |
Effect
of Designation
.
|
(d) |
Calculations
.
|
7. |
Transfer
|
8. |
Contractual
Currency
|
9. |
Miscellaneous
|
(e) |
Counterparts
and Confirmations.
|
10. |
Offices;
Multibranch Parties
|
11. |
Expenses
|
12. |
Notices
|
13. |
Governing
Law and Jurisdiction
|
14. |
Definitions
|
The
Royal Bank of Scotland plc
|
Soffive
Shipping Corporation
|
By:
|
By:
|
|||
Name:
|
Name:
|
|||
Title:
|
Title:
|
|||
Date:
|
Date:
|
(a) |
"
Specified
Entity
"
means in relation to Party A for the purpose
of:-
|
Section 5(a) (v) |
Not
Applicable
|
Section 5(a) (vi) |
Not
Applicable
|
Section 5(a) (vii) |
Not
Applicable
|
Section 5(b) (iv) |
Not
Applicable
|
Section 5(a) (v) |
Affiliates
of Party B
|
Section 5(a) (vi) |
Affiliates
of Party B
|
Section 5(a) (vii) |
Affiliates
of Party B
|
Section 5(b) (iv) |
Affiliates
of Party B
|
(b) |
"
Specified
Transaction
"
shall have the meaning specified in Section
14.
|
(c) |
The
"
Cross
Default
"
provisions of Section 5(a)(vi): –
|
(d)
|
The
"
Credit
Event upon Merger
"
provisions of Section 5(b)(iv): –
|
(e)
|
The
"
Automatic
Early Termination
"
provisions of Section 6(a): –
|
(f)
|
Payments
on Early Termination
.
For the purpose of Section 6(e) of this
Agreement:-
|
(i) |
Market
Quotation will apply.
|
(ii) |
The
Second Method will apply.
|
(g)
|
"
Termination
Currency
"
means such currency of any Transaction in respect of which an Early
Termination Date has been designated or is deemed to occur as may
be
selected by the party which is not the Defaulting Party or the Affected
Party (as the case may be), or where there are two Affected Parties
such
currency as may be agreed between them, if such currency is freely
available, and otherwise United States
Dollars.
|
(h) |
Additional
Termination Event
will apply.
|
(i)
|
Party
B or any Credit Support Provider of Party B consolidates or amalgamates
with, or merges into, or transfers all or substantially all its assets
to,
another entity ("
the
Transferee
")
and such action does not constitute a "
Merger
Without Assumption
"
described in Section 5(a)(viii) of this Agreement, but any policy
in
effect at the time (including any policy relating to lending or credit
limits) of Party A would not permit Party A to enter into a Transaction
or
Transactions with the Transferee on the terms (other than applicable
rates) of the Transactions then in effect under this
Agreement;
|
(ii)
|
any
circumstances arise which, in the reasonable opinion of Party A,
give
grounds for belief that Party B or any Credit Support Provider of
Party B
may not, or may be unable to, perform its obligations under this
Agreement
or any Credit Support Document;
|
(iii)
|
Party
B, or any Credit Support Provider of Party B, fails to give adequate
assurances of its ability to perform its obligations under this Agreement
or under any Credit Support Document on or before the third Business
Day
after a written request to do so has been given to Party B by Party
A;
and
|
(iv)
|
The
prepayment, repayment or cancellation by Party B in whole of the
Loan
Facility.
|
(a)
|
Payer
Representations
.
For the purpose of Section 3(e) of this Agreement, Party A will make
the
following representation and Party B will make the following
representation:-
|
(b)
|
Payee
Representations
.
For the purpose of Section 3(f) of this Agreement, Party A and Party
B
make no representations.
|
Party
required to
deliver
document
|
Form/Document/Certificate
|
Date
by which to be
delivered
|
Covered
by
Section
3(d)
Representation
|
|||
Party
A & B
|
Signing
Authority being evidence of authority, incumbency and specimen
signature
of each person executing any document on its behalf in connection
with
this Agreement.
|
On
the signing of this Agreement and, if requested, any
Confirmation
|
Yes
|
|||
Party
B
|
A
most recent copy of the Party's Annual Report and Accounts.
|
On
demand in respect of those which became publicly available prior
to the
date of this Agreement and, in respect of statements not publicly
available at the date of this Agreement, as soon as possible and,
in any
event, in each case within one hundred and eighty days of the end
of the
financial year to which they relate
|
Yes
|
|||
Party
B
|
Certified
Resolution of the Board of Directors approving this Agreement and
the
arrangements contemplated herein.
|
On
the signing of this Agreement
|
Yes
|
|||
Party
B
|
The
power of attorney (if any) of Party B under which this Agreement
and/or
any Confirmation is to be executed on behalf of Party B.
|
On
the signing of this Agreement
|
Yes
|
|||
Party
B
|
A
copy of the Articles of Incorporation and By-laws and Certificate
of
Incorporation (or equivalent constitutional documents) of Party
B.
|
On
the signing of this Agreement
|
Yes
|
|||
Party
B
|
Copies
of any statutory and/or regulatory consents, approvals and authorisations
necessary for Party B to enter into and perform this Agreement
and the
Transactions contemplated by this Agreement.
|
On
the signing of this Agreement
|
Yes
|
Party
required to
deliver
document
|
Form/Document/Certificate
|
Date
by which to be
delivered
|
Covered
by
Section
3(d)
Representation
|
|||
Party
B
|
The
Credit Support Document(s) referred to in Part 4(f) of the Schedule
to
this Agreement duly executed by the parties thereto.
|
On
the signing of this Agreement
|
Yes
|
|||
Party
B
|
Such
legal opinions in form and substance satisfactory to Party A as Party
A
may require.
|
|||||
Party
B
|
Confirmation
in form and substance satisfactory to Party A that all conditions
precedent to the Loan Facility have been satisfied
|
On
the signing of this Agreement
|
Yes
|
|||
Party
B
|
A
copy of the written acceptance by Party B's Process Agent of its
appointment to receive for Party B and on its behalf service of process
in
any Proceedings under this Agreement.
|
(a) |
Addresses
for Notices.
For the purpose of Section 12(a) of this
Agreement:-
|
Address:
|
c/o
RBS Global Banking & Markets
|
280
Bishopsgate
|
|
London,
EC2M 4RB
|
|
Attention:
|
Swaps
Administration
|
Fax:
|
+44
(0)20 7085 5050
|
Telephone:
|
+44
(0)20 7085 5000
|
Address:
|
c/o
RBS Global Banking & Markets
|
135
Bishopsgate
|
|
London,
EC2M 3UR
|
|
Attention:
|
Head
of Legal, Global Banking & Markets
|
Fax:
|
+44
(0)20 7085 8411
|
Address:
|
c/o
32 Karamanli Avenue
|
166
05 Voula
|
|
Athens,
Greece
|
|
Attention:
|
[●]
|
Fax:
|
+30
210 89 56 900
|
(b)
|
Process
Agent.
For the purpose of Section 13(c) of this
Agreement:-
|
(c) |
Offices.
The provisions of Section 10(a) will apply to this
Agreement.
|
(d) |
Multibranch
Party
.
For the purpose of Section 10(c) of this
Agreement:-
|
(e)
|
Calculation
Agent
.
The Calculation Agent is Party A unless otherwise specified in a
Confirmation in relation to the relevant Transaction. The failure
of Party
A to perform its obligations as Calculation Agent hereunder shall
not be
construed as an Event of Default or Termination
Event.
|
(f)
|
Credit
Support Document.
Party A provides no Credit Support Documents. Party B's obligations
to
Party A under this Agreement shall be secured by the Security
Documents.
|
(g)
|
Credit
Support Provider.
Credit Support Provider is not applicable in relation to Party A
and in
relation to Party B means each party that executes and/or has obligations
under the Security Documents.
|
(h)
|
Governing
Law.
This Agreement will be governed by and construed in accordance with
the
laws of England.
|
(i)
|
Netting
of Payments
.
Sub-paragraph (ii) of Section 2(c) of this Agreement will apply to
all
Transactions hereunder unless otherwise agreed in writing between
the
parties.
|
(j) |
"Affiliate"
will have the meaning specified in Section 14 of this
Agreement.
|
(a)
|
2000
ISDA Definitions.
The 2000 Definitions published by ISDA (the "Definitions") are
incorporated by reference herein. Any terms used and not otherwise
defined
herein which are contained in the Definitions shall have the meaning
set
forth therein.
|
(b)
|
Set-Off.
The following shall be added as Section
6(f):
|
(c)
|
Relationship
Between Parties.
Each Party will be deemed to represent to the other party on the
date on
which it enters into a Transaction that (absent a written agreement
between the parties that expressly imposes affirmative obligations
to the
contrary for that Transaction):-
|
(i)
|
Non-Reliance
.
It is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that
Transaction is appropriate or proper for it based upon its own judgement
and upon advice from such advisers as it has deemed necessary. It
is not
relying on any communication (written or oral) of the other party
as
investment advice or as a recommendation to enter into that Transaction;
it being understood that information and explanations related to
the terms
and conditions of a Transaction shall not be considered investment
advice
or a recommendation to enter into that Transaction. No communication
(written or oral) received from the other party shall be deemed to
be an
assurance or guarantee as to the expected results of that
Transaction.
|
(ii)
|
Assessment
and Understanding
.
It is capable of assessing the merits of and understanding (on its
own
behalf or through independent professional advice), and understands
and
accepts, the terms, conditions and risks of that Transaction. It
is also
capable of assuming, and assumes, the risks of that
Transaction.
|
(iii)
|
Status
of Parties.
The other party is not acting as a fiduciary for or an adviser to
it in
respect of that Transaction.
|
(d)
|
Tape
Recording.
Each party to this Agreement acknowledges and agrees to the tape
recording
of conversations between the parties to this Agreement whether by
one or
other or both of the parties and that such tape recordings may be
submitted in evidence to any court or legal proceedings for the purpose
of
establishing any matters relating to this
Agreement.
|
(e)
|
Additional
Representation.
The following additional clause (g) shall be added at the end of
Section
3.
|
"(g) |
No
Agency.
It is entering into this Agreement and each Transaction
as principal (and not as agent or in any other capacity, fiduciary
or otherwise)."
|
(f)
|
Contracts
(Rights of Third Parties) Act 1999.
No
term of this Agreement is enforceable by a person who is not a party
to
it.
|
(g)
|
Confirmations.
Party A shall promptly send to Party B a confirmation of each Transaction
between them, and Party B shall promptly confirm the accuracy of
that
Confirmation by fax or any other means agreed by the parties. Failure
to
confirm the accuracy within 10 Business Days of being sent the relevant
Confirmation will be deemed to be a confirmation of accuracy by Party
B.
|
(h)
|
Loan
Facility.
Section 14 of this Agreement is amended by the incorporation of the
following definition:-
|
(1)
|
Security.
Party B irrevocably and unconditionally confirms to Party A that
the
obligations of Party B to Party A under or pursuant to this Agreement
shall form part of the Indebtedness and that the performance by Party
B of
those obligations shall be secured by the Security
Documents.
|
(j)
|
Process
Agent.
Party B undertakes to notify Party A by no fewer than ten days' written
notice to Party A, in the event that the details of the Process Agent
contained in Part 4 (b) are changed or amended in any
way.
|
(a) |
FX
Transactions and Currency Option
Transactions
|
(b) |
Scope
–
Future and Outstanding
Transactions
|
(i)
|
FX
Transactions and Currency Option Transactions outstanding between
the
parties as of such date; and,
|
(ii)
|
FX
Transactions and Currency Option Transactions entered into by the
parties
on and after such date.
|
(c) |
Definitions
|
(d) |
Confirmations
|
(e) |
Payment
of Premiums for Currency Option
Transactions
|
(i)
|
Unless
otherwise agreed in writing by the parties, the Premium for any Currency
Option Transaction shall be paid on its Premium Payment
Date.
|
(ii) |
If
the Premium is not paid on its Premium Payment Date, the Seller may
elect:
|
(A) |
to
accept a late payment of such
Premium;
|
(B)
|
to
give written notice of such non-payment and, if such payment shall
not be
received within two (2) Local Business Days of such notice, treat
the
related Currency Option Transaction as void;
or
|
(C)
|
to
give written notice of such non-payment and, if such payment shall
not be
received within two (2) Local Business Days of such notice, treat
such
nonpayment as an Event of Default under Section 5(a)(i) of this
Agreement.
|
(f) |
Netting
Discharge and Termination of Currency Option
Transactions
|
(i) |
each
being with respect to the same Put Currency and the same Call
Currency;
|
(ii) |
each
having the same Expiration Date and Expiration
Time;
|
(iii)
|
each
being of the same style (i.e. both being either American style, European
style or Bermudan style);
|
(iv) |
each
having the same Strike Price;
|
(v) |
neither
of which shall have been exercised by delivery of a Notice of Exercise;
and
|
(vi) |
both
of which were entered into by the same Offices of Party A and Party
B;
|
(g) |
Payments
on Early Termination
|
Contents
|
||||
Clause
|
Page
|
|||
1
|
Definitions
|
1
|
||
2
|
Restrictions
|
2
|
||
3
|
First
fixed charge
|
3
|
||
4
|
Further
documentation etc
|
3
|
||
5
|
Representations
|
4
|
||
6
|
Notices
|
4
|
||
7
|
Supplemental
|
4
|
||
8
|
Law
and jurisdiction
|
5
|
(1)
|
SOFFIVE
SHIPPING CORPORATION
,
a
corporation incorporated in the Republic of Liberia having its registered
office at 80 Broad Street, Monrovia, Liberia (the "
Owner
");
and
|
(2)
|
THE
ROYAL BANK OF SCOTLAND plc
,
a
company incorporated in Scotland whose registered office is at 36
St.
Andrew Square, Edinburgh EH2 2YB, Scotland, acting for the purposes
of
this Deed through its branch at The Shipping Business Centre, 5-10
Great
Tower Street, London, EC3P 3HX, England (the "
Bank
").
|
(A)
|
By
a loan agreement dated 19 November 2007 and made between (i) the
Owner as
borrower and (ii) the Bank as lender (the "
Loan
Agreement
"),
the Bank agreed to make available to the Owner upon the terms and
conditions therein described a multicurrency loan of up to Forty
five
million Dollars ($45,000,0000) or the Equivalent Amount in an Optional
Currency or Optional Currencies;
|
(B)
|
The
Owner has entered into or may enter into one or more Transactions
(as such
term is defined in the 1992 ISDA Master Agreement dated 19 November
2007
between the Owner and the Bank (the "
Master
Swap Agreement
"))
as evidenced by one or more Confirmations (as such term is defined
in the
Master Agreement) which are governed by the Master Swap Agreement;
and
|
(C)
|
It
is a condition precedent to the Bank advancing the loan under the
Loan
Agreement that the Owner as security for, inter alia, its obligations
under the Loan Agreement shall execute this
Deed.
|
1 |
Definitions
|
1.1
|
In
this Deed, unless the context otherwise requires, the following
expressions shall have the following
meanings:
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature suffered, incurred or paid by the Bank in connection
with
the exercise of the powers referred to in or granted by the Loan
Agreement, the Master Swap Agreement, this Deed or any of the other
Security Documents or otherwise payable by the Owner;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Bank until the date of receipt or recovery thereof (whether
before
or after judgment) at a rate per annum calculated in accordance with
clause 3.4 of the Loan Agreement (as conclusively certified by the
Bank);
|
1
2
|
For
the purposes of this Deed an amount shall be deemed to be outstanding
and
to be due and payable to the Bank if the Bank is then entitled to
demand
payment of that amount, notwithstanding that it has not yet served
a
demand.
|
1
3
|
Clause
1.1 (Purpose) and clause 1.2 (Definitions) of the Loan Agreement
shall
apply with any necessary modifications for the purposes of this
Deed.
|
2
|
Restrictions
|
2
1
|
In
this clause references to assignment includes the creation, or permitting
to arise, of any form of beneficial interest or Security Interest
and
every other kind of disposition.
|
2.2
|
An
act or transaction which is contrary to, or inconsistent with, this
clause
shall be void as regards the Bank.
|
3
|
First
fixed charge
|
3.1
|
The
Owner with full title guarantee, hereby charges and agrees to charge
and
releases and agrees to release to the Bank as a continuing security
for
payment of the Outstanding Indebtedness, by way of first fixed charge,
the
Secured Property.
|
3.2
|
Upon
the occurrence of a Default the charge shall become enforceable and
the
Bank shall be entitled then or at any later time or times to appropriate
all or any part of the Secured Property in or towards discharge of
the
then Outstanding Indebtedness or any part thereof, and may do so
notwithstanding that any maturity date attached to any part or parts
of
the Secured Property may not yet have
arrived.
|
3.3
|
A
certificate signed by a director or other senior officer of the Bank
and
which states that on a specified date and (if the certificate also
states
this) at a specified time the Bank exercised its rights under this
clause
to appropriate a specified amount of Secured Property in the discharge
of
a specified amount of the Outstanding Indebtedness shall be conclusive
evidence that:
|
3 3.1 |
the
Bank's
liabilities in respect of the specified amount of Secured Property;
and
|
3 3.2 |
the
specified amount of Outstanding Indebtedness,
|
4
|
Further
documentation etc.
|
4.1
|
The
Owner shall execute forthwith any document which the Bank may specify
for
the purpose of:
|
4 1 1 |
supplementing
the rights which this Deed confers on the Bank in relation to the
Secured
Property; or
|
4.1.2 |
creating
a mortgage of the Secured Property to replace or supplement the charge
created in clause 3 above; or
|
4.1.3 |
registering
or otherwise perfecting this Deed or any mortgage created under clause
4.1.2 above; or
|
4 1 4 |
ensuring
or confirming the validity of anything done or to be done under this
Deed.
|
4.2
|
Any
such document shall be in the terms specified by the Bank and, in
the case
of a mortgage of the Secured Property, those terms may include a
provision
entitling the Bank, on or after a Default, to appropriate, or otherwise
deal with, the Secured Property for the purpose of discharging the
Outstanding Indebtedness.
|
4.3
|
The
Owner shall also forthwith do any act and execute any document (including
a document which amends or replaces this Deed) which the Bank specifies
for the purpose of enabling or assisting the Bank to comply, in relation
to the Secured Property and/or the Outstanding Indebtedness, with
any
requirement (legally binding or not) applicable to the Bank and,
in
particular, the requirements of any banking supervisory authority
with
regard to netting of cash
collateral.
|
4
4
|
For
the purpose of securing performance of the Owner's obligations under
clauses 4.1 to 4.3, the Owner irrevocably appoints the Bank as its
attorney, on its behalf and in its name or otherwise to sign or execute
any document which, in the opinion of the Bank, the Owner is obliged,
or
could be required, to sign or execute under any of the said clauses,
which
the Bank considers necessary or convenient for or in connection with
any
exercise or intended exercise of any rights which the Bank has under
this
Deed or any other purpose connected with this
Deed.
|
4.5
|
The
Bank may appoint any person or persons as its substitute under that
power
of attorney referred to in clause 4.4 and may also delegate that
power of
attorney to any person or persons.
|
5
|
Representations
|
5.1
|
The
Owner represents and warrants to the Bank as
follows:
|
5.1.1 |
the
Owner is the sole legal and beneficial owner of the Secured Property
and
has good marketable title to it;
|
5.1.2 |
no
third party has or will have any interest, right or claim of any
kind in
relation to any of the Secured
Property;
|
5.1.3 |
the
Owner has the corporate power, arid has taken all necessary corporate
action to authorise the execution of this Deed, the Loan Agreement and the
Master Swap Agreement; and
|
5.1.4 |
nothing
in this Deed will or might result in the Owner contravening any law
or
regulation which is now in force or which has been published but
not yet
brought into force or any contractual or other obligation which the
Owner
now has to a third party.
|
6
|
Notices
|
7
|
Supplemental
|
7.1
|
This
Deed, including the charge created by clause 3, shall remain in force
as a
continuing security until the Security Period has
ended.
|
7.2
|
The
rights of the Bank under this Deed will not be discharged or prejudiced
by:
|
7.2.1 |
any
kind of amendment or supplement to the other Security
Documents;
|
7.2.2 |
any
arrangement or concession, including a rescheduling, which the Bank
may
make in relation to any of the Loan Agreement, the Master Swap Agreement
and the other Security Documents, or any action by the Bank and/or
the
Owner and/or any other party thereto which is contrary to the terms
of the
Loan Agreement, the Master Swap Agreement and the other Security
Documents;
|
7.2 3 |
any
release or discharge, whether granted by the Bank or effected by
the
operation of any law, of all or any of the obligations of the Owner
and/or
any other party thereto under any of the Loan Agreement, the Master
Swap
Agreement and the other Security
Documents;
|
7 2 4 |
any
change in the ownership and/or control of the Owner and/or any other
party
thereto and/or merger, demerger or reorganisation involving the Owner
and/or any other party thereto; and
|
7.2.5 |
any
event or matter which is similar to, or connected with, any of the
foregoing,
|
7.3
|
Nothing
in this Deed excludes or restricts any right of counterclaim, set-off,
right to net payments, or any other right or remedy which the Bank
would
have had other than under the general law, the Loan Agreement, the
Master
Swap Agreement and the other Security
Documents.
|
8
|
Law
and jurisdiction
|
8.1
|
Law
|
8.2
|
Submission
to jurisdiction
|
8.3
|
Contracts
(Rights of Third Parties) Act
1999
|
EXECUTED
as a DEED
|
)
|
|
by
|
)
|
|
the
duly authorised attorney of
|
)
|
|
SOFFIVE
SHIPPING CORPORATION
|
)
|
|
for
it and on its behalf
|
)
|
|
in
the presence of:
|
)
|
|
ACCEPTED
|
)
|
|
by
|
)
|
|
the
duly authorised attorney of
|
||
THE
ROYAL BANK OF SCOTLAND plc
|
)
|
|
for
it and on its behalf
|
||
in
the presence of:
|
)
|
To:
|
The
Royal Bank of Scotland plc
|
The
Shipping Business Centre
|
|
5-10
Great Tower Street
|
|
London
EC3P 3HX
|
|
England
|
|
From:
|
Safety
Management Overseas S.A.
|
Edificio
Torre Universal
|
|
Piso
12 Avenida Federico Boyd
|
|
P.O.
Box 8807 Panama
|
|
Republic
of Panama
|
1
|
Loan
Agreement
|
2
|
Confirmation
of appointment
|
3
|
Representation
and warranty
|
3.1
|
We
hereby represent and warrant that the copy of the Management Agreement
set
out in Appendix 1 to this Letter is a true and complete copy of the
Management Agreement, that the Management Agreement constitutes valid
and
binding obligations of the Manager enforceable in accordance with
its
terms and that there have been no amendments or variations thereto
or
defaults thereunder by the Manager or, to the best of the Manager's
knowledge and belief, the Borrower.
|
3.2
|
We
hereby confirm that the representations and warranties set out in
clauses
8.2.9, 8.2.10 and 8.2.11 of the Loan Agreement are true and correct
in all
respects.
|
4
|
Undertakings
|
4.1
|
the
Manager will not agree or purport to agree to any amendment or variation
of the Management Agreement without the prior written consent of
the
Bank;
|
4.2
|
the
Manager will procure that any sub-manager appointed by it pursuant
to the
provisions of the Management Agreement will, on or before the date
of such
appointment, enter into an undertaking in favour of the Bank in
substantially the same form (mutatis mutandis) as this
Letter;
|
4.3
|
the
Manager will not, without the prior written consent of the Bank,
take any
action or institute any proceedings or make or assert any claim on
or in
respect of the Ship or its policies and contracts of insurance (which
expression includes all entries of the Ship in a protection and indemnity
or war risks association) which are from time to time during the
Security
Period (as such term is defined in the General Assignment) in place
or
taken out or entered into by or for the benefit of the Borrower (whether
in the sole name of the Borrower or in the joint names of the Borrower
and
the Bank or otherwise) in respect of the Ship and her Earnings (as
such
term is defined below) or otherwise howsoever in connection with
the Ship
and all benefits thereof (including claims of whatsoever nature and
return
of premiums) (together the "Insurances") or all moneys whatsoever
from
time to time due or payable to the Borrower during the Security Period
(as
such term is defined in the General Assignment) arising out of the
use or
operation of the Ship including (but without limiting the generality
of
the foregoing) all freight, hire and passage moneys, income arising
under
pooling arrangements, 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 charter party or other'
contract for the employment of the Ship (the "
Earnings
")
or any other property or other assets of the Borrower which the Bank
has
previously advised the Manager are subject to any Encumbrance or
right of
set-off in favour of the Bank by virtue of any of the security documents
executed in favour of the Bank pursuant to the Loan
Agreement;
|
4.4
|
the
Manager does hereby subordinate any claim that it may have against
the
Borrower or otherwise in respect of the Ship and its Earnings, Insurances
and Requisition Compensation (as such term is defined in the General
Assignment) to the claims of the Bank under the Loan Agreement and
the
other Security Documents and undertakes to exercise no right to which
it
may be entitled in respect of the Borrower and/or the Ship and/or
its
Earnings and/or Insurances and/or Requisition Compensation in competition
with the Bank;
|
4.5
|
the
Manager will discontinue any such action or proceedings or claim
which may
have been taken, instituted or made or asserted, promptly upon notice
from
the Bank to do so;
|
4.6
|
the
Manager will promptly notify the Bank if at any time the amount owed
by
the Borrower to the Manager pursuant to the Management Agreement
(whether
in respect of the Manager's remuneration or disbursements or otherwise)
exceeds US$100,000 or the equivalent in other currencies;
and
|
4.7
|
the
Manager will provide the Bank with such information concerning the
Ship as
the Bank may from time to time reasonably
require.
|
5
|
Insurance
assignment
|
5.1
|
By
way of security for the aggregate of the Loan and interest accrued
and
accruing thereon, the Expenses (as such term is defined in the General
Assignment), the Master Swap Agreement Liabilities (as such term
is
defined in the General Assignment) and all other sums of money from
time
to time owing by the Borrower to the Bank, whether actually or
contingently, under the Security Documents, the Master Swap Agreement
or
any of them to which the Borrower is or is to be a party (the
"
Outstanding
Indebtedness
")
the Manager with full title guarantee hereby irrevocably and
unconditionally assigns and agrees to assign to the Bank all of the
Manager's rights, title and interest in and to and the benefit of
the
Insurances.
|
5.2
|
The
Manager hereby undertakes to procure that a duly completed notice
in the
form set out in Appendix 2 to this Letter is given to all insurers
of the
Ship and to procure that such notice is promptly endorsed on all
policies
and entries in respect of the Insurances and agrees promptly to authorise
and/or instruct any broker, insurer or association with or through
whom
Insurances may be effected to endorse on any policy or entry or otherwise
to give effect to such loss payable clause as may be stipulated by
the
Bank.
|
5.3
|
The
Bank shall, at the Manager's cost, re-assign to the Manager all the
Manager's right, title and interest in the Insurances upon the Outstanding
Indebtedness being discharged in full to the satisfaction of the
Bank.
|
5.4
|
Any
moneys in respect of the Insurances which would (but for the assignment
contained in clause 5.1 above) be payable to the Manager shall be
applied
in accordance with clause 2.3 of the General Assignment and/or (as
the
case may be) clause 2.6 of the General
Assignment.
|
6
|
Law
and jurisdiction
|
6
1
|
The
agreement constituted by this Letter shall be governed by and construed
in
accordance with English law.
|
6.2
|
The
Manager agrees, for the benefit of the Bank, that any legal action
or
proceedings arising out of or in connection with this letter against
the
Manager or any of its assets may be brought in the English courts.
The
Manager irrevocably and unconditionally submits to the jurisdiction
of
such courts and whoever irrevocably designates, appoints and empowers
Cheeswrights at present of Bankside House, 107 Leadenhall Street,
London
EC3A 4HA, England to receive, for it and on its behalf, service of
process
issued out of the English courts in any such legal action or proceedings.
The submission to such jurisdiction shall not (and shall not be construed
so as to) limit the rights of the Bank to take any proceedings against
the
Manager in the courts of any other competent jurisdiction nor shall
the
taking of proceedings in any one or more jurisdictions preclude the
taking
of proceedings in any other jurisdiction, whether concurrently or
not.
|
6
3
|
No
term of this Letter is enforceable under the Contracts (Rights of
Third
Parties) Act 1999 by a person who is not a party to this Letter or
to whom
this Letter is not addressed.
|
Yours
faithfully
|
______________________________________
|
For
and on behalf of
|
SAFETY
MANAGEMENT OVERSEAS S.A.
|
_______________________________
|
SIGNED
|
for
and on behalf of
|
SAFETY
MANAGEMENT OVERSEAS S.A.
|
Dated:
[•]
|
To:
|
The
Royal Bank of Scotland plc
|
The
Shipping Business Centre
|
|
5-10
Great Tower Street
|
|
London
EC3P 3HX
|
|
England
|
|
From:
|
Safety
Management Overseas S.A.
|
Edificio
Torre Universal
|
|
Piso
12 Avenida Federico Boyd
|
|
P.O.
Box 8807 Panama
|
|
Republic
of Panama
|
1 |
Loan
Agreement
|
2 |
Confirmation
of appointment
|
3 |
Representation
and warranty
|
3
1
|
We
hereby represent and warrant that the copy of the Management Agreement
set
out in Appendix 1 to this Letter is a true and complete copy of the
Management Agreement, that the Management Agreement constitutes valid
and
binding obligations of the Manager enforceable in accordance with
its
terms and that there have been no amendments or variations thereto
or
defaults thereunder by the Manager or, to the best of the Manager's
knowledge and belief, the Borrower.
|
3.2
|
We
hereby confirm that the representations and warranties set out in
clauses
8.2.9, 8.2.10 and 8.2.11 of the Loan Agreement are true and correct
in all
respects.
|
4 |
Undertakings
|
4.1
|
the
Manager will not agree or purport to agree to any amendment or variation
of the Management Agreement without the prior written consent of
the
Bank;
|
4.2
|
the
Manager will procure that any sub-manager appointed by it pursuant
to the
provisions of the Management Agreement will, on or before the date
of such
appointment, enter into an undertaking in favour of the Bank in
substantially the same form (mutatis mutandis) as this
Letter;
|
4.3
|
the
Manager will not, without the prior written consent of the Bank,
take any
action or institute any proceedings or make or assert any claim on
or in
respect of the Ship or its policies and contracts of insurance (which
expression includes all entries of the Ship in a protection and indemnity
or war risks association) which are from time to time during the
Security
Period (as such term is defined in the General Assignment) in place
or
taken out or entered into by or for the benefit of the Borrower (whether
in the sole name of the Borrower or in the joint names of the Borrower
and
the Bank or otherwise) in respect of the Ship and her Earnings (as
such
term is defined below) or otherwise howsoever in connection with
the Ship
and all benefits thereof (including claims of whatsoever nature and
return
of premiums) (together the "
Insurances
")
or all moneys whatsoever from time to time due or payable to the
Borrower
during the Security Period (as such term is defined in the General
Assignment) arising out of the use or operation of the Ship including
(but
without limiting the generality of the foregoing) all freight, hire
and
passage moneys, income arising under pooling arrangements, 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 charter party or other contract for the employment of the
Ship (the
"
Earnings
")
or any other property or other assets of the Borrower which the Bank
has
previously advised the Manager are subject to any Encumbrance or
right of
set-off in favour of the Bank by virtue of any of the security documents
executed in favour of the Bank pursuant to the Loan
Agreement;
|
4.4
|
the
Manager does hereby subordinate any claim that it may have against
the
Borrower or otherwise in respect of the Ship and its Earnings, Insurances
and Requisition Compensation (as such term is defined in the General
Assignment) to the claims of the Bank under the Loan Agreement and
the
other Security Documents and undertakes to exercise no right to which
it
may be entitled in respect of the Borrower and/or the Ship and/or
its
Earnings and/or Insurances and/or Requisition Compensation in competition
with the Bank;
|
4
5
|
the
Manager will discontinue any such action or proceedings or claim
which may
have been taken, instituted or made or asserted, promptly upon notice
from
the Bank to do so;
|
4
6
|
the
Manager will promptly notify the Bank if at any time the amount owed
by
the Borrower to the Manager pursuant to the Management Agreement
(whether
in respect of the Manager's remuneration or disbursements or otherwise)
exceeds US$100,000 or the equivalent in other currencies;
and
|
4.7
|
the
Manager will provide the Bank with such information concerning the
Ship as
the Bank may from time to time reasonably
require.
|
5
|
Insurance
assignment
|
5.1
|
By
way of security for the aggregate of the Loan and interest accrued
and
accruing thereon, the Expenses (as such term is defined in the General
Assignment), the Master Swap Agreement Liabilities (as such term
is
defined in the General Assignment) and all other sums of money from
time
to time owing by the Borrower to the Bank, whether actually or
contingently, under the Security Documents, the Master Swap Agreement
or
any of them to which the Borrower is or is to be a party (the
"
Outstanding
Indebtedness
")
the Manager with full title guarantee hereby irrevocably and
unconditionally assigns and agrees to assign to the Bank all of the
Manager's rights, title and interest in and to and the benefit of
the
Insurances.
|
5.2
|
The
Manager hereby undertakes to procure that a duly completed notice
in the
form set out in Appendix 2 to this Letter is given to all insurers
of the
Ship and to procure that such notice is promptly endorsed on all
policies
and entries in respect of the Insurances and agrees promptly to authorise
and/or instruct any broker, insurer or association with or through
whom
Insurances may be effected to endorse on any policy or entry or otherwise
to give effect to such loss payable clause as may be stipulated by
the
Bank.
|
5.3
|
The
Bank shall, at the Manager's cost, re-assign to the Manager all the
Manager's right, title and interest in the Insurances upon the Outstanding
Indebtedness being discharged in full to the satisfaction of the
Bank.
|
5.4
|
Any
moneys in respect of the Insurances which would (but for the assignment
contained in clause 5.1 above) be payable to the Manager shall be
applied
in accordance with clause 2.3 of the General Assignment and/or (as
the
case may be) clause 2.6 of the General
Assignment.
|
6
|
Law
and jurisdiction
|
6.1
|
The
agreement constituted by this Letter shall be governed by and construed
in
accordance with English law.
|
6.2
|
The
Manager agrees, for the benefit of the Bank, that any legal action
or
proceedings arising out of or in connection with this letter against
the
Manager or any of its assets may be brought in the English courts.
The
Manager irrevocably and unconditionally submits to the jurisdiction
of
such courts and whoever irrevocably designates, appoints and empowers
Cheeswrights at present of Bankside House, 107 Leadenhall Street,
London
EC3A 4HA, England to receive, for it and on its behalf, service of
process
issued out of the English courts in any such legal action or proceedings.
The submission to such jurisdiction shall not (and shall not be construed
so as to) limit the rights of the Bank to take any proceedings against
the
Manager in the courts of any other competent jurisdiction nor shall
the
taking of proceedings in any one or more jurisdictions preclude the
taking
of proceedings in any other jurisdiction, whether concurrently or
not.
|
6
3
|
No
term of this Letter is enforceable under the Contracts (Rights of
Third
Parties) Act 1999 by a person who is not a party to this Letter or
to whom
this Letter is not addressed.
|
Yours
faithfully
|
_____________________________
|
For
and on behalf of
|
SAFETY
MANAGEMENT OVERSEAS S.A.
|
____________________________________
|
SIGNED
|
for
and on behalf of
|
SAFETY
MANAGEMENT OVERSEAS S.A.
|
Dated:
[•]
|
EXHIBIT 10.23
|
|
Global Banking & Markets
Shipping Business Centre 5-10 Great Tower Street London EC3P 3HX |
|
|
|
Telephone: +44 (0)20 7085 5000
Facsimile: +44 (0)20 7085 7134 |
|
|
|
www.rbs.com/gbm |
14 May 2008
Soffive Shipping Corporation
c/o Safety Management Overseas SA
32 Avenue Karamanli
166 73 Voula
PO Box 70677-106-6
Athens
GREECE
Attn. Mr Konstantinos Adamopoulos
Dear Sirs
Loan Agreement dated 19 November 2007 (the Loan Agreement) between The Royal Bank of Scotland plc (the Bank) and Soffive Shipping Corporation (the Borrower)
We refer to the above Loan Agreement and to the restrictions placed on the Borrower regarding Change of Ownership as per clause 9.3.13. At the request of the Borrower, we have pleasure in confirming that the Bank is prepared to agree to the proposed transfer of ownership of the Borrower to Safe Bulkers Inc., a newly formed company to be listed on the NYSE and which will initially offer 20% of its shares to the public by virtue of an IPO. The remaining 80% of the shares will remain initially within the existing beneficial ownership and control of the Hadjioannou family as advised to the Bank.
The Royal Bank of Scotland plc
Registered in Scotland No 90312 Registered Office: 38 St Andrew Square Edinburgh EH2 2YB A member of the London Stock Exchange and authorised and regulated by the Financial Services Authority |
2
Agreement is subject to the following amendments to the terms of the loan, which are to be documented by a supplemental agreement and such other supporting documentation as the Banks lawyers may require within 30 days of the successful placement of the IPO, the costs of which are to be borne by the Borrower:
3
Signing: |
The Supplemental Loan Agreement and other supplemental documentation to be executed on or before 15 June 2008, failing which this offer will lapse notwithstanding its acceptance.
|
This letter contains an outline of certain terms and conditions (it does not constitute a legally binding commitment on the Bank) which will, inter alia, be embodied in the Supplemental Loan Agreement and security documentation, such legal agreement and security documentation shall be governed by English law (except to the extent any security otherwise requires). The Documentation shall supersede this letter and all prior discussions and negotiations in relation to the loan facility.
The Bank shall be entitled to obtain such legal opinions from such jurisdictions as it may require and from lawyers appointed by it and the Borrower shall provide such corporate and other documentation as may be required by the Bank or its lawyers.
All other terms and conditions of the Loan Agreement shall remain unchanged and in full force and effect.
This offer remains subject to there being no facts, events or circumstances, now existing or hereafter arising, which come to our attention and which, in our good faith determination, materially adversely affect the Borrowers or any of the Security Parties business, assets, financial condition, operations or prospects, in which event the Bank reserves the right to terminate this offer.
Yours faithfully | ||
For THE ROYAL BANK OF SCOTLAND plc | ||
/s/ Stephen Moorby | /s/ Nicholas Pavlidis | |
STEPHEN MOORBY | NICHOLAS PAVLIDIS | |
SENIOR DIRECTOR, SHIP FINANCE | SENIOR DIRECTOR, SHIP FINANCE | |
Accepted on behalf of | ||
Soffive Shipping Corporation | ||
/s/ Konstantinos Adamopoulos | ||
Konstantinos Adamopoulos | ||
14/5/08 |
Clause
|
Page
|
|
1
|
Purpose
and definitions
|
1
|
2
|
The
Commitment and the Loan
|
9
|
3
|
Interest
and Interest Periods
|
10
|
4
|
Currencies
|
12
|
5
|
Repayment
and prepayment
|
13
|
6
|
Fees
and expenses
|
16
|
7
|
Payments
and taxes; accounts and calculations
|
17
|
8
|
Representations
and warranties
|
18
|
9
|
Undertakings
|
22
|
10
|
Conditions
|
27
|
11
|
Events
of Default
|
28
|
12
|
Indemnities
|
31
|
13
|
Unlawfulness
and increased costs
|
32
|
14
|
Security
and set-off
|
33
|
15
|
Accounts
|
34
|
16
|
Assignment,
transfer and lending office
|
35
|
17
|
Notices
and other matters
|
36
|
18
|
Governing
law and jurisdiction
|
37
|
Schedule
1 Form of Drawdown Notice
|
38
|
|
Schedule
2 Documents and evidence required as conditions precedent
|
39
|
|
Schedule
3 Calculation of Additional Cost
|
43
|
|
Schedule
4 Form of Interest Period Letter
|
45
|
|
Schedule
5 Form of Mortgage
|
46
|
|
Schedule
6 Form of Deed of Covenant
|
47
|
|
Schedule
7 Form of General Assignment
|
47
|
|
Schedule
8 Form of Manager’s Undertaking
|
48
|
|
Schedule
9 Form of Master Swap Agreement
|
49
|
Schedule
10 Form of Master Agreement Security Deed
|
50
|
(1)
|
|
KERASIES
SHIPPING CORPORATION
as
Borrower; and
|
(2)
|
|
THE
ROYAL BANK OF SCOTLAND plc
as
Bank.
|
1
|
|
Purpose
and definitions
|
1.1
|
|
Purpose
|
1.2
|
|
Definitions
|
(a) |
for
interest rate fixing purposes:
|
(i)
|
in
relation to a rate fixing in respect of euro, a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer
system (TARGET) is operating; and
|
(ii)
|
in
relation to a rate fixing in respect of any Optional Currency or
Dollars,
a day on which banks are open for business in the principal financial
centre in, respectively, the jurisdiction of the relevant Optional
Currency or New York City; and
|
(b) |
for
all other purposes (including, but not limited to, payments and receiving
notices):
|
(i) | a day on which banks are open for business in London; and |
(ii)
|
in
relation to payments in euros, a day on which banks are open for
business
in such other principal financial centre or centres of relevant
Participating Member States as the Bank may nominate;
and
|
(iii)
|
in
relation to payments in any Optional Currency or Dollars, a day on
which
banks are open for business in the principal financial centre in,
respectively, the jurisdiction of the relevant Optional Currency
or New
York City;
|
1.3
|
|
Headings
|
1.4
|
|
Construction
of certain terms
|
1.4.1
|
references to clauses and schedules are to be construed as references to clauses of, and schedules to, this Agreement and references to this Agreement include its schedules; |
1.4.2
|
|
references
to (or to any specified provision of) this Agreement or any other
document
shall be construed as references to this Agreement, that provision
or that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.4.3
|
|
references
to a “regulation” include any present or future regulation, rule,
directive, requirement, request or guideline (whether or not having
the
force of law) of any agency, authority, central bank or government
department or any self-regulatory or other national or supra-national
authority;
|
1.4.4
|
|
words
importing the plural shall include the singular and vice
versa;
|
1.4.5
|
|
references
to a time of day are to London
time;
|
1.4.6
|
|
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.7
|
|
references
to a “guarantee” include references to an indemnity or other assurance
against financial loss including, without limitation, an obligation
to
purchase assets or services as a consequence of a default by any
other
person to pay any Indebtedness and “guaranteed” shall be construed
accordingly; and
|
1.4.8
|
|
references
to any enactment shall be deemed to include references to such enactment
as reenacted, amended or extended.
|
2
|
|
The
Commitment and the Loan
|
2.1
|
|
Agreement
to lend
|
2.2
|
Drawdown
|
2.3
|
Amount
|
2.4
|
|
Availability
|
2.5
|
|
Termination
of Commitment
|
2.6
|
|
Application
of Proceeds
|
3
|
|
Interest
and Interest Periods
|
3.1
|
|
Normal
interest rate
|
3.2
|
|
Selection
of Interest Periods
|
3.3
|
|
Determination
of Interest Periods
|
3.3.1
|
|
the
first Interest Period in respect of the Loan or any Tranches into
which it
may be divided on the Drawdown Date shall commence on the Drawdown
Date
and each subsequent Interest Period in respect of any Tranche shall
commence on the last day of the previous Interest Period in respect
of
such Tranche;
|
3.3.2
|
|
Interest
Periods in respect of different Tranches shall end on the same
day;
|
3.3.3
|
|
if
any Interest Period would otherwise overrun a Repayment Date, then,
in the
case of the last Repayment Date, such Interest Period shall end on
such
Repayment Date, and in the case of any other Repayment Date or Repayment
Dates the Loan shall be divided into parts so that there is one part
in
the amount of the repayment instalment due on each Repayment Date
falling
during that Interest Period and having an Interest Period ending
on the
relevant Repayment Date and another part in the amount of the balance
of
the Loan having an Interest Period ascertained in accordance with
clause
3.2 and the other provisions of this clause 3.3 and the expression
“Interest Period in respect of the Loan” when used in clause 4 and
elsewhere in this Agreement refers to the Interest Period in respect
of
the balance of the Loan; and
|
3.3.4
|
|
if
the Borrower fails to specify the duration of an Interest Period
in
accordance with the provisions of clause 3.2 and this clause 3.3
such
Interest Period shall have a duration of six (6) months or such other
period as shall comply with this clause
3.3.
|
3.4
|
|
Default
interest
|
3.5 |
Notification
of Interest Periods and interest
rate
|
3.6
|
|
Market
disruption;
non-availability
|
3.6.1 |
If
and whenever, at any time prior to the commencement of any Interest
Period, the Bank shall have determined (which determination shall,
in the
absence of manifest error, be
conclusive):
|
(a)
|
that
adequate and fair means do not exist for ascertaining LIBOR or, as
the
case may be, EURIBOR during such Interest Period;
or
|
(b)
|
that
deposits in Dollars are not available to the Bank in the London Interbank
Market in the ordinary course of business in sufficient amounts to
fund
the Loan for such Interest Period or that LIBOR and/or, as the case
maybe,
EURIBOR, does not accurately reflect the cost to the Bank of obtaining
such deposits;
|
3.6.2
|
|
During
the period of ten (10) days after any Determination Notice has been
given
by the Bank under clause 3.6.1, the Bank shall certify an alternative
basis (the “
Substitute
Basis
”)
for maintaining the Loan. The Substitute Basis may (without limitation)
include alternative interest periods, alternative currencies or
alternative rates of interest but shall include a margin above the
cost of
funds including Additional Cost, if any, to the Bank equivalent to
the
Margin. Each Substitute Basis so certified shall be binding upon
the
Borrower and shall take effect in accordance with its terms from
the date
specified in the Determination Notice until such time as the Bank
notifies
the Borrower that none of the circumstances specified in clause 3.6.1
continues to exist whereupon the normal interest rate fixing provisions
of
this Agreement shall apply.
|
4
|
|
Currencies
|
4.1
|
|
Selection
of currencies
|
4.2
|
|
Limit
on currencies;
non-availability
|
4.2.1 |
A
Tranche may not be drawn down in, converted into or remain outstanding
in
an Optional Currency
if:
|
(a)
|
in
consequence thereof there would be more than two (2) currencies
outstanding at any time; or
|
(b)
|
the
amount to be converted is less than $1,000,000 or an integral multiple
of
$1,000,000; or
|
(c)
|
the
Bank notifies the Borrower not later than 3 p.m. on the fourth Banking
Day
before the date on which such Tranche is to be drawn down or the
beginning
of the relevant Interest Period that deposits of such Optional Currency
are not readily available to the Bank in an amount comparable with
such
Tranche; or
|
(d)
|
the
Bank determines (which determination shall be conclusive) at any
time
prior to 10 a.m. (local time in the place of payment) on the first
day of
the relevant Interest Period that by reason of any change in currency
availability, currency exchange rates or exchange controls it is
or will
be impracticable for such Tranche to be drawn down in, converted
into or
remain outstanding in that Optional Currency;
or
|
(e)
|
a
Default has occurred and is continuing;
or
|
(f)
|
a
Transaction is outstanding under the Master Swap
Agreement,
|
4.2.2 |
The
Borrower shall not be allowed to convert the Loan or any Tranche
on more
than four (4) occasions in any twelve month period. The first
twelve-month
period shall commence on the Drawdown Date and each subsequent
twelve-month period shall commence on the expiry of the previous
such
period.
|
4.3
|
|
Currency
amounts on drawdown
|
4.3.1 |
Drawdown
in Optional Currency
|
4.3.2 |
Drawdown
in Dollars
|
4.4
|
|
Currency
amount on conversion
|
4.5
|
Notional
obligations
|
4.6
|
Currency
Correction
|
4.7
|
Release
of moneys in Cash Collateral
Account
|
4.8
|
Incidental
costs and expenses
|
5
|
Repayment
and prepayment
|
5.1
|
Repayment
|
5.2
|
Voluntary
prepayment
|
5.2.1
|
without
premium or penalty, on any Interest Payment Date relating to the
part of
the Loan being prepaid together with any amounts payable under clause
12
and accrued interest to the date of prepayment and any other sums
then
payable under this Agreement and/or the Master Swap Agreement and/or
the
other Security Documents or any of them in respect of the Loan;
and
|
5.2.2
|
at
any other time upon payment to the Bank of accrued interest to the
date of
prepayment and such sum as the Bank in its absolute discretion shall
determine to be the loss (excluding loss of Margin on the amount
prepaid
to the end of the then current Interest Period), cost and expense
incurred
by the Bank as a result of the prepayment not being made on an Interest
Payment Date for any part of the Loan being prepaid and any other
sums
then payable under this Agreement and/or the Master Swap Agreement
and/or
the other Security Documents or any of
them.
|
5.3
|
Master
Swap Agreement, Repayments and
Prepayments
|
5.3.1
|
Notwithstanding
any provision of the Master Swap Agreement to the contrary, in the
case of
a prepayment of all or part of the Loan (including, without limit,
upon a
Total Loss in accordance with clause 5.4 and under clause 9.2) then
subject to clause 5.3.2 the Bank shall be entitled but not obliged
(and,
where relevant, may do without the consent of the Borrower, where
it would
otherwise be required whether under the Master Swap Agreement or
otherwise) to amend, re-book, supplement, cancel, close out, net
out,
terminate, liquidate, transfer or assign all or any part of the rights,
benefits and obligations created by any Transaction and/or the Master
Swap
Agreement and/or to obtain or re-establish any hedge or related trading
position in any manner and with any person the Bank in its absolute
discretion may determine and both the Bank’s and the Borrower’s continuing
obligations under any Transaction and/or Master Swap Agreement shall,
unless agreed otherwise by the Bank, be calculated so far as the
Bank
considers it practicable by reference to the amended repayment schedule
for the Loan taking into account the fact that less than the full
amount
of the Loan remains outstanding.
|
5.3.2
|
If
less than the full amount of the Loan remains outstanding, following
a
prepayment under this Agreement and the Bank in its absolute discretion
agrees, following a written request of the Borrower, that the Borrower
may
be permitted to maintain all or part of a Transaction in an amount
not
wholly matched with or linked to all or part of the Loan, the Borrower
shall within ten (10) days of being notified by the Bank of such
requirement, provide the Bank with, or procure the provision to the
Bank
of, such additional security as shall in the opinion of the Bank
be
adequate to secure the performance of such Transaction, which additional
security shall take such form, be constituted by such documentation
and be
entered into between such parties, as the Bank in its absolute discretion
may approve or require, and each document comprising such additional
security shall constitute a Credit Support
Document.
|
5.3.3
|
The
Borrower shall on the first written demand of the Bank indemnify
the Bank
in respect of all losses, costs and expenses (including, but not
limited
to, legal costs and expenses) incurred or sustained by the Bank as
a
consequence of or in relation to the effecting of any matter or
Transactions referred to in this clause
5.3.
|
5.3.4
|
Notwithstanding
any provision of the Master Swap Agreement to the contrary, if for
any
reason a Transaction has been entered into but the Loan is not drawn
down
under this Agreement then, subject to clause 5.3.5, the Bank shall
be
entitled but not obliged (and, where relevant, may do so without
the
consent of the Borrower where it would otherwise be required whether
under
the Master Swap Agreement or otherwise) to amend, re-book, supplement,
cancel, close out, net out, terminate, liquidate, transfer or assign
all
or any part of the rights, benefits and obligations created by such
Transaction and/or the Master Swap Agreement and/or to obtain or
re-establish any hedge or related trading position in any manner
and with
any person the Bank in its absolute discretion may
determine.
|
5.3.5
|
If
a Transaction has been entered into but the Loan is not drawn down
under
this Agreement and the Bank in its absolute discretion agrees, following
a
written request of the Borrower, that the Borrower may be permitted
to
maintain all or part of a Transaction, the Borrower shall within
ten (10)
days of being notified by the Bank of such requirement, provide the
Bank
with, or procure the provision to the Bank of, such additional security
as
shall in the opinion of the Bank be adequate to secure the performance
of
such Transaction, which additional security shall take such form,
be
constituted by such documentation and be entered into between such
parties, as the Bank in its absolute discretion may approve or require,
and each document comprising such additional security shall constitute
a
Credit Support Document for the purposes of the Master Swap Agreement
and/or otherwise.
|
5.3.6
|
Without
prejudice to or limitation of the obligations of the Borrower under
clause
5.3.3, in the event that the Bank exercises any of its rights under
clauses 5.3.1, 5.32, 5.3.3 or 5.3.4 and such exercise results in
all or
part of a Transaction being terminated such Transaction or the part
thereof terminated (which shall for the purposes hereof be treated
as a
separate Transaction) in each case shall be treated under the Master
Swap
Agreement in the same manner as if it were a Terminated Transaction
(as
defined in Section 14 of the Master Swap Agreement) pursuant to an
Event
of Default (as so defined in that Section 14) by the Borrower and,
accordingly, the Bank shall be permitted to recover from the Borrower
a
payment for early termination calculated in accordance with the provisions
of section 6(e)(i) of the Master Swap Agreement in respect of such
Transaction.
|
5.4
|
Prepayment
on Total Loss
|
5.4.1
|
in
the case of an actual total loss of the Ship on the actual date and
at the
time the Ship was lost or, if such date is not known, on the date
on which
the Ship was last reported;
|
5.4.2
|
in
the case of a constructive total loss of the Ship, upon the date
and at
the time notice of abandonment of the Ship is given to the insurers
of the
Ship for the time being (provided a claim for total loss is admitted
by
such insurers) or, if such insurers do not forthwith admit such a
claim,
at the date and at the time at which either a total loss is subsequently
admitted by the insurers or a total loss is subsequently adjudged
by a
competent court of law or arbitration tribunal to have
occurred;
|
5.4.3
|
in
the case of a compromised or arranged total loss, on the date upon
which a
binding agreement as to such compromised or arranged total loss has
been
entered into by the insurers of the
Ship;
|
5.4.4
|
in
the case of Compulsory Acquisition, on the date upon which the relevant
requisition of title or other compulsory acquisition occurs;
and
|
5.4.5
|
in
the case of hijacking, theft, condemnation, capture, seizure, arrest,
detention or confiscation of the Ship (other than where the same
amounts
to Compulsory Acquisition of the Ship) by any Government Entity,
or by
persons purporting to act on behalf of any Government Entity, which
deprives the Borrower of the use of the Ship for more than thirty
(30)
days, upon the expiry of the period of thirty (30) days after the
date
upon which the relevant hijacking, theft, condemnation, capture,
seizure,
arrest, detention or confiscation
occurred.
|
5.5
|
Amounts
payable on prepayment
|
5.6
|
Notice
of prepayment; reduction of repayment
instalments
|
5.7
|
Currency
amounts repayable
|
6
|
Fees
and expenses
|
6.1
|
Fees
|
6.1.1
|
The
Borrower shall pay to the Bank an arrangement fee of Eighteen thousand
two
hundred and thirty eight Dollars ($18,238) payable on the earlier
of (a)
the Drawdown Date and (b) 16 November
2007;
|
6.1.2
|
The
fee referred to in clause 6.1.1 shall be payable in full by the Borrower
to the Bank, and shall not be repayable, whether or not any part
of the
Commitment is ever advanced.
|
6.2
|
Expenses
|
6.2.1
|
in
connection with the negotiation, preparation, execution and, where
relevant, registration of the Security Documents and of any amendment
or
extension of or the granting of any waiver or consent under, any
of the
Security Documents and/or the Master Swap Agreement;
and
|
6.2.2
|
in
contemplation of, or otherwise in connection with, the enforcement
of, or
preservation of any rights under, any of the Security Documents and/or
the
Master Swap Agreement, or otherwise in respect of the moneys owing
under
any of the Security Documents and/or the Master Swap Agreement (including,
for the avoidance of doubt, expenses incurred in connection with
the Bank
obtaining any further insurance opinion(s) in respect of the Insurances
for the Ship as may be required by the Bank during the Security Period),
together with interest at the rate referred to in clause 3.4 from
the date
on which such expenses were incurred to the date of payment (as well
after
as before judgment).
|
6.3
|
Value
Added Tax
|
6.4
|
Stamp
and other duties
|
7
|
Payments
and taxes; accounts and
calculations
|
7.1
|
No
set-off or counterclaim
|
7.2
|
Payment
by the Bank
|
7.3
|
Non-Banking
Days
|
7.4
|
Calculations
|
7.5
|
Certificates
conclusive
|
7.6
|
Grossing-up
for Taxes
|
7.7
|
Loan
account
|
8
|
Representations
and warranties
|
8.1
|
Continuing
representations and
warranties
|
8.1.1
|
Due
incorporation
|
8.1.2
|
Corporate
power
|
8.1.3
|
Binding
obligations
|
8.1.4
|
No
conflict with other obligations
|
8.1.5
|
No
litigation
|
8.1.6
|
No
filings required
|
8.1.7
|
Choice
of law
|
8.1.8
|
No
immunity
|
8.1.9
|
Consents
obtained
|
8.2
|
Initial
representations and
warranties
|
8.2.1
|
Pari
passu
|
8.2.2
|
No
default under other Indebtedness
|
8.2.3
|
Information
|
8.2.4
|
No
withholding Taxes
|
8.2.5
|
No
Default
|
8.2.6
|
the
Ship
|
(a)
|
in
the absolute ownership of the Borrower who will on and after the
Drawdown
Date be the sole, legal and beneficial owner of the
Ship;
|
(b)
|
registered
in the name of the Borrower through the Registry as a ship under
the laws
and flag of the Flag State;
|
(c)
|
operationally
seaworthy and in everyway fit for service;
and
|
(d)
|
classed
with the Classification free of all requirements and recommendations
of
the Classification Society;
|
8.2.7
|
Ship’s
employment
|
8.2.8
|
Freedom
from Encumbrances
|
8.2.9
|
Compliance
with Environmental Laws and
Approvals
|
(a)
|
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have complied with
the
provisions of all Environmental
Laws;
|
(b)
|
the
Borrower and to the best of the Borrower’s knowledge and belief (having
made due enquiry) its Environmental Affiliates have obtained all
Environmental Approvals and are in compliance with all such Environmental
Approvals; and
|
(c)
|
neither
the Borrower nor to the best of the Borrower’s knowledge and belief
(having made due enquiry) any of its Environmental Affiliates has
received
notice of any Environmental Claim that the Borrower or any such
Environmental Affiliate is not in compliance with any Environmental
Law or
any Environmental Approval;
|
8.2.10
|
No
Environmental Claims
|
8.2.11
|
No
potential Environmental Claims
|
8.2.12
|
No
material adverse change
|
8.2.13
|
ISPS
Code
|
8.2.14
|
Copies
true and complete
|
8.3
|
Repetition
of representations and
warranties
|
9
|
Undertakings
|
9.1
|
General
|
9.1.1
|
Notice
of Default
|
9.1.2
|
Consents
and licences
|
9.1.3
|
Use
of proceeds
|
9.1.4
|
Pari
passu
|
9.1.5
|
Financial
statements
|
9.1.6
|
Delivery
of reports
|
9.1.7
|
Provision
of further information
|
9.1.8
|
Obligations
under Security Documents
|
9.1.9
|
Compliance
with Code
|
9.1.10
|
Withdrawal
of DOC and SMC
|
9.1.11
|
ISPS
Code compliance
|
(i)
|
maintain
at all times a valid and current ISSC in respect of the
Ship;
|
(ii)
|
immediately
notify the Bank in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the ISSC in respect of
the
Ship;
|
(iii)
|
procure
that the Ship will comply at all times with the ISPS
Code;
|
9.1.12
|
Issuance
of DOC and SMC
|
9.1.13
|
Knowledge
of customer
|
9.2
|
Security
value maintenance
|
9.2.1
|
Security
shortfall
|
(a)
|
prepay
such sum in Dollars as will result in the Security Requirement after
such
prepayment (taking into account any other repayment of the Loan made
between the date of the notice and the date of such prepayment) being
equal to the Security Value; or
|
(b)
|
constitute
to the satisfaction of the Bank such further security for the Loan
as
shall be acceptable to the Bank having a value for security purposes
(as
determined by the Bank in its absolute discretion) at the date upon
which
such further security shall be constituted which, when added to the
Security Value, shall not be less than the Security Requirement as
at such
date; or
|
(c)
|
pay
such additional amount to the credit of the Cash Collateral Account
as
will result in the Security Value after such payment being not less
than
the Security Requirement as at the date of such
payment.
|
9.2.2
|
Valuation
of Ship
|
9.2.3
|
Information
|
9.2.4
|
Costs
|
9.2.5
|
Valuation
of additional security
|
9.2.6
|
Documents
and evidence
|
9.2.7
|
Security
release
|
9.3
|
Negative
undertakings
|
9.3.1
|
Negative
pledge
|
9.3.2
|
No
merger
|
9.3.3
|
Disposals
|
9.3.4
|
Other
business
|
9.3.5
|
Acquisitions
|
9.3.6
|
Other
obligations
|
9.3.7
|
No
borrowing
|
9.3.8
|
Repayment
of borrowings
|
9.3.9
|
Guarantees
|
9.3.10
|
Loans
|
9.3.11
|
Sureties
|
9.3.12
|
Share
capital and distribution
|
9.3.13
|
Change
of Ownership
|
9.3.14
|
Subsidiaries
|
9.3.15
|
Manager
|
9.4
|
Cash
Collateral Account
Undertaking
|
10
|
Conditions
|
10.1
|
Documents
and evidence
|
10.1.1
|
the
Bank, or its duly authorised representative, shall have received,
not
later than two (2) Banking Days before the day on which the Drawdown
Notice for the Loan is given, the documents and evidence specified
in Part
1 of schedule 2 in form and substance satisfactory to the Bank;
and
|
10.1.2
|
the
Bank, or its duly authorised representative, shall have received,
on or
prior to the Drawdown Date, the documents and evidence specified
in Part 2
of schedule 2 in form and substance satisfactory to the
Bank.
|
10.2
|
General
conditions precedent
|
10.2.1
|
the
representations and warranties contained in clauses 8.1 and 8.2 are
true
and correct on and as of each such time as if each was made with
respect
to the facts and circumstances existing at such time;
and
|
10.2.2
|
no
Default shall have occurred and be continuing or would result from
the
making of the Loan.
|
10.3
|
Waiver
of conditions precedent
|
10.4
|
Further
conditions precedent
|
11
|
Events
of Default
|
11.1
|
Events
|
11.1.1
|
Non-payment:
any Security Party fails to pay any sum payable by it under any of
the
Security Documents at the time, in the currency and in the manner
stipulated in the Security Documents (and so that, for this purpose,
sums
payable on demand shall be treated as having been paid at the stipulated
time if paid within three (3) Banking Days of demand);
or
|
11.1.2
|
Master
Swap Agreement:
(i) an Event of Default or Potential Event of Default (in each case
as
defined in the Master Swap Agreement) has occurred and is continuing
under
the Master Swap Agreement or (ii) an Early Termination Date (as defined
in
the Master Swap Agreement) has occurred or been or become capable
of being
effectively designated under the Master Swap Agreement or (iii) a
person
entitled to do so gives notice of an Early Termination Date under
section
6(b)(iv) of the Master Swap Agreement or (iv) the Master Swap Agreement
is
terminated, cancelled, suspended, rescinded or revoked or otherwise
ceases
to remain in full force and effect for any reason;
or
|
11.1.3
|
Breach
of insurance and certain other obligations:
the Borrower fails to obtain and/or maintain the Insurances (as defined
in, and in accordance with the requirements of, the Security Documents)
or
if any insurer in respect of such Insurances cancels the Insurances
or
disclaims liability by reason, in either case, of mis-statement in
any
proposal for the Insurances or for any other failure or default on
the
part of the Borrower or any other person or the Borrower commits
any
breach of or omits to observe any of the obligations or undertakings
expressed to be assumed by it under clauses 9.2, 9.3 or 9.4;
or
|
11.1.4
|
Breach
of other obligations:
any Security Party commits any breach of or omits to observe any
of its
obligations or undertakings expressed to be assumed by it under any
of the
Security Documents (other than those referred to in clauses 11.1.1,
11.1.2
and 11.1.3 above) and, in respect of any such breach or omission
which in
the opinion of the Bank is capable of remedy, such action as the
Bank may
require shall not have been taken within fourteen (14) days of the
Bank
notifying the relevant Security Party of such default and of such
required
action; or
|
11.1.5
|
Misrepresentation:
any representation or warranty made or deemed to be made or repeated
by or
in respect of any Security Party in or pursuant to any of the Security
Documents or in any notice, certificate or statement referred to
in or
delivered under any of the Security Documents is or proves to have
been
incorrect or misleading in any material respect;
or
|
11.1.6
|
Cross-default:
any Indebtedness of the Borrower is not paid when due or any Indebtedness
of the Borrower becomes (whether by declaration or automatically
in
accordance with the relevant agreement or instrument constituting
the
same) due and payable prior to the date when it would otherwise have
become due (unless as a result of the exercise by the Borrower of
a
voluntary right of prepayment), or any creditor of the Borrower becomes
entitled to declare any such Indebtedness due and payable or any
facility
or commitment available to the Borrower relating to Indebtedness
is
withdrawn, suspended or cancelled by reason of any default (however
described) of the person concerned unless the Borrower shall have
satisfied
|
|
the
Bank that such withdrawal, suspension or cancellation will not
affect or
prejudice in any way the Borrower’s ability to pay its debts as they fall
due and fund its commitments, or any guarantee given by any Security
Party
in respect of Indebtedness is not honoured when due and called
upon;
or
|
11.1.7
|
Legal
process:
any judgment or order made against the Borrower is not stayed or
complied
with within seven (7) days or a creditor attaches or takes possession
of,
or a distress, execution, sequestration or other process is levied
or
enforced upon or sued out against, any of the undertakings, assets,
rights
or revenues of the Borrower and is not discharged within seven (7)
days;
or
|
11.1.8
|
Insolvency:
the Borrower is unable or admits inability to pay its debts as they
fall
due, suspends making payments on any of its debts or announces an
intention to do so; becomes insolvent; has assets the value of which
is
less than the value of its liabilities (taking into account contingent
and
prospective liabilities); or suffers the declaration of a moratorium
in
respect of any of its Indebtedness;
or
|
11.1.9
|
Reduction
or loss of capital:
a
meeting is convened by the Borrower for the purpose of passing any
resolution to purchase, reduce or redeem any of its share capital;
or
|
11.1.10
|
Winding
up:
any corporate action, legal proceedings or other procedure or step
is
taken for the purpose of winding up or an order is made or resolution
passed for the winding up of the Borrower or a notice is issued convening
a meeting for the purpose of passing any such resolution;
or
|
11.1.11
|
Administration:
any petition is presented, notice is given or other step is taken
for the
purpose of the appointment of an administrator of the Borrower or
the Bank
believes that any such petition or other step is imminent or an
administration order is made in relation to the Borrower;
or
|
11.1.12
|
Appointment
of receivers and managers:
any administrative or other receiver is appointed of the Borrower
or any
part of its assets and/or undertaking or any other steps are taken
to
enforce any Encumbrance over all or any part of the assets of the
Borrower; or
|
11.1.13
|
Compositions:
any corporate action, legal proceedings or other procedures or steps
are
taken, or negotiations commenced, by the Borrower or by any of its
creditors with a view to the general readjustment or rescheduling
of all
or part of its indebtedness or to proposing any kind of composition,
compromise or arrangement involving such company and any of its creditors;
or
|
11.1.14
|
Analogous
proceedings :
there occurs, in relation to the Borrower in any country or territory
in
which it carries on business or to the jurisdiction of whose courts
any
part of its assets is subject, any event which, in the reasonable
opinion
of the Bank, appears in that country or territory to correspond with,
or
have an effect equivalent or similar to, any of those mentioned in
clauses
11.1.7 to 11.1.13 (inclusive) or any Security Party otherwise becomes
subject, in any such country or territory, to the operation of any
law
relating to insolvency, bankruptcy or liquidation;
or
|
11.1.15
|
Cessation
of business:
the Borrower suspends or ceases or threatens to suspend or cease
to carry
on its business; or
|
11.1.16
|
Seizure:
all or a material part of the undertaking, assets, rights or revenues
of,
or shares or other ownership interests in the Borrower are seized,
nationalised, expropriated or compulsorily acquired by or under the
authority of any government; or
|
11.1.17
|
Invalidity:
any of the Security Documents shall at any time and for any reason
become
invalid or unenforceable or otherwise cease to remain in full force
and
effect, or if the validity
|
11.1.18
|
Unlawfulness:
it
becomes impossible or unlawful at any time for any Security Party,
to
fulfill any of the covenants and obligations expressed to be assumed
by it
in any of the Security Documents or for the Bank to exercise the
rights or
any of them vested in it under any of the Security Documents or otherwise;
or
|
11.1.19
|
Repudiation:
any Security Party repudiates any of the Security Documents or does
or
causes or permits to be done any act or thing evidencing an intention
to
repudiate any of the Security Documents;
or
|
11.1.20
|
Encumbrances
enforceable:
any Encumbrance (other than Permitted Liens) in respect of any of
the
property (or part thereof) which is the subject of any of the Security
Documents becomes enforceable; or
|
11.1.21
|
Material
adverse change:
there occurs, in the opinion of the Bank, a material adverse change
in the
financial condition of the Borrower by reference to the financial
position
of the Borrower as described by the Borrower to the Bank in the
negotiation of this Agreement; or
|
11.1.22
|
Arrest:
the Ship is arrested, confiscated, seized, taken in execution, impounded,
forfeited, detained in exercise or purported exercise of any possessory
lien or other claim or otherwise taken from the possession of the
Borrower
and the Borrower shall fail to procure the release of the Ship within
a
period of fourteen (14) days thereafter;
or
|
11.1.23
|
Registration:
the registration of the Ship under the laws and flag of the Flag
State is
cancelled or terminated without the prior written consent of the
Bank;
or
|
11.1.24
|
Unrest:
the Flag State becomes involved in hostilities or civil war or there
is a
seizure of power in the Flag State by unconstitutional means if,
in any
such case, such event could in the opinion of the Bank reasonably
be
expected to have a material adverse effect on the security constituted
by
any of the Security Documents; or
|
11.1.25
|
Environment:
the Borrower and/or any of its Environmental Affiliates fails to
comply
with any Environmental Law or any Environmental Approval or the Ship
is
involved in any incident which gives rise or may give rise to an
Environmental Claim if, in any such case, such non-compliance or
incident
or the consequences thereof could, in the opinion of the Bank, reasonably
be expected to have a material adverse effect on the business, assets,
operations, property or financial condition of the Borrower or any
other
Security Party or on the security constituted by any of the Security
Documents; or
|
11.1.26
|
P&I:
the Borrower or any other person fails or omits to comply with any
requirements of the protection and indemnity association or other
insurer
with which the Ship is entered for insurance or insured against protection
and indemnity risks (including oil pollution risks) to the effect
that any
cover (including, without limitation, any cover in respect of liability
for Environmental Claims arising in jurisdictions where the Ship
operates
or trades) is or may be liable to cancellation, qualification or
exclusion
at any time; or
|
11.1.27
|
Ownership:
there is any change in the legal ownership of the shares in the Borrower
from that existing at the date of this Agreement;
or
|
11.1.28
|
Material
events:
any other event occurs or circumstance arises which, in the opinion
of the
Bank, is likely materially and adversely to affect either (i) the
ability
of any Security Party to perform all or any of its obligations under
or
otherwise to comply with the terms of any of the Security Documents
or the
Master Swap Agreement or (ii) the security created by any of the
Security
Documents;
|
11.2
|
Acceleration
|
11.2.1
|
the
obligation of the Bank to make the Commitment available shall be
terminated, whereupon the Commitment shall be reduced to zero forthwith;
and/or
|
11.2.2
|
the
Loan and all interest accrued and all other sums payable under the
Security Documents have become due and payable, whereupon the same
shall,
immediately or in accordance with the terms of such notice, become
due and
payable.
|
11.3
|
Demand
basis
|
12
|
Indemnities
|
12.1 |
Miscellaneous
indemnities
|
12.1.1
|
any
default in payment by the Borrower of any sum under any of the Security
Documents when due;
|
12.1.2
|
the
occurrence of any other Event of
Default;
|
12.1.3
|
any
prepayment of the Loan or part thereof being made under clause 5.2,
5.3,
9.2.1 or 13.1, or any other repayment of the Loan or part thereof
being
made otherwise than on an Interest Payment Date relating to the part
of
the Loan prepaid or repaid; or
|
12.1.4
|
the
Loan not being made for any reason (excluding any default by the
Bank)
after the Drawdown Notice has been given,
|
12.2
|
Currency
indemnity
|
12.3
|
Environmental
indemnity
|
13
|
Unlawfulness
and increased costs
|
13.1
|
Unlawfulness
|
13.2
|
Increased
costs
|
13.2.1
|
subject
the Bank to Taxes or change the basis of Taxation of the Bank with
respect
to any payment under any of the Security Documents (other than Taxes
or
Taxation on the overall net income, profits or gains of the Bank
imposed
in the jurisdiction in which its principal or Iending office under
this
Agreement is located); and/or
|
13.2.2
|
increase
the cost to, or impose an additional cost on, the Bank or its holding
company in making or keeping the Commitment available or maintaining
or
funding all or part of the Loan;
and/or
|
13.2.3
|
reduce
the amount payable or the effective return to the Bank under any
of the
Security Documents; and/or
|
13.2.4
|
reduce
the Bank’s or its holding company’s rate of return on its overall capital
by reason of a change in the manner in which it is required to allocate
capital resources to the Bank’s obligations under any of the Security
Documents; and/or
|
13.2.5
|
require
the Bank or its holding company to make a payment or forego a return
on or
calculated by reference to any amount received or receivable by the
Bank
under any of the Security Documents;
and/or
|
13.2.6
|
require
the Bank or its holding company to incur or sustain a loss (including
a
loss of future potential profits) by reason of being obliged to deduct
all
or part of the Commitment or the Loan from its capital for regulatory
purposes,
|
(a)
|
the
Bank shall notify the Borrower in writing of such event promptly
upon its
becoming aware of the same; and
|
(b)
|
the
Borrower shall on demand pay to the Bank the amount which the Bank
specifies (in a certificate setting forth the basis of the computation
of
such amount but not including any matters which the Bank or its holding
company regards as confidential) is required to compensate the Bank
and/or
(as the case may be) its holding company for such liability to Taxes,
cost, reduction, payment, foregone return or
loss.
|
13.3
|
Exception
|
14
|
Security
and set-off
|
14.1
|
Application
of moneys
|
14.1.1
|
first
in or towards payment of all unpaid fees and expenses which may be
owing
to the Bank under any of the Security Documents and/or the Master
Swap
Agreement;
|
14.1.2
|
secondly
in or towards payment of any arrears of interest owing in respect
of the
Loan or any part thereof;
|
14.1.3
|
thirdly
in or towards repayment of the Loan (whether the same is due and
payable
or not);
|
14.1.4
|
fourthly
in or towards payment to the Bank for any loss suffered by reason
of any
such payment in respect of principal not being effected on an Interest
Payment Date relating to the part of the Loan
repaid;
|
14.1.5
|
fifthly,
in or towards payment to the Bank of any sum owing to the Bank under
the
Master Swap Agreement;
|
14.1.6
|
sixthly
in or towards payment to the Bank of any other sums owing to it under
any
of the other Security Documents;
and
|
14.1.7
|
seventhly
the surplus (if any) shall be paid to the Borrower or to whomsoever
else
may be entitled to receive such
surplus.
|
14.2
|
Set-off
|
14.2.1
|
The
Borrower authorises the Bank (without prejudice to any of the Bank’s
rights at law, in equity or otherwise), at any time and without notice
to
the Borrower, to apply any credit balance to which the Borrower is
then
entitled standing upon any account of the Borrower with any branch
of the
Bank in or towards satisfaction of any sum due and payable from the
Borrower to the Bank under any of the Security Documents. For this
purpose, the Bank is authorised to purchase with the moneys standing
to
the credit of such account such other currencies as may be necessary
to
effect such application. The Bank shall not be obliged to exercise
any
right given to it by this clause 14.2. The Bank shall notify the
Borrower
forthwith upon the exercise or purported exercise of any right of
set-off
giving full details in relation
thereto.
|
14.2.2
|
Without
prejudice to its rights hereunder and/or under the Master Swap Agreement,
the Bank may at the same time as, or at any time after, any Default
under
this Agreement or the Borrower’s default under the Master Swap Agreement,
set-off any amount due now or in the future from the Borrower to
the Bank
under this Agreement against any amount due from the Bank to the
Borrower
under the Master Swap Agreement and apply the first amount in discharging
the second amount. The effect of any set-off under this clause 14.2.2
shall be effective to extinguish or, as the case may require, reduce
the
liabilities of the Bank under the Master Swap
Agreement.
|
14.3
|
Further
assurance
|
14.4
|
Conflicts
|
15
|
Accounts
|
15.1
|
General
|
15.2
|
Cash
Collateral Account:
withdrawals
|
15.3
|
Application
of accounts
|
15.4
|
Charging
of Cash Collateral Account
|
16
|
Assignment,
transfer and lending
office
|
16.1
|
Benefit
and burden
|
16.2
|
No
assignment by Borrower
|
16.3 |
Assignment
by
Bank
|
16.4 |
Transfer
|
16.5
|
Documenting
assignments and transfers
|
16.6
|
Lending
office
|
16.7
|
Disclosure
of information
|
17
|
Notices
and other matters
|
17.1
|
Notices
|
17.1.1
|
be
in writing delivered personally or by first-class prepaid letter
(airmail
if available) or facsimile transmission or other means of
telecommunication in permanent written
form;
|
17.1.2
|
be
deemed to have been received, subject as otherwise provided in the
relevant Security Document, in the case of a letter, when delivered
personally or three (3) days after it has been put in to the post
and, in
the case of a facsimile transmission or other means of telecommunication
in permanent written form, at the time of despatch (provided that
if the
date of despatch is not a business day in the country of the addressee
or
if the time of despatch is after the close of business in the country
of
the addressee it shall be deemed to have been received at the opening
of
business on the next such business day);
and
|
17.1.3
|
be
sent:
|
(a) |
if
to the Borrower at:
32
Karamanli Avenue166 05 Voula
Greece
Fax
no: +3
0
210 895 6900
Attention
:
George
Papadopoulos
|
(b) |
if
to the Bank at:
The
Shipping Business Centre
5-10
Great Tower Street
London,
EC3P 3HX
England
Fax
No: 44 207 085
7142
Attention:
Shipping Business Centre
|
17.2
|
No
implied waivers, remedies
cumulative
|
17.3
|
English
language
|
18
|
Governing
law and jurisdiction
|
18.1
|
Law
|
18.2
|
Submission
to jurisdiction
|
18.3
|
Contracts
(Rights of Third Parties) Act
1999
|
To:
|
The
Royal Bank of Scotland plc
Shipping
Business Centre
5-10
Great Tower Street
London
EC3P 3H
England
|
Dollar Amount
|
Currency in which Tranche
is to be outstanding
|
Interest Period
|
Please credit the funds to:
|
(a)
|
no
event or circumstance has occurred and is continuing which constitutes
a
Default;
|
(b)
|
the
representations and warranties contained in clauses 8.1 and 8.2 of
the
Loan Agreement are true and correct at the date hereof as if made
with
respect to the facts and circumstances existing at such
date;
|
(c)
|
the
borrowing to be effected by the drawdown of the Loan will be within
our
corporate powers, has been validly authorised by appropriate corporate
action and will not cause any limit on our borrowings (whether imposed
by
statute, regulation, agreement or otherwise) to be exceeded;
and
|
(d)
|
there
has been no material adverse change in our financial position from
that
described by us to the Bank in the negotiation of the Loan
Agreement.
|
KERASIES
SHIPPING CORPORATION
|
(i) |
being
true and correct;
|
(ii) | being duly passed at meetings of the directors of such Security Party and of the shareholders of such Security Party each duly convened and held; |
(iii) | not having been amended, modified or revoked; and |
(iv) | being in full force and effect |
(a)
|
evidence
satisfactory to the Bank that the Ship is subject to a ship security
plan
which complies with the ISPS Code;
and
|
(b)
|
a
copy certified (in a certificate dated no earlier than five (5) Banking
Days prior to the Drawdown Date) as a true and complete copy by an
officer
of the Borrower of the ISSC for the Ship and the continuous synopsis
record required by ISPS Code;
|
1
|
The
Additional Cost is an addition to the interest rate to compensate
the Bank
for the cost of compliance with (a) the requirements of the Bank
of
England and/or the Financial Services Authority (or, in either case,
any
other authority which replaces all or any of its functions) or (b)
the
requirements of the European Central
Bank.
|
2
|
On,
or as soon as possible after, the first day of each Interest Period,
the
Bank shall calculate, as a percentage rate, its Additional Cost in
accordance with the following paragraphs. The Additional Cost will
be
expressed as a percentage rate per annum and will be rounded up to
four
decimal places.
|
3
|
The
Additional Cost when the Bank lends from an office in any member
state of
the European Union that has adopted or adopts the Euro as its lawful
currency in accordance with legislation of the European Union relating
to
Economic and Monetary Union will be the percentage (expressed as
a per
annum rate) which is its reasonable determination of the cost of
complying
with the minimum reserve requirements of the European Central Bank
in
respect of loans made from that
office.
|
4
|
The
Additional Cost for the Bank lending from an office in the United
Kingdom
will be calculated as follows:
|
A
|
is
the percentage of Eligible Liabilities (assuming these to be in excess
of
any stated minimum) which that Lender is from time to time required
to
maintain as an interest free cash ratio deposit with the Bank of
England
to comply with cash ratio
requirements.
|
B
|
is
the percentage rate of interest (excluding the Margin and the Additional
Cost and, if any part of the Loan has not been paid on its due date,
the
additional rate of interest specified in clause 3.4 payable for the
relevant Interest Period on the
Loan.
|
C
|
is
the percentage (if any) of Eligible Liabilities which that Lender
is
required from time to time to maintain as interest bearing Special
Deposits with the Bank of England.
|
D
|
is
the percentage rate per annum payable by the Bank of England to the
Agent
on interest bearing Special
Deposits.
|
E
|
is
designed to compensate the Bank for amounts payable under the Fees
Rules
and is calculated by the Bank as being the most recent rate of charge
payable by it to the Financial Services Authority under the Fees
Rules in
respect of the relevant financial year of the Financial Services
Authority
(calculated for this purpose by the Bank as being the average of
the Fee
Tariffs applicable to the Bank for that financial year) and expressed
in
pounds per £1,000,000 of the Tariff Base of the
Bank.
|
5
|
For
the purposes of this schedule:
|
(a) |
“
Eligible
Liabilities
”
and “
Special
Deposits
”
have the meanings given to them from time to time under or pursuant
to the
Bank of England Act 1998 or (as may be appropriate) by the Bank of
England;
|
(b) |
“
Fees
Rules
”
means the rules on periodic fees contained in the Supervision manual
of
the Financial Services Authority’s Handbook of rules and guidance or such
other law or regulation as may be in force from time to time in respect
of
the payment of fees for the acceptance of
deposits;
|
(c) |
“
Fee
Tariffs
”
means the fee tariffs specified in the Fees Rules under the activity
group
A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee
required
pursuant to the Fees Rules but taking into account any applicable
discount
rate);
|
(d) |
“
Tariff
Base
”
has the meaning given to it in, and will be calculated in accordance
with,
the Fees Rules; and
|
(e) |
“
pounds
”
and “
£
”
means the lawful currency of the United
Kingdom.
|
6
|
In
application of the above formulae, A, B, C and D will be included
in the
formulae as figures and not as percentages (i.e. 5 per cent. will
be
included in the formula as 5 and not a 0.05). A negative result obtained
by subtracting D from B shall be taken as zero. The resulting figures
shall be rounded to four decimal
places.
|
7
|
Any
determination by the Bank in accordance with this schedule in relation
to
a formula, the Additional Cost or any amount payable to it shall,
in the
absence of manifest error, be conclusive and binding on the
Borrower.
|
8
|
The
Bank may from time to time, after consultation with the Borrower,
determine and notify the Borrower of any amendments which need to
be made
to this schedule to comply with any change in law, regulation or
any
requirements from time to time imposed by the Bank of England, the
Financial Services Authority or the European Central Bank (or, in
any
case, any other authority which replaces all or any of its functions)
and
any such determination shall, in the absence of manifest error, be
conclusive and binding on the
Borrower.
|
I.M.O.
No.
CALL
SIGN
|
Name
of Ship
|
Year
of Registry or Date of
Provisional
Registry/Port of
Registry
|
9256884
P3UG9
|
Katerina
|
2004,
Limassol, Cyprus
|
Whether
a Sailing, Steam or Motor Ship
|
Horse
Power of Engines, if any
|
Motor
Ship
|
8,550
kw
|
Length
(Article 2(8))
|
217.81
|
|||
Breadth
(Regulation 2(3))
|
32.26
|
|||
Moulded
depth amidships to Upper Deck (Regulation 2(2))
|
19.30
|
Gross:
40,002
|
Net:
26,101
|
SIGNED,
SEALED AND DELIVERED
as
a
DEED
by
by
as
the duly authorised attorney-in-fact
of
KERASIES
SHIPPING CORPORATION
pursuant
to a Power of Attorney
)
dated
[
·
]
2007
in
the presence of:-
|
)
)
)
)
)
)
)
)
)
|
|
(Seal) |
SIGNED,
SEALED AND DELIVERED
|
)
|
by
|
)
|
as
the duly authorised Attorney of
|
)
|
)
|
|
pursuant
to a Power of Attorney
|
)
|
dated
|
)
|
)
|
(Seal) |
Name:
|
Title:
|
Seat:
|
of Consular Officer/Notary Public/Certifying Officer
|
Dated December
2007
|
|||
KERASIES
SHIPPING CORPORATION
|
(1)
|
||
and
|
|||
THE
ROYALBANKOF SCOTLAND plc
|
(2)
|
Clause |
Page
|
|
1
|
Definiitions
|
1
|
2
|
Representations
and warranties
|
5
|
3
|
Mortgage
of the Ship
|
5
|
4
|
Covenant
to pay
|
6
|
5
|
Continuing
security and other matters
|
6
|
6
|
Covenants
|
7
|
7
|
Powers
of Mortgagee to protect security and remedy defaults
|
14
|
8
|
Powers
of Mortgagee on Event of Default
|
15
|
9
|
Application
of moneys
|
16
|
10
|
Remedies
cumulative and other provisions
|
17
|
11
|
Costs
and indemnity
|
17
|
12
|
Attorney
|
18
|
13
|
Further
assurance
|
18
|
14
|
Notices
|
18
|
15
|
Counterparts
|
18
|
16
|
Severability
of provisions
|
19
|
17
|
Law,
jurisdiction and language
|
19
|
(1)
|
KERASIES
SHIPPING CORPORATION
whose registered office is at 80 Broad Street, Monrovia, Republic
of
Liberia (the “
Owner
”);
and
|
(2)
|
THE
ROYAL BANK OF SCOTLAND plc
whose registered office is at 36 St. Andrew Square, Edinburgh EH2
2YB,
Scotland, acting for the purposes of this Deed through its branch
at The
Shipping Business Centre, 5-10 Great Tower Street, London EC3P 3HX,
England (the “
Mortgagee
”).
|
(A)
|
the
Owner is the sole, absolute and unencumbered, legal and beneficial
owner
of one hundred one hundredth (100/100th) shares in the Ship described
in
clause 1.2;
|
(B)
|
by
a Loan Agreement dated 13 December 2007 and made between (1) the
Owner
(therein referred to as the “
Borrower
“)
and (2) the Mortgagee (therein referred to as the “
Bank
”),
the Mortgagee agreed (inter alia) to advance by way of a multicurrency
loan to the Owner, upon the terms and conditions therein contained,
a sum
of up to Forty million Dollars ($40,000,000) or the Equivalent Amount
in
an Optional Currency or Optional
Currencies;
|
(C)
|
by
a Master Swap Agreement dated 13 December 2007 and made between (1)
the
Owner and (2) the Mortgagee, the Mortgagee agreed the terms and conditions
upon which it would enter into an interest rate swap transaction
or
transactions with the Owner in respect of the Loan (whether in whole
or in
part as the case may be from time to
time);
|
(D)
|
the
Owner has executed in favour of the Mortgagee a statutory mortgage
of even
date herewith in account current form constituting a first priority
Cyprus
mortgage of one hundred one hundredth (100/1 00th) shares in the
said
Ship; and
|
(E)
|
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the Deed
of
Covenant referred to in the Loan Agreement but shall nonetheless
continue
in full force and effect notwithstanding any discharge of the
Mortgage.
|
1 |
Definitions
|
1.1 |
Defined
expressions
|
1.2 |
Definitions
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including, without limitation, Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee or any Receiver in connection with the exercise of
the
powers referred to in or granted by this Deed or otherwise payable
by the
Owner in accordance with clause 11;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee or any Receiver until the date of receipt or recovery
thereof (whether before or after judgment) at a rate per annum calculated
in accordance with clause 3.4 of the Loan Agreement (as conclusively
certified by the Mortgagee or such Receiver, as the case may
be);
|
(a)
|
the
Ship;
|
(b)
|
the
Insurances;
|
(c)
|
the
Earnings; and
|
(d)
|
any
Requisition Compensation;
|
(a)
|
the
actual, constructive, compromised or arranged total loss of the Ship;
or
|
(b)
|
the
Compulsory Acquisition of the Ship;
or
|
(c)
|
the
hijacking, theft, condemnation, capture, seizure, arrest, detention
or
confiscation of the Ship (other than where the same amounts to the
Compulsory Acquisition of the Ship) by any Government Entity, or
by
persons acting or purporting to act on behalf of any Government Entity,
unless the Ship be released and restored to the Owner from such hijacking,
theft, condemnation, capture, seizure, arrest, detention or confiscation
within thirty (30) days after the occurrence thereof;
and
|
1.3 |
Insurance
terms
|
1.3.1 |
“
excess
risks
”
means the proportion (if any) of claims for general average, salvage
and
salvage charges and under the ordinary collision clause not recoverable
in
consequence of the value at which the Ship is assessed for the purpose
of
such claims exceeding her insured
value;
|
1.3.2 |
“
protection
and indemnity risks
”
means the usual risks (including oil pollution and freight, demurrage
and
defence cover) covered by a United Kingdom protection and indemnity
association or a protection and indemnity association which is
managed in
London (including, without limitation, 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 8 of the Institute Time Clauses
(Hulls)
(1/11/95) or the Institute Amended Running Down Clause (1/11/95)
or any
equivalent provision); and
|
1.3.3 |
“
war
risks
”
includes those risks covered by the standard form of English marine
policy
with Institute War and Strikes Clauses (Time) (1/10/83) attached
or
similar cover.
|
1.4 |
Construction
of Mortgage terms
|
1.4.1 |
references
to “interest” shall be construed as references to interest covenanted to
be paid in accordance with clause 4.1.2 and any interest specified
in
paragraph (b) of the definition of “Expenses” in clause
1.2;
|
1.4.2 |
references
to “principal” shall be construed as references to all moneys (other than
interest) for the time being comprised in the Outstanding
Indebtedness;
|
1.4.3 |
the
expression “all sums for the time being owing to the Mortgagee” means the
whole of the Outstanding Indebtedness;
and
|
1.4.4 |
the
expression “Account Current” means an account or accounts which shall be
kept by the Owner with the Mortgagee and from which the Mortgagee
may
(without giving notice or making any demand) debit any part of the
Outstanding Indebtedness.
|
1.5 |
Headings
|
1.6.1 |
references
to clauses and schedules are to be construed as references to clauses
of,
and schedules to, this Deed and references to this Deed include its
schedules;
|
1.6.2 |
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.6.3 |
words
importing the plural shall include the singular and vice
versa;
|
1.6.4 |
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.6.5 |
references
to a “
guarantee
”
shall include references to an indemnity or other assurance against
financial loss including, without limitation, an obligation to purchase
assets or services as a consequence of a default by any other person
to
pay any Indebtedness and “
guaranteed
”
shall be construed accordingly; and
|
1.6.6 |
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.7 |
Conflict
with Loan Agreement
|
2 |
Representations
and warranties
|
2.1 |
The
Owner hereby represents and warrants to the Mortgagee
that:
|
2.1.1 |
it
is the sole, absolute, legal and beneficial owner of the
Ship;
|
2.1.2 |
the
Ship is not subject to any charter which, if entered into after the
date
of this Deed, would have required the consent of the Mortgagee under
clause 6.1.15, and there is no existing or intended agreement or
arrangement whereby the Earnings may be shared with any person other
than
the Mortgagee as provided in the General
Assignment;
|
2.1.3 |
neither
the Mortgaged Property nor any part thereof is subject to any Encumbrance
save as constituted by the Mortgage and this Deed and the General
Assignment or otherwise permitted by the terms of this Deed;
and
|
2.1.4 |
it
has power and is entitled to register the Ship under the laws and
flag of
Cyprus.
|
3 |
Mortgage
of the Ship
|
4 |
Covenant
to pay
|
4.1 |
In
consideration of the advance by the Mortgagee to the Owner on
or before
the date hereof of the total principal sum of Forty million Dollars
($40,000,000) or the Equivalent Amount in an Optional Currency
or Optional
Currencies (receipt of which sum the Owner hereby acknowledges)
in
accordance with the provisions of the Loan Agreement, the Owner
hereby
covenants with the
Mortgagee:
|
4.1.1 |
to
repay the Loan by the instalments and on the dates referred to and
otherwise in the manner and upon the terms set out in the Loan
Agreement;
|
4.1.2 |
to
pay interest on the Loan, and on any overdue interest or other moneys
payable under the Loan Agreement, at the rate or rates from time
to time
applicable thereto in the manner and upon the terms set out in the
Loan
Agreement;
|
4.1.3 |
to
pay all other moneys payable by the Owner under the Security Documents
or
any of them at the times and in the manner therein specified;
and
|
4.1.4 |
to
pay and discharge to the Mortgagee the Master Swap Agreement Liabilities
on their due date.
|
5 |
Continuing
security and other matters
|
5.1
|
Continuing
Security
|
5.1.1 |
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance by the Owner with all of the covenants, terms and conditions
contained in the Security Documents to which the Owner is or is to
be a
party, express or implied and the security so created shall not be
satisfied by any intermediate payment or satisfaction of any part
of the
amount hereby and thereby secured (or by any settlement of accounts
between the Owner or any other person who may be liable to the Mortgagee
in respect of the Outstanding Indebtedness or any part thereof and
the
Mortgagee) ;
|
5.1.2 |
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any other of the Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
5.1.3 |
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
5.2
|
Rights
additional
|
5.3
|
No
enquiry
|
5.4
|
Obligations
of Owner and Mortgagee
|
5.5
|
Discharge
of Mortgage
|
6 |
Covenants
|
6.1
|
The
Owner hereby covenants with the Mortgagee and undertakes throughout
the
Security Period:
|
6.1.1
|
Insurance
|
(a)
|
Insured
risks, amounts and terms
|
(i)
|
against
fire and usual marine risks (including excess risks) and war risks,
on an
agreed value basis, in such amounts (but not in any event less than
whichever shall be the greater of the market value of the Ship for
the
time being and One hundred and ten per cent (110%) of the aggregate
of the
Loan and the Master Swap Agreement Liabilities) and upon such terms
as
shall from time to time be approved in writing by the Mortgagee;
and
|
(ii)
|
against
protection and indemnity risks (including pollution risks for the
highest
amount in respect of which cover is or may become available for ships
of
the same type, size, age and flag as the Ship and a freight, demurrage
and
defence cover) for the full value and tonnage of the Ship (as approved
in
writing by the Mortgagee) and upon such terms as shall from time
to time
be approved in writing by the Mortgagee;
and
|
(iii)
|
in
respect of such other matters of whatsoever nature and howsoever
arising
in respect of which insurance would be maintained by a prudent owner
of
the Ship;
|
(b)
|
Approved
brokers, insurers and associations
|
(c)
|
Fleet
liens, set-off and cancellation
|
(d)
|
Payment
of premiums and calls
|
(e)
|
Renewal
|
(f)
|
Guarantees
|
(g)
|
Hull
policy documents, notices, loss payable clauses and brokers’ undertakings
to deposit with the Approved Brokers (or procure the deposit of)
all
slips, cover notes, policies, certificates of entry or other instruments
of insurance from time to time issued in connection with such of
the
insurances referred to in clause 6.1.1(a) as are effected through
the
Approved Brokers and procure that the interest of the Mortgagee shall
be
endorsed thereon by incorporation of the relevant Loss Payable Clause
and,
where the Insurances have been assigned to the Mortgagee, by means
of a
Notice of Assignment of Insurances (signed by the Owner and by any
other
assured who shall have assigned its interest in the Insurances to
the
Mortgagee) and that the Mortgagee shall be furnished with pro forma
copies
thereof and a letter or letters of undertaking from the Approved
Brokers
in such form as shall from time to time be required by the
Mortgagee;
|
(h)
|
Associations’
loss payable clauses, undertakings and certificates
|
(i)
|
Extent
of cover and exclusions
|
(j)
|
Correspondence
with brokers and associations
|
(k)
|
Independent
report
|
(I)
|
Collection
of claims
|
(m)
|
Employment
of Ship
|
(n)
|
Application
of recoveries
|
(o)
|
Assignment
of Insurances
|
6.1.2
|
Ship’s
name and registration
|
6.1.3
|
Repair
|
6.1.4
|
Modification;
removal of parts; equipment owned by third
parties
|
(a)
|
make
any modification to the Ship in consequence of which her structure,
type
or performance characteristics could or might be materially altered
or her
value materially reduced; or
|
(b)
|
remove
any material part of the Ship or any equipment the value of which
is such
that its removal from the Ship would materially reduce the value
of the
Ship without replacing the same with equivalent parts or equipment
which
are owned by the Owner free from Encumbrances;
or
|
(c)
|
install
on the Ship any equipment owned by a third party which cannot be
removed
without causing damage to the structure or fabric of the
Ship;
|
6.1.5
|
Maintenance
of class; compliance with
regulations
|
6.1.6
|
Surveys
|
6.1.7
|
Inspection
|
6.1.8
|
Prevention
of and release from arrest
|
6.1.9
|
Employment
|
6.1.10
|
Information
|
6.1.11
|
Notification
of certain events
|
(a)
|
any
damage to the Ship requiring repairs the cost of which will or might
exceed the Casualty Amount;
|
(b)
|
any
occurrence in consequence of which the Ship has or may become a Total
Loss;
|
(c)
|
any
requisition of the Ship for hire;
|
(d)
|
any
requirement or recommendation made by any insurer or the Classification
Society or by any competent authority which is not, or cannot be,
complied
with in accordance with its terms;
|
(e)
|
any
arrest or detention of the Ship or any exercise or purported exercise
of a
lien or other claim on the Ship or the Earnings or Insurances or
any part
thereof;
|
(f)
|
any
petition or notice of meeting to consider any resolution to wind
up the
Owner (or any event analogous thereto under the laws of the place
of its
incorporation);
|
(g)
|
the
occurrence of any Default; or
|
(h)
|
the
occurrence of any Environmental Claim against the Owner or the Ship
or any
incident, event or circumstances which may give rise to any such
Environmental Claim;
|
6.1.12
|
Payment
of outgoings and evidence of
payments
|
6.1.13
|
Encumbrances
|
6.1.14
|
Sale
or other disposal
|
6.1.15
|
Chartering
|
(a)
|
on
demise charter for any period;
|
(b)
|
by
any time or consecutive voyage charter for a term which exceeds or
which
by virtue of any optional extensions therein contained may exceed
thirteen
(13) months’ duration;
|
(c)
|
on
terms whereby more than two (2) months’ hire (or the equivalent) is
payable in advance;
|
(d)
|
below
the market rate prevailing at the time when the Ship is fixed or
other
than on arms’ length terms;
|
6.1.16
|
Sharing
of Earnings
|
6.1.17
|
Payment
of Earnings
|
6.1.18
|
Repairers’
liens
|
6.1.19
|
Manager
|
6.1.20
|
Registration
of Mortgage
|
6.1.21
|
Notice
of Mortgage
|
6.1.22
|
Conveyance
on default
|
6.1.23
|
Anti-drug
abuse
|
6.1.24
|
Compliance
with Environmental Laws
|
7 |
Powers
of Mortgagee to protect security and remedy
defaults
|
7.1
|
Protective
action
|
7.2
|
Remedy
of defaults
|
7.2.1
|
if
the Owner fails to comply with any of the provisions of clause 6.1.1,
the
Mortgagee shall be entitled (but not bound) to effect and thereafter
to
maintain all such insurances upon the Ship as in its discretion it
may
think fit in order to procure the compliance with such provisions
or
alternatively, to require the Ship (at the Owner’s risk) to remain in, or
to proceed to and remain in a port designated by the Mortgagee until
such
provisions are fully complied with;
|
7.2.2
|
if
the Owner fails to comply with any of the provisions of clauses 6.1.3,
6.1.5 or 6.1.6, the Mortgagee shall be entitled (but not bound) to
arrange
for the carrying out of such repairs, changes or surveys as it may
deem
expedient or necessary in order to procure the compliance with such
provisions; and
|
7.2.3
|
if
the Owner fails to comply with any of the provisions of clause 6.1.8,
the
Mortgagee shall be entitled (but not bound) to pay and discharge
all such
debts, damages, liabilities and outgoings as are therein mentioned
and/or
to take any such measures as it may deem expedient or necessary for
the
purpose of securing the release of the Ship in order to procure the
compliance with such provisions
|
8 |
Powers
of Mortgagee on Event of
Default
|
8.1 |
Powers
|
8.1.1
|
to
take possession of the Ship;
|
8.1.2
|
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
8.1.3
|
to
collect, recover, compromise and give a good discharge for, all claims
then outstanding or thereafter arising under the Insurances or any
of them
or in respect of any other part of the Mortgaged Property, and to
take
over or institute (if necessary using the name of the Owner) all
such
proceedings in connection therewith as the Mortgagee in its absolute
discretion thinks fit, and, in the case of the Insurances, to permit
the
brokers through whom collection or recovery is effected to charge
the
usual brokerage therefor;
|
8.1.4
|
to
discharge, compound, release or compromise claims in respect of the
Ship
or any other part of the Mortgaged Property which have given or may
give
rise to any charge or lien or other claim on the Ship or any other
part of
the Mortgaged Property or which are or may be enforceable by proceedings
against the Ship or any other part of the Mortgaged
Property;
|
8.1.5
|
to
sell the Ship or any share or interest therein with or without prior
notice to the Owner, and with or without the benefit of any charterparty,
and free from any claim by the Owner (whether in admiralty, in equity,
at
law or by statute) by public auction or private contract, at such
place
and upon such terms as the Mortgagee in its absolute discretion may
determine, with power to postpone any such sale, or otherwise to
sell the
Ship pursuant to the Mortgagee’s statutory power of sale under section 35
of the Merchant Shipping (Registration of Ships, Sales and Mortgages)
Law
of 1963 (as amended) and without being answerable for any loss occasioned
by such sale or resulting from postponement thereof and with power,
where
the Mortgagee purchases the Ship, to make payment of the sale price
by
making an equivalent reduction in the amount of the Outstanding
Indebtedness in the manner referred to in clause
9.1;
|
8.1.6
|
to
manage, insure, maintain and repair the Ship, and to employ, sail
or lay
up the Ship in such manner and for such period as the Mortgagee,
in its
absolute discretion, deems expedient accounting only for net profits
arising from any such employment;
and
|
8.1.7
|
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 8.1.
|
8.2 |
Receiver
|
8.2.1
|
Appointment
|
8.2.2
|
Remuneration
|
8.2.3
|
Liability
of mortgagee in possession
|
8.3 |
Dealings
with Mortgagee or Receiver
|
9 |
Application
of moneys
|
9.1 |
Application
|
9.2 |
Shortfalls
|
10 |
Remedies
cumulative and other
provisions
|
10.1 |
No
implied waivers; remedies
cumulative
|
10.2 |
Delegation
|
10.3 |
Incidental
powers
|
11 |
Costs
and indemnity
|
11.1 |
Costs
|
11.2 |
Mortgagee’s
and Receiver’s indemnity
|
12 |
Attorney
|
12.1 |
Power
|
12.2 |
Exercise
of power
|
12.3 |
Filings
|
13 |
Further
assurance
|
14 |
Notices
|
15 |
Counterparts
|
16 |
Severability
of provisions
|
17 |
Law,
jurisdiction and language
|
17.1 |
Law
|
17.2 |
Submission
to jurisdiction
|
SIGNED
,
SEALED
and
DELIVERED
as
a
DEED
by
for
and on behalf of
THE
ROYAL BANK OF SCOTLAND plc
pursuant
to a power of attorney
dated
in
the presence of:
Witness:
Name:
Address:
Occupation:
|
)
)
)
)
)
)
)
|
Attorney-in-Fact
|
KERASIES
SHIPPING CORPORATION
|
(1) | |
and
|
||
THE
ROYAL BANK OF SCOTLAND plc
|
(2) |
Clause |
Page
|
|
1
|
Definitions
|
1
|
2
|
Assignment
and application of funds
|
4
|
3
|
Continuing
security and other matters
|
6
|
4
|
Powers
of Mortgagee to protect security and remedy defaults
|
7
|
5
|
Powers
of Mortgagee on Event of Default
|
7
|
6
|
Attorney
|
8
|
7
|
Further
assurance
|
8
|
8
|
Costs
and indemnities
|
8
|
9
|
Remedies
cumulative and other provisions
|
9
|
10
|
Notices
|
9
|
11
|
Counterparts
|
9
|
12
|
Law
and jurisdiction
|
10
|
Schedule
1 Forms of Loss Payable Clauses
|
11
|
|
Schedule
2 Form of Notice of Assignment of Insurances
|
12
|
(1)
|
KERASIES
SHIPPING CORPORATION
a
company incorporated in Liberia whose registered office is at 80
Broad
Street, Monrovia, Republic of Liberia (the “
Owner
’’);
and
|
(2)
|
THE
ROYAL BANK OF SCOTLAND plc
a
company incorporated in Scotland whose registered office is at 36
St.
Andrew Square, Edinburgh EH2 2YB, Scotland, acting for the purposes
of
this Deed through its branch at The Shipping Business Centre, 5-10
Great
Tower Street, London EC3P 3HX, England (the “
Mortgagee
”).
|
(A)
|
by
an Agreement (the “
Loan
Agreement
”)
dated 13 December 2007 and made between the Owner (1) (therein referred
to
as the “
Borrower
”)
and the Mortgagee (2) (therein referred to as the “
Bank
”)
the Mortgagee agreed (inter alia) to advance by way of a multicurrency
loan to the Owner, upon the terms and conditions therein contained
the sum
of up to Forty million Dollars ($40,000,000) or the Equivalent Amount
in
an Optional Currency or Optional Currencies (the “
Loan
”);
|
(B)
|
by
a Master Swap Agreement dated 13 December 2007 and made between (1)
the
Owner and (2) the Mortgagee, the Mortgagee agreed the terms and conditions
upon which it would enter into an interest rate swap transaction
or
transactions with the Owner in respect of the Loan (whether in whole
or in
part as the case may be from time to
time);
|
(C)
|
pursuant
to the Loan Agreement there has been or will be executed by the Owner
in
favour of the Mortgagee a first priority Cyprus statutory ship mortgage
in
account current form and deed of covenant collateral thereto (together
the
“
Mortgage
”)
on the vessel
Katerina
documented in the name of the Owner under the laws and flag of the
Republic of Cyprus under IMO Number 9256884 (the “
Ship
”)
and the Mortgage of even date herewith has been or will be registered
in
the Registry of Cyprus Ships as security for the payment by the Owner
of
the Outstanding Indebtedness (as that expression is defined in the
Mortgage); and
|
(D)
|
this
Deed is supplemental to the Loan Agreement, the Master Swap Agreement
and
the Mortgage and to the security thereby created and is the General
Assignment referred to in the Loan Agreement but shall nonetheless
continue in full force and effect notwithstanding any discharge of
the
Mortgage.
|
1 |
Definitions
|
1.1 |
Defined
expressions
|
1.2 |
Definitions
|
(a)
|
the
Earnings;
|
(b)
|
the
Insurances; and
|
(c)
|
any
Requisition Compensation;
|
(a)
|
all
losses, liabilities, costs, charges, expenses, damages and outgoings
of
whatever nature (including without limitation Taxes, repair costs,
registration fees and insurance premiums) suffered, incurred or paid
by
the Mortgagee in connection with the exercise of the powers referred
to in
or granted by the Loan Agreement, the Mortgage, this Deed or any
other of
the Security Documents or otherwise payable by the Owner in accordance
with clause 11 of the Mortgage or clause 8;
and
|
(b)
|
interest
on all such losses, liabilities, costs, charges, expenses, damages
and
outgoings from the date on which the same were suffered, incurred
or paid
by the Mortgagee until the date of receipt or recovery thereof (whether
before or after judgment) at a rate per annum calculated in accordance
with clause 3.4 of the Loan Agreement (as conclusively certified
by the
Mortgagee);
|
1.3 |
Headings
|
1.4 |
Construction
of certain terms
|
1.4.1
|
references
to clauses and schedules are to be construed as references to clauses
of
and schedules to this Deed and references to this Deed include its
schedules;
|
1.4.2
|
references
to (or to any specified provision of) this Deed or any other document
shall be construed as references to this Deed, that provision or
that
document as in force for the time being and as amended in accordance
with
the terms thereof, or, as the case may be, with the agreement of
the
relevant parties;
|
1.4
.3
|
words
importing the plural shall include the singular and vice
versa;
|
1.4.4
|
references
to a person shall be construed as references to an individual, firm,
company, corporation, unincorporated body of persons or any Government
Entity;
|
1.4.5
|
references
to a “
guarantee
”
include references to an indemnity or other assurance against financial
loss including, without limitation, an obligation to purchase assets
or
services as a consequence of a default by any other person to pay
any
Indebtedness and “
guaranteed
”
shall be construed accordingly; and
|
1.4.6
|
references
to statutory provisions shall be construed as references to those
provisions as replaced or amended or re-enacted from time to
time.
|
1.5 |
Conflict
with Loan Agreement
|
2 |
Assignment
and application of funds
|
2.1 |
Assignment
|
2.1.1
|
Earnings
|
2.1.2
|
Insurances
|
(a)
|
any
moneys payable under the Insurances, other than any moneys payable
under
any loss of earnings insurance, shall be payable in accordance with
the
terms of the relevant Loss Payable Clause and the Mortgagee will
not in
the meantime give any notification to the contrary to the insurers
as
contemplated by the Loss Payable
Clauses;
|
(b)
|
any
insurance moneys received by the Mortgagee in respect of any major
casualty (as specified in the relevant Loss Payable Clause) shall,
unless
prior to receipt or whilst such moneys are in the hands of the Mortgagee
there shall have occurred a Default (whereupon such insurance monies
shall
be applied in accordance with clause 2.3 or clause 2.6 (as the case
may
be)), be paid over to the Owner upon the Owner furnishing evidence
satisfactory to the Mortgagee that all loss and damage resulting
from such
casualty has been properly made good and repaired, and that all repair
accounts and other liabilities whatsoever in connection with the
casualty
have been fully paid and discharged by the Owner, provided however
that
the insurers with whom the fire and usual marine risks insurances
are
effected may, in the case of a major casualty, and with the previous
consent in writing of the Mortgagee, make payment on account of repairs
in
the course of being effected; and
|
(c)
|
any
moneys payable under any loss of earnings insurance shall be payable
in
accordance with the terms of the relevant Loss Payable Clause and
shall be
subject to such provisions of this clause 2 as shall apply to Earnings
and
the Mortgagee will not give any notification to the insurers as
contemplated in such Loss Payable Clause unless and until the Mortgagee
shall have become entitled under clause 2.1.1 to direct that the
Earnings
be paid to the Mortgagee.
|
2.2 |
Notice
|
2.3 |
Application
|
2.3.1
|
recovery
under the Insurances (other than under any loss of earnings insurance
and
any such sum or sums as may have been received by the Mortgagee in
accordance with the relevant Loss Payable Clause in respect of a
major
casualty as therein defined and paid over to the Owner as provided
in
clause 2.1.2(b) or which fall to be otherwise applied under clause
2.6);
and
|
2.3.2
|
Requisition
Compensation,
|
2.4 |
Shortfalls
|
2.5 |
Application
of Earnings received by
Mortgagee
|
2.5.1
|
if
received by the Mortgagee, or in the hands of the Mortgagee, prior
to the
occurrence of an Event of Default be retained by the Mortgagee and
shall
be paid over by the Mortgagee to the Owner at such times, in such
amounts
and for such purposes and/or shall be applied by the Mortgagee in
or
towards satisfaction of any sums from time to time accruing due and
payable by the Owner under the Security Documents or any of them
or by
virtue of payment demanded thereunder, in each case as the Mortgagee
may
in its absolute discretion
determine;
|
2.5.2
|
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.5.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.6 |
Application
of Insurances received by
Mortgagee
|
2.6.1
|
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of a Default but prior to the occurrence of an Event of
Default, be retained by the Mortgagee and shall be paid over by the
Mortgagee to the Owner at such times, in such amounts and for such
purposes and/or shall be applied by the Mortgagee in or towards
satisfaction of any sums from time to time accruing due and payable
by the
Owner under the Security Documents or any of them or by virtue of
payment
demanded thereunder, in each case as the Mortgagee may in its absolute
discretion determine;
|
2.6.2
|
if
received by the Mortgagee, or in the hands of the Mortgagee, after
the
occurrence of an Event of Default, be applied by the Mortgagee in
the
manner specified in clause 2.3 and/or clause 2.6.1, as the Mortgagee
may
in its absolute discretion
determine.
|
2.7 |
Use
of Owner’s name
|
2.8 |
Reassignment
|
3 |
Continuing
security and other matters
|
3.1 |
Continuing
security
|
3.1
1
|
be
held by the Mortgagee as a continuing security for the payment of
the
Outstanding Indebtedness and the performance and observance of and
compliance with all of the covenants, terms and conditions contained
in
the Security Documents, express or implied, and that the security
so
created shall not be satisfied by any intermediate payment or satisfaction
of any part of the amount hereby and thereby secured (or by any settlement
of accounts between the Owner or any other person who may be liable
to the
Mortgagee in respect of the Outstanding Indebtedness or any part
thereof
and the Mortgagee);
|
3.1.2
|
be
in addition to, and shall not in any way prejudice or affect, and
may be
enforced by the Mortgagee without prior recourse to, the security
created
by any other of the Security Documents or by any present or future
Collateral Instruments, right or remedy held by or available to the
Mortgagee or any right or remedy of the Mortgagee thereunder;
and
|
3.1.3
|
not
be in any way prejudiced or affected by the existence of any of the
other
Security Documents or any such Collateral Instrument, rights or remedies
or by the same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Mortgagee dealing with, exchanging,
varying or failing to perfect or enforce any of the same, or giving
time
for payment or performance or indulgence or compounding with any
other
person liable.
|
3.2 |
Rights
additional
|
3.3 |
No
enquiry
|
3.4 |
Obligations
of Owner and Mortgagee
|
3.5 |
Discharge
of Mortgage
|
4 |
Powers
of Mortgagee to protect security and remedy
defaults
|
4.1 |
Protective
action
|
4.2 |
Remedy
of defaults
|
5 |
Powers
of Mortgagee on Event of
Default
|
5.1 |
Powers
|
5.1.1
|
to
require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be delivered forthwith
to
such adjusters and/or brokers and/or other insurers as the Mortgagee
may
nominate;
|
5.1.2 |
to
collect, recover, compromise and give a good discharge for, all
claims
then outstanding or thereafter arising under the Insurances or
any of them
or in respect of the Earnings or Requisition Compensation or
any part
thereof, and to take over or institute (if necessary using the
name of the
Owner) all such proceedings in connection therewith as the Mortgagee
in
its absolute discretion thinks fit, and, in the case of the Insurances,
to
permit any brokers through whom collection or recovery is effected
to
charge the usual brokerage
therefor;
|
5.1.3 |
to
discharge, compound, release or compromise claims in respect
of the
Earnings, Insurances or Requisition Compensation or any part
thereof which
have given or may give rise to any charge or lien or other claim
on the
Earnings, Insurances or Requisition Compensation or any part
thereof
|
or which are or may be enforceable by proceedings against the Earnings, Insurances or Requisition Compensation or any part thereof; and |
5.1.4
|
to
recover from the Owner on demand all Expenses incurred or paid by
the
Mortgagee in connection with the exercise of the powers (or any of
them)
referred to in this clause 5.1 .
|
6 |
Attorney
|
6.1 |
Appointment
|
6.2 |
Exercise
of power
|
6.3 |
Filings
|
7 |
Further
assurance
|
8 |
Costs
and indemnities
|
8.1 |
Costs
|
8.2 |
Mortgagee’s
indemnity
|
9 |
Remedies
cumulative and other
provisions
|
9.1 |
No
implied waivers; remedies
cumulative
|
9.2 |
Delegation
|
9.3 |
Incidental
powers
|
10 |
Notices
|
11 |
Counterparts
|
12 |
Law
and jurisdiction
|
12.1 |
Law
|
12.2 |
Submission
to jurisdiction
|
12.3 |
Contracts
(Rights of Third Parties) Act
1999
|
1 |
Hull
and machinery (marine and war
risks)
|
(a)
|
all
claims hereunder in respect of an actual or constructive or compromised
or
arranged total loss, and all claims in respect of a major casualty
(that
is to say any casualty the claim in respect of which exceeds $500,000
(or
the equivalent in any other currency) inclusive of any deductible)
shall
be paid in full to the Mortgagee or to its order;
and
|
(b)
|
all
other claims hereunder shall be paid in full to the Owner or to its
order,
unless and until the Mortgagee shall have notified the insurers hereunder
to the contrary, whereupon all such claims shall be paid to the Mortgagee
or to its order.
|
2 |
Protection
and indemnity risks
|
3 |
Loss
of earnings
|
SIGNED
,
SEALED
and
DELIVERED
as
a
DEED
by
for
and on behalf of
THE
ROYAL BANK OF SCOTLAND plc
pursuant
to a power of attorney
dated
in
the presence of:
Witness:
Name:
Address:
Occupation:
|
)
)
)
)
)
)
)
|
Attorney-in-Fact
|
To:
|
The
Royal Bank of Scotland plc
The
Shipping Business Centre
5-10
Great Tower Street
London
EC3P 3HX
England
|
From:
|
Safety
Management Overseas S.A.
Edificio
Torre Universal
Piso
12 Avenida Federico Boyd
P.O.
Box 8807 Panama
|
1 |
Loan
Agreement
|
2 |
Confirmation
of appointment
|
3 |
Representation
and warranty
|
3.1 |
We
hereby represent and warrant that the copy of the Management Agreement
set
out in Appendix 1 to this letter is a true and complete copy of the
Management Agreement, that the Management Agreement constitutes valid
and
binding obligations of the Manager enforceable in accordance with
its
terms and that there have been no amendments or variations thereto
or
defaults thereunder by the Manager or, to the best of the Manager’s
knowledge and belief, the Borrower.
|
3.2 |
We
hereby confirm that the representations and warranties set out in
clauses
8.2.9, 8.2.10 and 8.2.11 of the Loan Agreement are true and correct
in all
respects.
|
4 |
Undertakings
|
4.1 |
the
Manager will not agree or purport to agree to any amendment or variation
of the Management Agreement without the prior written consent of
the
Bank;
|
4.2 |
the
Manager will procure that any sub-manager appointed by it pursuant
to the
provisions of the Management Agreement will, on or before the date
of such
appointment, enter into an undertaking in substantially the same
form
(mutatis mutandis) as this letter;
|
4.3 |
the
Manager will not, without the prior written consent of the Bank,
take any
action or institute any proceedings or make or assert any claim on
or in
respect of the Ship or its policies and contracts of insurance (which
expression includes all entries of the Ship in a protection and indemnity
or war risks association) which are from time to time during the
Security
Period (as such term is defined in the General Assignment) in place
or
taken out or entered into by or for the benefit of the Borrower (whether
in the sole name of the Borrower or in the joint names of the Borrower
and
the Bank or otherwise) in respect of the Ship and her Earnings (as
such
term is defined below) or otherwise howsoever in connection with
the Ship
and all benefits thereof (including claims of whatsoever nature and
return
of premiums) (together the “
Insurances
”)
or all moneys whatsoever from time to time due or payable to the
Borrower
during the Security Period (as such term is defined in the General
Assignment) arising out of the use or operation of the Ship including
(but
without limiting the generality of the foregoing) all freight, hire
and
passage moneys, income arising under pooling arrangements, 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 charter party or other contract for the employment of the
Ship (the
“
Earnings
”)
or any other property or other assets of the Borrower which the Bank
has
previously advised the Manager are subject to any encumbrance or
right of
set-off in favour of the Bank by virtue of any of the security documents
executed in favour of the Bank pursuant to the Loan
Agreement;
|
4.4 |
the
Manager does hereby subordinate any claim that it may have against
the
Borrower or otherwise in respect of the Ship and its Earnings, Insurances
and Requisition Compensation (as such term is defined in the General
Assignment) to the claims of the Bank under the Loan Agreement and
the
other Security Documents (as such term is defined in the General
Assignment) and undertakes to exercise no right to which it may be
entitled in respect of the Borrower and/or the Ship and/or its Earnings
and/or Insurances and/or Requisition Compensation (as such term is
defined
in the General Assignment) in competition with the
Bank;
|
4.5 |
the
Manager will discontinue any such action or proceedings or claim
which may
have been taken, instituted or made or asserted, promptly upon notice
from
the Bank to do so;
|
4.6 |
the
Manager will promptly notify the Bank if at any time the amount owed
by
the Borrower to the Manager pursuant to the Management Agreement
(whether
in respect of the Manager’s remuneration or disbursements or otherwise)
exceeds US$100,000 or the equivalent in other currencies;
and
|
4.7 |
the
Manager will provide the Bank with such information concerning the
Ship as
the Bank may from time to time reasonably
require.
|
5 |
Insurance
assignment
|
5.1 |
By
way of security for the aggregate of the Loan and interest accrued
and
accruing thereon, the Expenses (as such term is defined in the General
Assignment) the Master Swap Agreement Liabilities (as such term is
defined
in the General Assignment) and all other sums of money from time
to time
owing by the Borrower to the Bank, whether actually or contingently,
under
the Security Documents (as such term is defined in the General Assignment)
or any of them to which the Borrower is or is to be a party (the
“
Outstanding
Indebtedness
”)
the Manager with full title guarantee hereby irrevocably and
unconditionally assigns and agrees to assign to the Bank all of the
Manager’s rights, title and interest in and to and the benefit of the
Insurances.
|
5.2 |
The
Manager hereby undertakes to procure that a duly completed notice
in the
form set out in Appendix 2 to this letter is given to all insurers
of the
Ship and to procure that such notice is promptly endorsed on all
policies
and entries in respect of the Insurances and agrees promptly to authorise
and/or instruct any broker, insurer or association with or through
whom
Insurances may be effected to endorse on any policy or entry or otherwise
to give effect to such loss payable clause as may be stipulated by
the
Bank.
|
5.3 |
The
Bank shall, at the Manager’s cost, re-assign to the Manager all the
Manager’s right, title and interest in the Insurances upon the Outstanding
Indebtedness being discharged in full to the satisfaction of the
Bank.
|
5.4 |
Any
moneys in respect of the Insurances which would (but for the assignment
contained in clause 5(a) above) be payable to the Manager shall be
applied
in accordance with clauses 2.3 and 2.6 (as the case may be) of the
General
Assignment.
|
6 |
Law
and jurisdiction
|
6.1 |
The
agreement constituted by this letter shall be governed by and construed
in
accordance with English law.
|
6.2 |
The
Manager agrees, for the benefit of the Bank, that any legal action
or
proceedings arising out of or in connection with this letter against
the
Manager or any of its assets may be brought in the English courts.
The
Manager irrevocably and unconditionally submits to the jurisdiction
of
such courts and whoever irrevocably designates, appoints and empowers
Cheeswrights at present of Bankside House, 107 Leadenhall Street,
London
EC3A 4HA, England, receive for it and on its behalf, service of process
issued out of the English courts in any such legal action or proceedings.
The submission to such jurisdiction shall not (and shall not be construed
so as to) limit the rights of the Bank to take any proceedings against
the
Manager in the courts of any other competent jurisdiction nor shall
the
taking of proceedings in any one or more jurisdictions preclude the
taking
of proceedings in any other jurisdiction, whether concurrently or
not.
|
6.3 |
No
term of this Letter is enforceable under the Contracts (Rights of
Third
Parties) Act 1999 by a person who is not a party to this
letter.
|
1. |
Interpretation
|
2. |
Obligations
|
(a) |
General
Conditions
.
|
(c) |
Netting
.
If on any date amounts would otherwise be
payable:-
|
(d) |
Deduction
or Withholding for Tax
.
|
3. |
Representations
|
(a) |
Basic
Representations
.
|
4. |
Agreements
|
5. |
Events
of Default and Termination
Events
|
6. |
Early
Termination
|
(c) |
Effect
of Designation
.
|
(d) |
Calculations
.
|
7. |
Transfer
|
8. |
Contractual
Currency
|
9. |
Miscellaneous
|
(e) |
Counterparts
and Confirmations
.
|
10. |
Offices;
Multibranch Parties
|
11. |
Expenses
|
12. |
Notices
|
13. |
Governing
Law and Jurisdiction
|
14. |
Definitions
|
The
Royal Bank of Scotland plc
|
Kerasies
Shipping Corporation
|
|||||
By:
|
By:
|
|||||
Name:
|
Name:
George Papadopoulos
|
|||||
Title:
|
Title:
Attorney-in-fact
|
|||||
Date:
13 December 2007
|
|
Date:
13 December 2007
|
(a)
|
“Specified
Entity”
means in relation to Party A for the purpose
of:-
|
(b)
|
“Specified
Transaction”
shall have the meaning specified in Section
14.
|
(c)
|
The
“Cross
Default”
provisions of Section 5(a)(vi):-
will
not apply to Party A
will
apply to Party B
If
such provisions apply:-
“Specified
Indebtedness”
will have the meaning specified in Section 14 of this
Agreement.
“Threshold
Amount”
means zero.
|
(d)
|
The
“Credit
Event upon Merger”
provisions of Section 5(b)(iv):-
will
apply to Party A
andwill
apply to Party B
|
(e)
|
The
“Automatic
Early Termination”
provision of Section 6(a):-
will
not apply to Party A and
will
not apply to Party B
|
(f)
|
Payments
on Early Termination.
For the purpose of Section 6(e) of this
Agreement:-
|
(i)
|
Market
Quotation will apply.
|
(ii)
|
The
Second Method will apply.
|
(g
)
|
“Termination
Currency”
means such currency of any Transaction in respect of which an Early
Termination Date has been designated or is deemed to occur as may
be
selected by the party which is not the Defaulting Party or the Affected
Party (as the case may be), or where there are two Affected Parties
such
currency as may be agreed between them, if such currency is freely
available, and otherwise United States
Dollars.
|
(h)
|
Additional
Termination Event
will apply.
|
(i)
|
Party
B or any Credit Support Provider of Party B consolidates or amalgamates
with, or merges into, or transfers all or substantially all its assets
to,
another entity (
“the
Transferee”
)
and such action does not constitute a
“Merger
Without Assumption”
described in Section 5(a)(viii) of this Agreement, but any policy
in
effect at the time (including any policy relating to lending or credit
limits) of Party A would not permit Party A to enter into a
Transaction or Transactions with the Transferee on the terms (other
than
applicable rates) of the Transactions then in effect under this
Agreement;
|
(ïi)
|
any
circumstances arise which, in the reasonable opinion of Party A,
give
grounds for belief that Party B or any Credit Support Provider of
Party B
may not, or may be unable to, perform its obligations under this
Agreement
or any Credit Support Document;
|
(iii)
|
Party
B, or any Credit Support Provider of Party B, fails to give adequate
assurances of its ability to perform its obligations under this Agreement
or under any Credit Support Document on or before the third Business
Day
after a written request to do so has been given to Party B by Party
A;
and
|
(iv)
|
The
prepayment, repayment or cancellation by Party B in whole of the
Loan
Facility.
|
(a)
|
Payer
Representations.
For the purpose of Section 3(e) of this Agreement, Party A will make
the
following representation and Party B will make the following
representation:-
|
(b)
|
Payee
Representations.
For the purpose of Section 3(f) of this Agreement, Party A and Party
B
make no representations.
|
Party required to
deliver document
|
Form/Document/Certificate
|
Date by which to be
delivered
|
Covered by
Section 3(d)
Representation
|
Party
A & B
|
Signing
Authority being evidence of authority, incumbency and specimen signature
of each person executing any document on its behalf in
connection
with this Agreement.
|
On
the signing of this Agreement and, if requested, any
Confirmation
|
Yes
|
|||
Party
B
|
A
most recent copy of the Party’s Annual Report and
Accounts.
|
On
demand in respect of those which became publicly available prior
to the
date of this Agreement and, in respect of statements not publicly
available at the date of this Agreement, as soon as possible and,
in any
event, in each case within one hundred and eighty days of the end
of the
financial year to which they relate
|
Yes
|
|||
Party
B
|
Certified
Resolution of the Board of Directors approving this Agreement and
the
arrangements contemplated herein.
|
On
the signing of this Agreement
|
Yes
|
|||
Party
B
|
The
power of attorney (if any) of Party B under which this Agreement
and/or
any Confirmation is to be executed on behalf of Party B.
|
On
the signing of this Agreement
|
Yes
|
|||
Party
B
|
A
copy of the Articles of Incorporation and By-laws and Certificate
of
Incorporation (or equivalent constitutional documents) of Party
B.
|
On
the signing of this Agreement
|
Yes
|
|||
Party
B
|
Copies
of any statutory and/or regulatory consents, approvals and authorisations
necessary for Party B to enter into and perform this Agreement and
the
|
On
the signing of this Agreement
|
Yes
|
Party required to
deliver document
|
Form/Document/Certificate
|
Date by which to be
delivered
|
Covered by
Section 3(d)
Representation
|
Transactions contemplated by this Agreement. | ||||||
Party
B
|
The
Credit Support Document(s) referred to in Part 4(f) of the Schedule
to
this Agreement duly executed by the parties thereto.
|
On
the signing of this Agreement
|
Yes
|
|||
Party
B ---
|
Such
legal opinions in form and substance satisfactory to Party A as Party
A
may require.
|
|||||
Party
B
|
Confirmation
in form and substance satisfactory to Party A that all conditions
precedent to the Loan Facility have been satisfied.
|
On
the signing of this Agreement
|
||||
Party
B
|
A
copy of the written acceptance by Party B’s Process Agent of its
appointment to receive for Party B and on its behalf service of process
in
any Proceedings under this Agreement.
|
(a)
|
Addresses
for Notices
.
For the purpose of Section 12(a) of this
Agreement:-
|
Address: |
c/o
RBS Global Banking & Markets
|
280
Bishopsgate
London,
EC2M 4RB
|
Attention:
Fax:
Telephone:
|
Swaps
Administration
+44
(0)20 7085 5050
+44
(0)20 7085 5000
|
Address: |
c/o
RBS Global Banking & Markets
135
Bishopsgate
London,
EC2M 3UR
|
Attention
:
Fax:
|
Head
of Legal, Global Banking & Markets
+44
(0)20 7085 8411
|
Address: |
c/o
32 Karamanli Avenue
166
05 Voula
Athens,
Greece
|
Attention:
Fax:
|
Mr
George Papadopoulos
+30
210 89 56 900
|
(b)
|
Process
Agent.
For the purpose of Section 13(c) of this
Agreement:-
|
(c) |
Offices.
The
provisions of Section 10(a) will apply to this
Agreement.
|
(d)
|
Multibranch
Party.
For the purpose of Section 10(c) of this
Agreement:-
|
(e)
|
Calculation
Agent
.
The Calculation Agent is Party A unless otherwise specified in a
Confirmation in relation to the relevant Transaction. The failure
of Party
A to perform its obligations as Calculation Agent hereunder shall
not be
construed as an Event of Default or Termination
Event.
|
(f)
|
Credit
Support Document
.
Party A provides no Credit Support Documents. Party B’s obligations to
Party A under this Agreement shall be secured by the Security
Documents.
|
(g)
|
Credit
Support Provider
.
Credit Support Provider is not applicable in relation to Party A
and in
relation to Party B means each party that executes and/or has obligations
under the Security Documents.
|
(h)
|
Governing
Law
.
This Agreement will be governed by and construed in accordance with
the
laws of England.
|
(i)
|
Netting
of Payments
.
Sub-paragraph (ii) of Section 2(c) of this Agreement will apply to
all
Transactions hereunder unless otherwise agreed in writing between
the
parties.
|
(j)
|
“Affiliate”
will have the meaning specified in Section 14 of this
Agreement.
|
(a)
|
2000
ISDA Definitions.
The 2000 Definitions published by ISDA (the “Definitions”) are
incorporated by reference herein. Any terms used and not otherwise
defined
herein which are contained in the Definitions shall have the meaning
set
forth therein .
|
(b)
|
Set-Off.
The following shall be added as Section
6(f):
|
(c)
|
Relationship
Between Parties.
Each Party will be deemed to represent to the other party on the
date on
which it enters into a Transaction that (absent a written agreement
between the parties that expressly imposes affirmative obligations
to the
contrary for that Transaction):-
|
(i)
|
Non-Reliance.
It
is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that
Transaction is appropriate or proper for it based upon its own judgement
and upon advice from such advisers as it has deemed necessary. It
is not
relying on any communication (written or oral) of the other party
as
investment advice or as a recommendation to enter into that Transaction;
it being understood that information and explanations related to
the terms
and conditions of a Transaction shall not be considered investment
advice
or a recommendation to enter into that Transaction. No communication
(written or oral) received from the other party shall be deemed to
be an
assurance or guarantee as to the expected results of that
Transaction.
|
(ii)
|
Assessment
and Understanding.
It
is capable of assessing the merits of and understanding (on its own
behalf
or through independent professional advice), and understands and
accepts,
the terms, conditions and risks of that Transaction. It is also capable
of
assuming, and assumes, the risks of that
Transaction.
|
(iii)
|
Status
of Parties.
The other party is not acting as a fiduciary for or an adviser to
it in
respect of that Transaction.
|
(d)
|
Tape
Recording.
Each party to this Agreement acknowledges and agrees to the tape
recording
of conversations between the parties to this Agreement whether by
one or
other or both of the parties and that such tape recordings may be
submitted in evidence to any court or legal proceedings for the purpose
of
establishing any matters relating to this
Agreement.
|
(e)
|
Additional
Representation.
The following additional clause (g) shall be added at the end of
Section 3
:
|
“(g)
|
No
Agency.
It
is entering into this Agreement and each Transaction as principal
(and not
as agent or in any other capacity, fiduciary or
otherwise).”
|
(f)
|
Contracts
(Rights of Third Parties) Act 1999.
No
term of this Agreement is enforceable by a person who is not a party
to
it.
|
(g)
|
Confirmations.
Party A shall promptly send to Party B a confirmation of each Transaction
between them, and Party B shall promptly confirm the accuracy of
that
Confirmation by fax or any other means agreed by the parties. Failure
to
confirm the accuracy within 10 Business Days of being sent the relevant
Confirmation will be deemed to be a confirmation of accuracy by Party
B.
|
(h)
|
Loan
Facility.
Section 14 of this Agreement is amended by the incorporation of the
following definition:-
|
(i)
|
Security.
Party B irrevocably and unconditionally confirms to Party A that
the
obligations of Party B to Party A under or pursuant to this Agreement
shall form part of the Indebtedness and that the performance by Party
B of
those obligations shall be secured by the Security
Documents.
|
(j)
|
Process
Agent.
Party B undertakes to notify Party A by no fewer than ten days’ written
notice to Party A, in the event that the details of the Process Agent
contained in Part 4 (b) are changed or amended in any
way.
|
(a)
|
FX
Transactions and Currency Option
Transactions
|
(b)
|
Scope
–
Future
and Outstanding
Transactions
|
(i)
|
FX
Transactions and Currency Option Transactions outstanding between
the
parties as of such date; and,
|
(ii)
|
FX
Transactions and Currency Option Transactions entered into by the
parties
on and after such date.
|
(c)
|
Definitions
|
(d)
|
Confirmations
|
(e)
|
Payment
of Premiums for Currency Option
Transactions
|
(i)
|
Unless
otherwise agreed in writing by the parties, the Premium for any Currency
Option Transaction shall be paid on its Premium Payment
Date.
|
(ii)
|
If
the Premium is not paid on its Premium Payment Date, the Seller may
elect:
|
(B)
|
to
give written notice of such non-payment and, if such payment shall
not be
received within two (2) Local Business Days of such notice, treat
the
related Currency Option Transaction as void;
or
|
(C)
|
to
give written notice of such non-payment and, if such payment shall
not be
received within two (2) Local Business Days of such notice, treat
such
nonpayment as an Event of Default under Section 5(a)(i) of this
Agreement.
|
(f)
|
Netting
Discharge and Termination of Currency Option
Transactions
|
(i)
|
each
being with respect to the same Put Currency and the same Call
Currency;
|
(ii)
|
each
having the same Expiration Date and Expiration
Time;
|
(iii)
|
each
being of the same style (i.e. both being either American style, European
style or Bermudan style);
|
(iv)
|
each
having the same Strike Price;
|
(v)
|
neither
of which shall have been exercised by delivery of a Notice of Exercise;
and
|
(vi)
|
both
of which were entered into by the same Offices of Party A and Party
B;
|
(g)
|
Payments
on Early Termination
|
KERASIES
SHIPPING CORPORATION
|
(1) | |
and
|
||
THE
ROYAL BANK OF SCOTLAND plc
|
(2) |
MASTER
AGREEMENT SECURITY DEED
m.v.
Katerina
|
Page
|
||||
1
|
Definitions
|
1
|
||
2
|
Restrictions
|
2
|
||
3
|
First
fixed charge
|
2
|
||
4
|
Further
documentation etc.
|
3
|
||
5
|
Representations
|
3
|
||
6
|
Notices
|
4
|
||
Supplemental
|
4
|
|||
8
|
Law
and jurisdiction
|
4 |
(1)
|
KERASIES
SHIPPING CORPORATION
,
a
company incorporated in the Republic of Liberia having its registered
office at 80 Broad Street, Monrovia, Liberia (the “
Borrower
”);
and
|
(2)
|
THE
ROYAL BANK OF SCOTLAND plc
,
a
company incorporated in Scotland whose registered office is at 36
St.
Andrew Square, Edinburgh EH2 2YB, Scotland, acting for the purposes
of
this Deed through its branch at The Shipping Business Centre, 5-10
Great
Tower Street, London, EC3P 3HX, England (the “
Bank
”).
|
(A)
|
By
a loan agreement dated 13 December 2007 and made between (i) the
Borrower
as borrower and (ii) the Bank as Bank (the “
Loan
Agreement
”),
the Bank agreed to make available to the Borrower upon the terms
and
conditions therein described a multicurrency loan of up to Forty
million
Dollars ($40,000,000) or the Equivalent Amount in an Optional Currency
or
Optional Currencies;
|
(B)
|
the
Borrower has entered into or may enter into one or more Transactions
(as
such term is defined in the 1992 ISDA Master Agreement dated 13 December
2007 between the Borrower and the Bank (the “
Master
Agreement
”))
as evidenced by one or more Confirmations (as such term is defined
in the
Master Agreement) which are governed by the Master Agreement;
and
|
(C)
|
it
is a condition precedent to the Bank advancing the loan under the
Loan
Agreement that the Borrower as security for, inter alia, its obligations
under the Loan Agreement shall execute this
Deed.
|
1. |
Definitions
|
1.1 |
In
this
Deed, unless the context otherwise requires, the following expressions
shall have the following
meanings:
|
1.2 |
For
the purposes of this Deed an amount shall be deemed to be outstanding
and
to be due and payable to the Bank if the Bank is then entitled to
demand
payment of that amount, notwithstanding that it has not yet served
a
demand.
|
1.3 |
Clause
1.1 (Purpose) and Clause 1.2 (Definitions) of the Loan Agreement
shall
apply with any necessary modifications for the purposes of this
Deed.
|
2 |
Restrictions
|
2.1 |
In
this clause references to assignment includes the creation, or permitting
to arise, of any form of beneficial interest or Security Interest
and
every other kind of disposition.
|
2.2 |
An
act or transaction which is contrary to, or inconsistent with, this
clause
shall be void as regards the Bank.
|
3 |
First
fixed charge
|
3.1 |
The
Borrower with full title guarantee, hereby charges and agrees to
charge
and releases and agrees to release to the Bank as a continuing security
for payment of the Outstanding Indebtedness, by way of first fixed
charge,
the Secured Property.
|
3.2 |
Upon
the occurrence of a Default the charge shall become enforceable and
the
Bank shall be entitled then or at any later time or times to appropriate
all or any part of the Secured Property in or towards discharge of
the
then Outstanding Indebtedness or any part thereof, and may do so
notwithstanding that any maturity date attached to any part or parts
of
the Secured Property may not yet have
arrived.
|
3.3 |
A
certificate signed by a director or other senior officer of the
Bank and
which states that on a specified date and (if the certificate also
states
this) at a specified time the Bank exercised its rights under this
clause
to appropriate a specified amount of Secured Property in the discharge
of
a specified amount of the Outstanding Indebtedness shall be conclusive
evidence that:
|
3.3.1 |
the
Bank’s liabilities in respect of the specified amount of Secured Property;
and
|
3.3.2 |
the
specified amount of Outstanding Indebtedness
|
4 |
Further
documentation etc.
|
4.1 |
The
Borrower shall execute forthwith any document which the Bank may
specify
for the purpose of:
|
4.1.1 |
supplementing
the rights which this Deed confers on the Bank in relation to the
Secured
Property; or
|
4.1.2 |
creating
a mortgage of the Secured Property to replace or supplement the
charge
created in clause 3 above; or
|
4.1.3 |
registering
or otherwise perfecting this Deed or any mortgage created under
clause
4.1.2 above; or
|
4.1.4 |
ensuring
or confirming the validity of anything done or to be done under
this
Deed.
|
4.2 |
The
document shall be in the terms specified by the Bank and, in the
case of a
mortgage of the Secured Property, those terms may include a provision
entitling the Bank, on or after a Default, to appropriate, or otherwise
deal with, the Secured Property for the purpose of discharging the
Outstanding Indebtedness.
|
4.3 |
The
Borrower shall also forthwith do any act and execute any document
(including a document which amends or replaces this Deed) which the
Bank
specifies for the purpose of enabling or assisting the Bank to comply,
in
relation to the Secured Property and/or the Outstanding Indebtedness,
with
any requirement (legally binding or not) applicable to the Bank and,
in
particular, the requirements of any banking supervisory authority
with
regard to netting of cash
collateral.
|
4.4 |
For
the purpose of securing performance of the Borrower’s obligations under
clauses 4.1 to 4.3, the Borrower irrevocably appoints the Bank as its
attorney, on its behalf and in its name or otherwise to sign or execute
any document which, in the opinion of the Bank, the Borrower is obliged,
or could be required, to sign or execute under any of the said clauses,
which the Bank considers necessary or convenient for or in connection
with
any exercise or intended exercise of any rights which the Bank has
under
this Deed or any other purpose connected with this
Deed.
|
4.5 |
The
Bank may appoint any person or persons its substitute under that
power of
attorney referred to in clause 4.4 and may also delegate that power
of
attorney to any person or persons.
|
5 |
Representations
|
5.1 |
The
Borrower represents and warrants to the Bank as
follows:
|
5.1.1 |
the
Borrower is the sole legal and beneficial Borrower of the Secured
Property
and has good marketable title to
it;
|
5.1.2 |
no
third party has or will have any interest, right or claim of any
kind in
relation to any of the Secured
Property;
|
5.1.3 |
the
Borrower has the corporate power, and has taken all necessary
corporate
action to authorise the execution of this Deed, the Loan Agreement
and the
Master Swap Agreement;
and
|
5.1.4 |
nothing
in this Deed will or might result in the Borrower contravening
any law or
regulation which is now in force or which has been published but
not yet
brought into force or any contractual or other obligation which
the
Borrower now has to a third
party.
|
6 |
Notices
|
7 |
Supplemental
|
7.1 |
This
Deed, including the charge created by clause 3, shall remain in
force as a
continuing security until the Security Period has
ended.
|
7.2 |
The
rights of the Bank under this Deed will not be discharged or prejudiced
by:
|
7.2.1 |
any
kind of amendment or supplement to the other Security Documents;
or
|
7.2.2 |
any
arrangement or concession, including a rescheduling, which the
Bank may
make in relation to any of the Loan Agreement, the Master Swap
Agreement
and the other Security Documents, or any action by the Bank and/or
the
Borrower and/or any other party thereto which is contrary to the
terms of
the Loan Agreement, the Master Swap Agreement and the other Security
Documents; or
|
7.2.3 |
any
release or discharge, whether granted by the Bank or effected by
the
operation of any law, of all or any of the obligations of the Borrower
and/or any other party thereto under any of the Loan Agreement,
the Master
Swap Agreement and the other Security Documents;
or
|
7.2.4 |
any
change in the Borrowership and/or control of the Borrower
and/or any other
party thereto and/or merger, demerger or reorganisation involving
the
Borrower and/or any other party thereto;
or
|
7.2.5 |
any
event or matter which is similar to, or connected with, any of
the
foregoing,
|
7.3 |
Nothing
in this Deed excludes or restricts any right of counterclaim, set-off,
right to net payments, or any other right or remedy which the Bank
would
have had other than under the general law, the Loan Agreement, the
Master
Swap Agreement and the other Security
Documents.
|
8 |
Law
and jurisdiction
|
8.1 |
Law
|
8.2 |
Submission
to jurisdiction
|
8.3 |
Contracts
(Rights of Third Parties) Act
1999
|
EXECUTED
as
a
DEED
By
George Papadopoulos
the
duly authorised attorney of
KERASIES
SHIPPING CORPORATION
for
it and on its behalf
pursuant
to a Power of Attorney
dated
5 December 2007 in the presence of:
|
)
)
)
)
)
)
)
|
ACCEPTED
by
the duly authorised attorney of
THE
ROYAL BANK OF SCOTLAND plc
for
it and on its behalf
pursuant
to a Power of Attorney
dated
in
the presence of:
|
)
)
)
)
)
)
)
|
SIGNED
By
George Papadopoulos
for
and on behalf of
KERASIES
SHIPPING CORPORATION
|
)
)
) _______________________________
)
Attorney-in-fact
|
SIGNED
by
Nick Smith
for
and on behalf of
THE
ROYAL BANK OF SCOTLAND plc
|
)
)
)
_______________________________
)
Attorney-in-fact
|
EXHIBIT 10.25
|
|
Global Banking & Markets
Shipping Business Centre 5-10 Great Tower Street London EC3P 3HX |
|
|
|
Telephone: +44 (0)20 7085 5000
Facsimile: +44 (0)20 7085 7134 |
|
|
|
www.rbs.com/gbm |
14 May 2008
Kerasies Shipping Corporation
c/o Safety Management Overseas SA
32 Avenue Karamanli
166 73 Voula
PO Box 70677-106-6
Athens
GREECE
Attn. Mr Konstantinos Adamopoulos
Dear Sirs
Loan Agreement dated 13 December 2007 (the Loan Agreement) between The Royal Bank of Scotland plc (the Bank) and Kerasies Shipping Corporation (the Borrower)
We refer to the above Loan Agreement and to the restrictions placed on the Borrower regarding Change of Ownership as per clause 9.3.13. At the request of the Borrower, we have pleasure in confirming that the Bank is prepared to agree to the proposed transfer of ownership of the Borrower to Safe Bulkers Inc., a newly formed company to be listed on the NYSE and which will initially offer 20% of its shares to the public by virtue of an IPO. The remaining 80% of the shares will remain initially within the existing beneficial ownership and control of the Hadjioannou family as advised to the Bank.
Agreement is subject to the following amendments to the terms of the loan, which are to be documented by a supplemental agreement and such other supporting documentation as
The Royal Bank of Scotland plc
Registered in Scotland No 90312 Registered Office: 38 St Andrew Square Edinburgh EH2 2YB A member of the London Stock Exchange and authorised and regulated by the Financial Services Authority |
2
the Banks lawyers may require within 30 days of the successful placement of the IPO, the costs of which are to be borne by the Borrower:
3
Signing: |
The Supplemental Loan Agreement and other
supplemental
documentation to be executed on or before 15 June 2008, failing
which this offer will lapse notwithstanding its acceptance.
|
This letter contains an outline of certain terms and conditions (it does not constitute a legally binding commitment on the Bank) which will, inter alia, be embodied in the Supplemental Loan Agreement and security documentation, such legal agreement and security documentation shall be governed by English law (except to the extent any security otherwise requires). The Documentation shall supersede this letter and all prior discussions and negotiations in relation to the loan facility.
The Bank shall be entitled to obtain such legal opinions from such jurisdictions as it may require and from lawyers appointed by it and the Borrower shall provide such corporate and other documentation as may be required by the Bank or its lawyers.
All other terms and conditions of the Loan Agreement shall remain unchanged and in full force and effect.
This offer remains subject to there being no facts, events or circumstances, now existing or hereafter arising, which come to our attention and which, in our good faith determination, materially adversely affect the Borrowers or any of the Security Parties business, assets, financial condition, operations or prospects, in which event the Bank reserves the right to terminate this offer.
Yours faithfully | ||
For THE ROYAL BANK OF SCOTLAND plc | ||
/s/ Stephen Moorby | /s/ Nicholas Pavlidis | |
STEPHEN MOORBY | NICHOLAS PAVLIDIS | |
SENIOR DIRECTOR, SHIP FINANCE | SENIOR DIRECTOR, SHIP FINANCE | |
Accepted on behalf of | ||
Kerasies Shipping Corporation | ||
/s/ Konstantinos Adamopoulos | ||
Konstantinos Adamopoulos | ||
14/5/08 |
SCHEDULE 1: Conditions Precedent and Subsequent |
51
|
|
Part
I: Conditions precedent
|
51
|
|
Part
II: Conditions subsequent
|
55
|
|
SCHEDULE 2: Calculation of Mandatory Cost |
56
|
|
SCHEDULE 3: Form of Drawdown Notice |
58
|
(1)
|
MARINDOU
SHIPPING CORPORATION
,
a
company incorporated under the laws of the Republic of Liberia whose
registered office is at 80 Broad Street, Monrovia, Liberia (the
“
Borrower
”)
|
(2)
|
DnB
NOR BANK ASA
,
as through its office at 20 St. Dunstan’s Hill, London EC3R 8HY, England
(the “
Lender
”)
|
(A)
|
The
Borrower is the registered owner of the Vessel which is registered
under
the flag of Cyprus.
|
(B)
|
The
Lender has agreed to advance to the Borrower a secured multi-currency
reducing revolving credit facility of up to forty two million Dollars
($42,000,000) to assist the Borrower in re-financing its Existing
Indebtedness and for its general working capital
purposes.
|
1
|
Definitions
and Interpretation
|
1.1
|
In
this Agreement:
|
(a)
|
moneys
borrowed;
|
(b)
|
any
acceptance credit;
|
(c)
|
any
bond, note, debenture, loan stock or similar
instrument;
|
(d)
|
any
finance or capital lease;
|
(e)
|
receivables
sold or discounted (other than on a non-recourse
basis);
|
(f)
|
deferred
payments for assets or services;
|
(g)
|
any
derivative transaction protecting against or benefiting from fluctuations
in any rate or price (and, when calculating the value of any derivative
transaction, only the marked to market value shall be taken into
account);
|
(h)
|
any
amount raised under any other transaction (including any forward
sale or
purchase agreement) having the commercial effect of a borrowing;
|
(i)
|
any
counter-indemnity obligation in respect of a guarantee, indemnity,
bond,
standby or documentary letter of credit or any other instrument issued
by
a bank or financial institution;
and
|
(j)
|
the
amount of any liability in respect of any guarantee or indemnity
for any
of the items referred to in paragraphs (a) to (1)
above.
|
(a)
|
the
applicable Screen Rate; or
|
(b)
|
(if
no Screen Rate is available for any Interest Period) the arithmetic
mean
of the rates (rounded upwards to four decimal places) quoted to the
Lender
in the London interbank market,
|
(a)
|
an
actual, constructive, arranged, agreed or compromised total loss
of the
Vessel; or
|
(b)
|
the
requisition for title or compulsory acquisition of the Vessel by
any
government or other competent authority (other than by way of requisition
for hire); or
|
(c)
|
the
capture, seizure, arrest, detention or confiscation of the Vessel
by any
government or by persons acting or purporting to act on behalf of
any
government, unless the Vessel is released and returned to the possession
of the Borrower within one month after the capture, seizure, arrest,
detention or confiscation in
question.
|
1.2
|
In
this Agreement:
|
1.2.1 |
words
denoting the plural number include the singular and vice
versa;
|
1.2.2 |
words
denoting persons include corporations, partnerships, associations
of
persons (whether incorporated or not) or governmental or quasi-
governmental bodies or authorities and vice
versa;
|
1.2.3 |
references
to Recitals, Clauses and Schedules are references to recitals, clauses
and
schedules to or of this Agreement;
|
1.2.4 |
references
to this Agreement include the Recitals and the
Schedules;
|
1.2.5 |
the
headings and contents page(s) are for the purpose of reference only,
have
no legal or other significance, and shall be ignored in the interpretation
of this Agreement;
|
1.2.6 |
references
to any document (including, without limitation, to all or any of
the
Relevant Documents) are, unless the context otherwise requires, references
to that document as amended, supplemented, novated or replaced from
time
to time;
|
1.2.7 |
references
to statutes or provisions of statutes are references to those statutes,
or
those provisions, as from time to time amended, replaced or
re-enacted;
|
1.2.8 |
references
to the Lender include its successors, transferees and
assignees;
|
1.2.9 |
a
time of day (unless otherwise specified) is a reference to London
time;
and
|
1.2.10 |
words
and expressions defined in the Master Agreement, unless the context
otherwise requires, have the same
meaning.
|
1.3
|
Offer
letter
|
2
|
The
Loan and its Purpose
|
2.1
|
Amount
Subject
to the terms of this Agreement, the Lender agrees to make available
to the
Borrower a revolving credit in an aggregate amount not exceeding
the
Maximum Amount at any one time.
|
2.2
|
Purpose
The Borrower shall apply the Loan for the purpose referred to in
Recital
(B).
|
2.3
|
Monitoring
The Lender shall not be bound to monitor or verify the application
of any
amount borrowed under this
Agreement.
|
3
|
Conditions
of Utilisation
|
3.1
|
Conditions
precedent
The Borrower is not entitled to have any Drawing advanced unless
the
Lender has received all of the documents and other evidence listed
in Part
1 of Schedule 1.
|
3.2
|
Further
conditions precedent
The Lender will only be obliged to advance a Drawing if on the date
of the
Drawdown Notice and on the proposed Drawdown
Date:
|
3.2.1 |
no
Default is continuing or would result from the advance of that Drawing;
and
|
3.2.2 |
the
representations made by the Borrower under Clause 12 are true in
all
material respects.
|
3.3
|
Drawing
limit
The Lender will only be obliged to advance a Drawing
if:
|
3.3.1 |
no
other Drawing has been made on the same Business
Day;
|
3.3.2 |
that
Drawing is not less than one million Dollars ($1,000,000) or, if
in excess
of one million Dollars ($1,000,000), integral multiples of five hundred
thousand Dollars ($500,000); and
|
3.3.3 |
that
Drawing will not increase the outstanding amount of the Loan to a
sum in
excess of the Maximum Amount.
|
3.4
|
Reduction
of Maximum Amount
The Maximum Amount:
|
3.4.1 |
shall
be reduced by twenty (20) reduction amounts, the first six (6) reduction
amounts on each of the Reduction Dates, each reduction amount in
the
amount of seven hundred and fifty thousand Dollars ($750,000), the
following six (6) reduction amounts each in the amount of one million
Dollars ($1,000,000), the following seven (7) reduction amounts each
in
the amount of one million six hundred and eighty seven thousand five
hundred Dollars ($1,687,500) and the final reduction amount in the
amount
of nineteen million six hundred and eighty seven thousand five hundred
Dollars ($19,687,500) (comprising of a reduction amount of one million
six
hundred and eighty seven thousand five hundred Dollars ($1,687,500)
and a
balloon reduction of eighteen million Dollars ($18,000,000)), the
first
Reduction Date being the date which is six (6) calendar months from
the
date of this Agreement and subsequent Reduction Dates being at consecutive
intervals of six (6) calendar months thereafter, with the last Reduction
Date being on the Final Maturity Date;
and
|
3.4.2 |
may
(in addition to any reduction required under Clause 3.4.1) be reduced
by
the Borrower by five hundred thousand Dollars ($500,000) or an integral
multiple of that amount with effect from any Business Day by written
notice to the Lender given not fewer than fourteen (14) days prior
to that
Business Day, which notice shall be irrevocable. Any voluntary reduction
in the Maximum Amount shall be in addition to, and without prejudice
to,
the mandatory reductions in the Maximum Amount made pursuant to Clause
3.4.1 and may not be reversed. Any reduction under this Clause 3.4.2
shall
satisfy the obligations under Clause 3.4.1 in order
|
of
maturity. Amounts repaid by the Borrower pursuant to this Clause
shall not
be available for reborrowing.
|
3.5
|
Conditions
subsequent
The Borrower undertakes to deliver or to cause to be delivered to
the
Lender on, or as soon as practicable after, the first Drawdown Date
the
additional documents and other evidence listed in Part II of Schedule
1.
|
3.6
|
No
Waiver
If
the Lender in its sole discretion agrees to advance a Drawing to
the
Borrower before all of the documents and evidence required by Clause
3.1
have been delivered to or to the order of the Lender, the Borrower
undertakes to deliver all outstanding documents and evidence to or
to the
order of the Lender no later than the date specified by the
Lender.
|
3.7
|
Form
and content
All documents and evidence delivered to the Lender under this Clause
3
shall:
|
3.7.1 |
be
in form and substance acceptable to the
Lender;
|
3.7.2 |
if
required by the Lender, be certified, notarised, legalised or attested
in
a manner acceptable to the Lender;
and
|
3.7.3 |
if
copies, be certified as true and complete copies by a director or
the
secretary or the legal advisor or a duly authorised attorney-in-fact
of
the Borrower.
|
4
|
Advance
|
5
|
Currency
|
5.1
|
Conversion
The Borrower may Convert all or any part of the Loan into a Permitted
Currency not later than five (5) Business Days before the Drawdown
Date or
at any time during the Facility Period, subject to there being no
Event of
Default which is continuing and subject to the Permitted Currency
being
available to the Lender. Upon conversion, that part of the Loan shall
remain denominated in, and shall be repayable in, the Permitted Currency
until the end of the relevant Interest Payment Date. Clause 3.4 shall
be
amended so that the Maximum Amount of the Loan shall be reduced in
the
Permitted Currency or Permitted Currencies selected under this Clause,
provided that the Reduction Dates specified in Clause 3.4 shall not
be
changed.
|
5.2
|
Indemnity
The Borrower shall indemnify the Lender from time to time on demand
against all Break Costs, other losses, costs, claims, damages and
expenses
which the Lender may from time to time suffer, incur or sustain by
reason
of the Lender agreeing to and/or implementing the terms of this Clause
(including, without limitation, all costs and expenses incurred by
the
Lender in effecting any
conversion).
|
6
|
Repayment
|
6.1
|
Repayment
of each Drawing
The Borrower agrees to repay each Drawing to the Lender on the last
day of
the Interest Period in respect of that Drawing. On the Final Maturity
Date
the Borrower shall repay to the Lender all amounts then outstanding
under
or pursuant to this Agreement. Without limitation to the repayments
required by Clause 3.4, in addition the Borrower may repay any Drawing
in
whole or in part in integral multiples of five hundred thousand Dollars
($500,000) (or the equivalent in the Permitted Currency in which
the
Drawing in question is then denominated) and no repayment shall be
made in
an amount which is less than one million Dollars ($1,000,000) (or
the
equivalent in the Permitted Currency in which the Drawing in question
is
then denominated) (or as otherwise may be agreed by the Lender) provided
that it has first given to the Lender not fewer than two (2) Business
Days’ prior written notice expiring on a
|
Business
Day of its intention to do so. Any notice pursuant to this Clause
once
given shall be irrevocable and shall oblige the Borrower to make
the
repayment referred to in the notice on the Business Day specified
in the
notice, together with all interest accrued on the amount repaid up
to and
including that Business Day.
|
6.2
|
Reborrowing
Amounts of the Loan which are repaid or prepaid shall be available
for
reborrowing in accordance with Clause 3 prior to the Availability
Termination Date.
|
7
|
Prepayment
|
7.1
|
Illegality
If
it becomes unlawful in any jurisdiction for the Lender to perform
any of
its obligations as contemplated by this Agreement or to fund or maintain
the Loan:
|
7.1.1 |
the
Lender shall promptly notify the Borrower of that event;
and
|
7.1.2 |
the
Borrower shall repay any Drawing on the last day of its current Interest
Period or, if earlier, the date specified by the Lender in the notice
delivered to the Borrower (being no earlier than the last day of
any
applicable grace period permitted by
law).
|
7.2
|
Voluntary
prepayment of Loan
The Borrower may prepay the whole or any part of a Drawing (but,
if in
part, being an amount that reduces that Drawing by a minimum amount
of
five hundred thousand Dollars ($500,000) or an integral multiple
of that
amount (or as otherwise may be agreed by the Lender) provided that
it
gives the Lender not less than fourteen (14) Business Days’ (or such
shorter period of the notice as the Lender may agree) prior notice.
Amounts prepaid by the Borrower pursuant to this Clause shall be
available
for reborrowing. Any prepayment under this Clause 7.2 shall satisfy
the
obligations under Clause 6.1 in order of
maturity.
|
7.3
|
Mandatory
prepayment on sale or Total Loss
Upon the sale or Total Loss of the Vessel, the Maximum Amount shall
reduce
to zero and the Borrower shall a repay the Indebtedness in full,
in the
case of a sale of the Vessel, by not later than
|
the
date of the sale of the Vessel or, in the case of a Total Loss, by
not
later than the date falling one hundred and eighty (180) days from
the
date of the casualty giving rise to the Total Loss (or such longer
period
as the Lender may in its discretion agree). Amounts prepaid by the
Borrower pursuant to this Clause shall not be available for
reborrowing.
|
7.4
|
Mandatory
prepayment on reduction of Maximum Amount
If
the Maximum Amount is reduced in accordance with Clause 3.4 to an
amount
which is less than the aggregate amount of the Drawings then outstanding,
the Borrower shall, simultaneously with that reduction, prepay one
or more
outstanding Drawings to the extent required to ensure that the aggregate
amount of the Drawings outstanding does not exceed the reduced Maximum
Amount.
|
7.5
|
Restrictions
Any notice of prepayment given under this Clause 7 shall be irrevocable
and, unless a contrary indication appears in this Agreement, shall
specify
the date or dates upon which the relevant prepayment is to be made
and the
amount of that prepayment.
|
8
|
Interest
|
8.1
|
Interest
Periods
The period during which each Drawing shall be outstanding under this
Agreement shall be an Interest Period of one (1), three (3), six
(6), nine
(9) or twelve (12) months’ duration, as selected by the Borrower in the
Drawdown Notice in respect of the Drawing in question, or such other
duration as may be agreed by the
Lender.
|
8.2
|
Beginning
and end of Interest Periods
Each Interest Period shall start on the Drawdown Date of the Drawing
in
question and end on the date which numerically corresponds to that
Drawdown Date in the relevant calendar month
|
except
that, if there is no numerically corresponding date in that calendar
month, the Interest Period shall end on the last Business Day in
that
month.
|
8.3
|
Interest
Periods to meet Maturity Date
If
an Interest Period for a Drawing would otherwise expire after the
Maturity
Date, the Interest Period for that Drawing shall expire on the Maturity
Date.
|
8.4
|
Non-Business
Days
If
an Interest Period would otherwise end on a day which is not a Business
Day, that Interest Period will instead end on the next Business Day
in
that calendar month (if there is one) or the preceding Business Day
(if
there is not).
|
8.5
|
Interest
rate
During
each Interest Period interest shall accrue on the relevant Drawing
at the
rate determined by the Lender to be the aggregate of (a) the Margin,
(b)
LIBOR and (c) the Mandatory Cost, if
any.
|
8.6
|
Failure
to select Interest Period
If
the Borrower at any time fails to select or agree an Interest Period
in
accordance with Clause 8.1, the interest rate applicable shall be
the rate
determined by the Lender in accordance with Clause 8.5 for an Interest
Period of such duration (not exceeding six months) as the Lender
may
select.
|
8.7
|
Accrual
and payment of interest
Interest shall accrue from day to day, shall be calculated on the
basis of
a 360 day year and the actual number of days elapsed (or, in any
circumstance where market practice differs, in accordance with the
prevailing market practice and shall be paid by the Borrower to the
Lender
on the last day of each Interest Period and, if the Interest Period
is
longer than six (6) months, on the dates falling at six (6) monthly
intervals after the first day of that Interest
Period.
|
8.8
|
Default
interest
If
the Borrower fails to pay any amount payable by it under a Finance
Document on its due date, interest shall accrue on the overdue amount
from
the due date up to the date of actual payment (both before and after
judgment) at a rate which is one per cent (1%) higher than the rate
which
would
|
have
been payable if the overdue amount had, during the period of non-payment,
constituted a Drawing in the currency of the overdue amount for successive
Interest Periods, each selected by the Lender (acting reasonably).
Any
interest accruing under this Clause 8.8 shall be immediately payable
by
the Borrower on demand by the Lender. If unpaid, any such interest
will be
compounded with the overdue amount at the end of each Interest Period
applicable to that overdue amount but will remain immediately due
and
payable.
|
8.9
|
Changes
in market circumstances
If
at any time the Lender determines (which determination shall be final
and
conclusive and binding on the Borrower) that, by reason of changes
affecting the London interbank market, adequate and fair means do
not
exist for determining the rate of interest on a Drawing for any Interest
Period:
|
8.9.1 |
the
Lender shall give notice to the Borrower of the occurrence of such
event;
and
|
8.9.2 |
the
rate of interest on the relevant Drawing for that Interest Period
shall be
the rate per annum which is the sum
of:
|
(a)
|
the
Margin; and
|
(b)
|
the
rate which expresses as a percentage rate per annum the cost to the
Lender
of funding the relevant Drawing from whatever source it may reasonably
select; and
|
(c)
|
the
Mandatory Cost, if any,
|
8.9.3 |
the
Lender will negotiate with the Borrower in good faith with a view
to
modifying this Agreement to provide a substitute basis for determining
the
rate of interest which is financially a substantial equivalent to
the
basis provided for in this
Agreement;
|
8.9.4 |
any
substitute basis agreed pursuant to Clause 8.9.3 shall be binding
on the
parties to this Agreement; and
|
8.9.5 |
if,
within thirty (30) days of the giving of the notice referred to in
Clause
8.9.1, the Borrower and the Lender fail to agree in writing on a
substitute basis for determining the rate of interest in respect
of the
relevant Drawing, the Lender shall cease to be obliged to advance
that
Drawing, but, if it has already been advanced, the Borrower will
immediately prepay it, together with any Break Costs, and the Maximum
Amount shall be reduced by the amount of that
Drawing.
|
8.10
|
Determinations
conclusive
The Lender shall promptly notify the Borrower of the determination
of a
rate of interest under this Clause 8 and each such determination
shall
(save in the case of manifest error) be final and
conclusive.
|
9
|
Indemnities
|
9.1
|
Transaction
expenses
The Borrower will, within fourteen (14) days of the Lender’s written
demand, pay the Lender the amount of all costs and expenses (including
legal fees and Value Added Tax or any similar or replacement tax
if
applicable) incurred by the Lender in connection
with:
|
9.1.1 |
the
negotiation, preparation, printing, execution and registration of
the
Finance Documents (whether or not any Finance Document is actually
executed or registered and whether or not a Drawing is
advanced);
|
9.1.2 |
any
amendment, addendum or supplement to any Finance Document (whether
or not
completed); and
|
9.1.3 |
any
other document which may at any time be required by the Lender to
give
effect to any Finance Document or which the Lender is entitled to
call for
or obtain under any Finance Document (including, without limitation,
all
premiums and other sums from time to time payable by the Lender in
relation to the Mortgagee’s
Insurances).
|
9.2
|
Funding
costs
The Borrower shall indemnify the Lender on the Lender’s written demand
against all losses and costs incurred or sustained by the Lender
if, for
any reason, a Drawing is not advanced to the Borrower after the relevant
Drawdown Notice has been given to the Lender, or is advanced on a
date
other than that requested in the Drawdown Notice (unless, in either
case,
as a result of any default by the
Lender).
|
9.3
|
Break
Costs
The Borrower shall indemnify the Lender on the Lender’s written demand
against all costs, losses, premiums or penalties incurred by the
Lender as
a result of its receiving any prepayment of all or any part of a
Drawing
(whether pursuant to Clause 7 or otherwise) on a day other than the
last
day of an Interest Period for that Drawing, or any other payment
under or
in relation to the Finance Documents on a day other than the due
date for
payment of the sum in question, including (without limitation) any
losses
or costs incurred in liquidating or re- employing deposits from third
parties acquired to effect or maintain all or any part of a Drawing,
and
any liabilities, expenses or losses incurred by the Lender in terminating
or reversing, or otherwise in connection with, any Transaction or
any
other interest rate and/or currency swap, transaction or arrangement
entered into by the Lender to hedge any exposure arising under this
Agreement, or in terminating or reversing, or otherwise in connection
with, any open position arising under this Agreement or the Master
Agreement.
|
9.4
|
Currency
indemnity
In
the event of the Lender receiving or recovering any amount payable
under a
Finance Document in a currency other than the Currency of Account,
and if
the amount received or recovered is insufficient when Converted into
the
Currency of Account at the date of receipt to satisfy in full the
amount
due, the Borrower shall, on the Lender’s written demand, pay to the Lender
such further amount in the Currency of Account as is sufficient to
satisfy
in full the amount due and that further amount shall be due to the
Lender
as a separate debt under this
Agreement.
|
9.5
|
Increased
costs (subject to Clause 9.6)
If, by reason of the introduction of any law, or any change in any
law, or
any change in the interpretation or administration of any law, or
compliance with any request or requirement from any central bank
or any
fiscal, monetary or other authority occurring after the date of this
Agreement:
|
9.5.1 |
the
Lender (or the holding company of the Lender) shall be subject to
any Tax
with respect to payment of all or any part of the Indebtedness (other
than
Tax on overall net income); or
|
9.5.2 |
the
basis of Taxation of payments to the Lender in respect of all or
any part
of the Indebtedness shall be changed;
or
|
9.5.3 |
any
reserve requirements shall be imposed, modified or deemed applicable
against assets held by or deposits in or for the account of or loans
by
any branch of the Lender; or
|
9.5.4 |
the
manner in which the Lender allocates capital resources to its obligations
under this Agreement and/or the Master Agreement or any ratio (whether
cash, capital adequacy, liquidity or otherwise) which the Lender
is
required or requested to maintain shall be affected;
or
|
9.5.5 |
there
is imposed on the Lender (or on the holding company of the Lender)
any
other condition in relation to the Indebtedness or the Finance
Documents;
|
9.6
|
Exceptions
to increased costs
Clause 9.5 does not apply to the extent any additional cost or reduced
return referred to in that Clause
is:
|
9.6.1 |
compensated
for by a payment made under Clause 9.10;
or
|
9.6.2 |
compensated
for by a payment made under Clause 17.3;
or
|
9.6.3 |
compensated
for by the payment of the Mandatory Cost;
or
|
9.6.4 |
attributable
to the wilful breach by the Lender (or the holding company of the
Lender)
of any law or regulation.
|
9.7
|
Events
of Default
The Borrower shall indemnify the Lender from time to time on the
Lender’s
written demand against all losses, costs and liabilities incurred
or
sustained by the Lender as a consequence of any Event of
Default.
|
9.8
|
Enforcement
costs
The Borrower shall pay to the Lender on the Lender’s written demand the
amount of all costs and expenses (including legal fees) incurred
by the
Lender in connection with the enforcement of, or the preservation
of any
rights under, any Finance Document including (without limitation)
any
losses, costs and expenses which the Lender may from time to time
sustain,
incur or become liable for by reason of the Lender being mortgagee
of the
Vessel and/or a lender to the Borrower, or by reason of the Lender
being
deemed by any court or authority to be an operator or controller,
or in
any way concerned in the operation or control, of the
Vessel.
|
9.9
|
Other
costs
The Borrower shall pay to the Lender on the Lender’s written demand the
amount of all sums which the Lender may pay or become actually or
contingently liable for on account of the Borrower in connection
with the
Vessel
|
(whether
alone or jointly or jointly and Severally with any other person)
including
(without limitation) all sums which the Lender may pay or guarantees
which
it may give in respect of the Insurances, any expenses incurred by
the
Lender in connection with the maintenance or repair of the Vessel
or in
discharging any lien, bond or other claim relating in any way to
the
Vessel, and any sums which the Lender may pay or guarantees which
it may
give to procure the release of the Vessel from arrest or
detention.
|
9.10
|
Taxes
The Borrower shall pay all Taxes to which all or any part of the
Indebtedness or any Finance Document may be at any time subject (other
than Tax on the Lender’s overall net income) and shall indemnify the
Lender on the Lender’s written demand against all liabilities, costs,
claims and expenses resulting from any omission to pay or delay in
paying
any such Taxes.
|
10
|
Fees
|
10.1
|
Commitment
fee
The Borrower shall pay to the Lender a fee computed at the rate of
zero
point two per cent (0.2%) per annum on the undrawn Maximum Amount
from
time to time from the date of this Agreement until the Availability
Termination Date. The accrued commitment fee is payable on the last
day of
each successive period of three (3) months from the date of this
Agreement
and on the Availability Termination
Date.
|
10.2
|
Arrangement
fee
The Borrower shall pay to the Lender on the date of this Agreement
an
arrangement fee in the amount of sixty two thousand five hundred
Dollars
($62,500).
|
11
|
Security
and Application of Moneys
|
11.1
|
Security
Documents
As
security for the payment of the Indebtedness, the Borrower shall
execute
and deliver to the Lender or cause to be executed and delivered to
the
Lender the following documents in such forms and containing such
terms and
conditions as the Lender shall
require:
|
11.1.1 |
a
first priority Cypriot statutory mortgage over the Vessel together
with a
collateral deed of covenants;
|
11.1.2 |
a
first priority deed of assignment of the insurances, Earnings and
Requisition Compensation of the Vessel;
and
|
11.1.3 |
a
first priority deed of charge over the Cash Collateral Account and
all
amounts from time to time standing to the credit of the Cash Collateral
Account.
|
11.2
|
Accounts
The Borrower shall maintain the Accounts with the Lender for the
duration
of the Facility Period free of Encumbrances and rights of set off
other
than those created by or under the Finance
Documents.
|
11.3
|
Earnings
The Borrower shall procure that all Earnings and any Requisition
Compensation are credited to the Operating
Account.
|
11.4
|
Application
of Operating Account
The Borrower shall procure that there is transferred from the Operating
Account to the Lender:
|
11.4.1 |
on
the due date for repayment of each Drawing, the amount of that Drawing;
and
|
11.4.2 |
on
each Interest Payment Date in respect of a Drawing, the amount of
interest
due in respect of that Drawing,
|
11.5
|
Borrower’s
obligations not affected
If
for any reason the amount standing to the credit of the Operating
Account
is insufficient to repay any Drawing or to make any payment of interest
when due, the Borrower’s obligation to repay that Drawing or to make that
payment of interest shall not be affected.
|
11.6
|
Release
of surplus
Any amount remaining to the credit of the Operating Account following
the
making of any transfer required by Clause 11.4 shall (unless a Default
shall have occurred and be continuing) be released to or to the order
of
the Borrower, subject to an amount of one hundred and fifty thousand
Dollars
|
($150,000)
remaining credited to the Operating Account at all times during the
Facility Period.
|
11.7
|
Relocation
of Accounts
At
any time following the occurrence and during the continuation of
a
Default, the Lender may without the consent of the Borrower relocate
either or both of the Accounts to any other branch of the Lender,
without
prejudice to the continued application of this Clause 11 and the
rights of the Lender under the Finance
Documents.
|
11.8
|
Application
after acceleration
From and after the giving of notice to the Borrower by the Lender
under
Clause 14.2, the Borrower shall procure that all sums from time to
time
standing to the credit of either of the Accounts are immediately
transferred to the Lender for application in accordance with Clause
11.14
and the Borrower irrevocably authorises the Lender to make those
transfers.
|
11.9
|
General
application of moneys
The Borrower, subject to Clause 11.10, irrevocably authorises the
Lender
to apply all sums which the Lender may
receive:
|
11.9.1 |
pursuant
to a sale or other disposition of the Vessel or any right, title
or
interest in the Vessel; or
|
11.9.2 |
by
way of payment of any sum in respect of the Insurances, Earnings
or
Requisition Compensation; or
|
11.9.3 |
by
way of transfer of any sum from either of the Accounts;
or
|
11.9.4 |
otherwise
arising under or in connection with any Security
Document,
|
11.10
|
Application
of moneys on sale or Total Loss
The Borrower irrevocably authorises the Lender to apply all sums
which the
Lender may receive pursuant to a sale by the Borrower of the Vessel
or a
Total Loss in or towards satisfaction of the prepayment due and payable
by
virtue of that sale or Total Loss under Clause
|
7.3, but the Borrower’s obligation to make that prepayment shall not be affected if those sums are insufficient to satisfy that obligation. |
11.11
|
Determination
of market value
For the purpose of the Security Documents, the market value of the
Vessel
shall be the average value certified by the Brokers, who shall report
directly to the Lender and shall be appointed by the Borrower not
later
than five (5) days after the Lender’s request for the Borrower to appoint
such Brokers. In the event that the Borrower fails to appoint such
Brokers
within five (5) days after the Lender’s request so to do or if a Broker
appointed by the Borrower is not approved by the Lender and the Borrower
fails to appoint an alternative Broker who is approved by the Lender
within such five (5) day period, the Borrower irrevocably authorises
the
Lender to appoint a Broker in its discretion to conduct such valuations.
All valuations pursuant to this Clause shall be made on the basis
of a
sale of the Vessel for prompt delivery for cash at arm’s length on normal
commercial terms by a willing seller to a willing buyer and free
of any
existing charter or other contract of employment. The Borrower agrees
to
accept each valuation obtained pursuant to this Clause as conclusive
evidence of the Vessel’s market value at the date of such
valuation.
|
11.12
|
Cost
of valuation
The Borrower shall be liable for all costs and expenses incurred
by the
Lender in obtaining up to two valuations in each year of the Facility
Period one upon each anniversary of the date of this Agreement and
the
other six (6) months after every calendar year unless there is an
Event of
Default in which case the Borrower shall be liable for all costs
and
expenses incurred by the Lender in obtaining any number of valuations
required by it pursuant to Clause 11.11 and shall reimburse the Lender
in
respect of all such costs and expenses on
demand.
|
11.13
|
Provision
of information
The Borrower undertakes promptly to supply the Lender with such
information concerning the Vessel’s condition, location and employment as
the Lender may reasonably require.
|
11.14
|
Additional
security
If
and so often as the aggregate of the market value of the Vessel
(determined in accordance with Clause 11.11) plus the value of any
additional security for the time being provided to the Lender pursuant
to
this Clause shall be less than (a) one hundred per cent (100%) of
the
amount of the Loan, for the period commencing on the first Drawdown
Date
and ending on the third anniversary of the first Drawdown Date, (b)
one
hundred and ten per cent (110%) of the amount of the Loan from the
third
anniversary of the first Drawdown Date until the sixth anniversary
of the
first Drawdown Date and (c) one hundred and twenty per cent (120%)
of the
amount of the Loan thereafter, the Borrower will, within fourteen
(14)
days of the request of the Lender to do so, at the Borrower’s
option:-
|
(a)
|
pay
to the credit of the Cash Collateral Account such amount as shall
be
necessary to establish that the aggregate of the market value of
the
Vessel (determined in accordance with Clause 11.11) plus the value
of any
additional security for the time being provided to the Lender pursuant
to
this Clause shall be no less than (a) one hundred per cent (100%)
of the
amount of the Loan, for the period commencing on the first Drawdown
Date
and ending on the third anniversary of the first Drawdown Date, (b)
one
hundred and ten per cent (110%) of the amount of the Loan from the
third
anniversary of the first Drawdown Date until the sixth anniversary
of the
first Drawdown Date and (c) one hundred and twenty per cent (120%)
of the
amount of the Loan thereafter; or
|
(b)
|
give
to the Lender other security in amount and form acceptable to the
Lender
in its discretion; or
|
(c)
|
repay
such amount of the Loan as shall be necessary to establish that the
aggregate of the market value of the Vessel (determined in accordance
with
Clause 11.11) plus the value of any additional security for the time
being
provided to the Lender pursuant to this Clause shall be no less than
(a)
one hundred per cent (100%) of the amount of the Loan, for the period
|
commencing
on the first Drawdown Date and ending on the third anniversary of
the
first Drawdown Date, (b) one hundred and ten per cent (110%) of the
amount
of the Loan from the third anniversary of the first Drawdown Date
until
the sixth anniversary of the first Drawdown Date and (c) one hundred
and
twenty per cent (120%) of the amount of the Loan
thereafter.
|
11.15
|
Return
of additional security
If
and so often as the aggregate of the market value of the Vessel
(determined in accordance with Clause 11.11) plus the value of any
additional security for the time being provided to the Lender pursuant
to
Clause 11.14 shall exceed (a) one hundred per cent (100%) of the
amount of
the Loan, for the period commencing on the first Drawdown Date and
ending
on the third anniversary of the first Drawdown Date, (b) one hundred
and
ten per cent (110%) of the amount of the Loan from the third anniversary
of the first Drawdown Date until the sixth anniversary of the first
Drawdown Date and (c) one hundred and twenty per cent (120%) of the
amount
of the Loan thereafter, then the Lender shall, within fourteen (14)
days
of the request of the Borrower to do so, release to the Borrower
such
portion of the amount standing to the credit of the Cash Collateral
Account in accordance with Clause 11.14 and/or such amount of the
security referred to in Clause 11.14(b) as shall be required to ensure
that the aggregate of the market value of the Vessel (determined
as
aforesaid) plus the value of any additional security for the time
being
provided to the Lender pursuant to Clause 11.14 is equal to, but
not less
than (a) one hundred percent (100%) of the amount of the Loan, for
the
period commencing on the first Drawdown Date and ending on the third
anniversary of the first Drawdown Date, (b) one hundred and ten per
cent
(110%) of the amount of the Loan from the third anniversary of the
first
|
Drawdown
Date until the sixth anniversary of the first Drawdown Date and (c)
one
hundred and twenty per cent (120%) of the amount of the Loan
thereafter.
|
12
|
Representations
|
12.1
|
Representations
The Borrower makes the representations and warranties set out in
this
Clause 12.1 to the Lender on the date of this
Agreement.
|
12.1.1 |
Status
Each Security Party (which is not an individual) which is a corporation,
duly incorporated and validly existing under the law of its jurisdiction
of incorporation and has the power to own its assets and carry on
its
business as it is being conducted.
|
12.1.2 |
Binding
obligations
The obligations expressed to be assumed by each Security Party in
each
Finance Document to which it is a party are legal, valid, binding
and
enforceable obligations.
|
12.1.3 |
Non-conflict
with other obligations
The entry into and performance by each Security Party of, and the
transactions contemplated by, the Finance Documents do not conflict
with:
|
(a)
|
any
law or regulation applicable to that Security
Party;
|
(b)
|
the
constitutional documents of that Security Party;
or
|
(c)
|
any
document binding on that Security Party or any of its
assets,
|
12.1.4 |
Power
and authority
Each Security Party has the power to enter into, perform and deliver,
and
has taken all necessary action to authorise its entry into, performance
and delivery of, the Finance Documents to which it is a party and
the
transactions contemplated by those Finance
Documents.
|
12.1.5 |
Validity
and admissibility in evidence
All
consents, licences, approvals, authorisations, filings and registrations
required or desirable:
|
(a)
|
to
enable each Security Party lawfully to enter into, exercise its rights
and
comply with its obligations in the Finance Documents to which it
is a
party or to enable the Lender to enforce and exercise all its rights
under
the Finance Documents; and
|
(b)
|
to
make the Finance Documents to which any Security Party is a party
admissible in evidence in its jurisdiction of
incorporation,
|
12.1.6 |
Governing
law and enforcement
The choice of English law as the governing law of any Finance Document
expressed to be governed by English law will be recognised and enforced
in
the jurisdiction of incorporation of each relevant Security Party,
and any
judgment obtained in England in relation to any such Finance Document
will
be recognised and enforced in the jurisdiction of incorporation of
each
relevant Security Party.
|
12.1.7 |
Deduction
of Tax
No
Security Party is required under the law of its jurisdiction of
incorporation to make any deduction for or on account of Tax from
any
payment it may make under any Finance
Document.
|
12.1.8 |
No
filing or stamp taxes
Under the law of jurisdiction of incorporation of each relevant Security
Party it is not necessary that the Finance Documents be filed, recorded
or
enrolled with any court or other authority in that jurisdiction or
that
any stamp, registration or similar tax be paid on or in relation
to the
Finance Documents or the transactions contemplated by the Finance
Documents.
|
12.1.9 |
No
default
No
Event of Default is continuing or might reasonably be expected to
result
from the advance of a Drawing.
|
12.1.10 |
No
misleading information
Any factual information provided by any Security Party to the Lender
was
true and accurate in all material respects as at the date it was
provided.
|
12.1.11 |
Pari
passu ranking
The payment obligations of each Security Party under the Finance
Documents
to which it is a party rank at least pari passu with the claims of
all its
other unsecured and unsubordinated creditors, except for obligations
mandatorily preferred by law applying to companies
generally.
|
12.1.12 |
No
proceedings pending or threatened
No
litigation, arbitration or administrative proceedings of or before
any
court, arbitral body or agency have been started or (to the best
of the
Borrower’s knowledge threatened) which, if adversely determined, might
reasonably be expected to have a materially adverse effect on the
business, assets, financial condition or credit worthiness of any
Security
Party.
|
12.1.13 |
Disclosure
of material facts
The Borrower is not aware of any material facts or circumstances
which
have not been disclosed to the Lender and which might, if disclosed,
have
adversely affected the decision of a person considering whether or
not to
make loan facilities of the nature contemplated by this Agreement
available to the Borrower.
|
12.1.14 |
No
established place of business in the UK or US
No
Security Party has an established place of business in the United
Kingdom
or the United States of America.
|
12.1.15 |
Completeness
of Relevant Documents
The copies of any Relevant Documents provided or to be provided by
the
Borrower to the Lender in accordance with Clause 3 are, or will be,
true
and accurate copies of the originals and represent, or will represent,
the
full agreement between the parties to those Relevant Documents in
relation
to the subject matter of those Relevant Documents and there are no
commissions, rebates, premiums or other payments due or to become
due in
connection with
|
the
subject matter of those Relevant Documents other than in the ordinary
course of business or as disclosed to, and approved in writing by,
the
Lender.
|
12.2
|
Repetition
Each representation and warranty in Clause 12.1 is deemed to be repeated
by the Borrower by reference to the facts and circumstances then
existing
on the date of each Drawdown Notice and the first day of each Interest
Period.
|
13
|
Undertakings
and Covenants
|
13.1
|
Information
Undertakings
|
13.1.1 |
Financial
statements
The Borrower or the Managers will supply to the Lender, on request
within
sixty (60) days of the end of each calendar year during the Facility
Period the unaudited management accounts for the Vessel prepared
by the
Managers showing the income and expenditure for the Vessel for such
calendar year, with the first such accounts to be supplied by not
later
than sixty (60) days of the end of
2007.
|
13.1.2 |
Information:
miscellaneous
The Borrower shall supply to the
Lender:
|
(a)
|
promptly
upon becoming aware of them, details of any litigation, arbitration
or
administrative proceedings which are current, threatened or pending
against any Security Party, and which might, if adversely determined, have
a materially adverse effect on the business, assets, financial condition
or credit worthiness of that Security Party;
and
|
(b)
|
promptly,
such further information regarding the financial condition, business
and
operations of any Security Party as the
|
Lender may reasonably request including, without limitation, cash flow analyses and details of the operating costs of the Vessel. |
13.1.3 |
Notification
of default
|
(a)
|
The
Borrower shall notify the Lender of any Default (and the steps, if
any,
being taken to remedy it) promptly-upon-becoming aware of its
occurrence.
|
(b)
|
Promptly
upon a request by the Lender, the Borrower shall supply to the Lender
a
certificate signed by two of its directors or senior officers on
its
behalf certifying that no Default is continuing (or if a Default
is
continuing, specifying the Default and the steps, if any, being taken
to
remedy it).
|
13.1.4 |
“
Know
your customer
”
checks
If:
|
(a)
|
the
introduction of or any change in (or in the interpretation, administration
or application of) any law or regulation made after the date of this
Agreement;
|
(b)
|
any
change in the status of the Borrower after the date of this Agreement;
or
|
(c)
|
a
proposed assignment or transfer by the Lender of any of its rights
and
obligations under this Agreement,
|
13.2
|
General
undertakings
|
13.2.1 |
Authorisations
The Borrower shall promptly:
|
(a)
|
obtain,
comply with and do all that is necessary to maintain in full force
and
effect; and
|
(b)
|
supply
certified copies to the Lender of,
|
13.2.2 |
Compliance
with laws
The Borrower shall comply in all respects with all laws to which
it may be
subject, if failure so to comply would materially impair its ability
to
perform its obligations under the Finance
Documents.
|
13.2.3 |
Conduct
of business
The Borrower shall carry on and conduct its business in a proper
and
efficient manner, file all requisite tax returns and pay all tax
which
becomes due and payable (except where contested in good
faith).
|
13.2.4 |
Evidence
of good standing
The Borrower will from time to time if requested by the Lender provide
the
Lender with evidence in form and substance satisfactory to the Lender
that
the Security Parties and all corporate shareholders of any Security
Party
remain in good standing.
|
13.2.5 |
Liquidity
The Borrower will throughout the Facility Period maintain or procure
that
the Managers maintain in the Operating Account at all times a minimum
positive account balance free of any Encumbrances (other
|
than in
favour of the Lender) of not less than one hundred and fifty thousand
Dollars ($150,000). Any undrawn amounts under this Agreement may
be
included for the purpose of this calculation and this calculation
shall
exclude cash deposited with the Lender as security for any other
facility
or in connection with Clause 5.
|
13.2.6 |
Negative
pledge and no disposals
The Borrower shall not create nor permit to subsist any Encumbrance
or
other third party rights over any of its present or future assets
or
undertaking nor dispose of any those assets or of all or part of
that
undertaking.
|
13.2.7 |
Merger
The Borrower shall not without the prior written consent of the Lender
enter into any amalgamation, demerger, merger or corporate
reconstruction.
|
13.2.8 |
Change
of business
The Borrower shall not without the prior written consent of the Lender
make any substantial change to the general nature of its business
from
that carried on at the date of this
Agreement.
|
13.2.9 |
No
other business
The Borrower shall not without the prior written consent of the Lender
engage in any business other than the ownership, operation, chartering
and
management of the Vessel.
|
13.2.10 |
No
place of business in UK or US
The Borrower shall not have an established place of business in the
United
Kingdom or the United States of America at any time during the Facility
Period.
|
13.2.11 |
No
borrowings
The Borrower shall not without the prior written consent of the Lender
borrow any money (except for the Loan and unsecured Financial Indebtedness
subordinated to the Loan) nor incur any obligations under
leases.
|
13.2.12 |
No
substantial liabilities
Except in the ordinary course of business, the Borrower shall not
without
the prior written consent of the Lender incur
|
any liability to any third party which is in the Lender’s opinion of a substantial nature. |
13.2.13 |
No
loans or other financial commitments
The Borrower shall not without the prior written consent of the Lender
make any loan nor enter into any guarantee or indemnity or otherwise
voluntarily assume any actual or contingent liability in respect
of any
obligation of any other person.
|
13.2.14 |
No
dividends
The Borrower shall not without the prior written consent of the Lender
pay
any dividends or make any other distributions to shareholders or
issue any
new shares.
|
13.2.15 |
Inspection
of records
The Borrower will permit the inspection of its financial records
and
accounts from time to time by the Lender or its
nominee.
|
13.2.16 |
No
change in Relevant Documents
The Borrower shall procure that, without the prior written consent
of the
Lender, there shall be no termination of, alteration to, or waiver
of any
term of, any of the Relevant
Documents.
|
13.2.17 |
No
change in ownership or control of the Borrower or the
Managers
The Borrowers shall not permit any change in its beneficial ownership
and
control and the beneficial ownership and control of the Managers
from that
advised to the Lender at the date of this
Agreement.
|
13.2.18 |
No
purchase of a vessel
The Borrower shall not purchase any vessel or any shares in any
vessel.
|
13.2.19 |
No
dealings with Master Agreement
The Borrower shall not assign, novate or encumber or in any other
way
transfer any of its rights or obligations under the Master Agreement,
nor
enter into any interest rate exchange or hedging agreement with anyone
other than the Lender.
|
13.3
|
Vessel
undertakings
|
13.3.1 |
No
sale of Vessel
The Borrower shall not sell or otherwise dispose of the Vessel or
any
shares in the Vessel nor agree to do so without the prior written
consent
of the Lender.
|
13.3.2 |
No
chartering after Event of Default
Following the occurrence and during the continuation of an Event
of
Default the Borrower shall not without the prior written consent
of the
Lender let the Vessel on charter or renew or extend any charter or
other
contract of employment of the Vessel (nor agree to do
so).
|
13.3.3 |
No
change in management
The Borrower shall procure that, without the prior written consent
of the
Lender, there shall be no termination of, alteration to, or waiver
of any
term of, the Management Agreement and the Borrower shall not without
the
prior written consent of the Lender permit the Managers to sub-contract
or
delegate the commercial or technical management of the Vessel to
any third
party.
|
13.3.4 |
Registration
of Vessel
The
Borrower undertakes to maintain the registration of the Vessel under
the
flag stated in Recital (A) for the duration of the Facility Period
unless
the Lender agrees otherwise in
writing.
|
13.3.5 |
Evidence
of current COFR
The Borrower will, if and for so long as the Vessel trades in the
United
States of America and Exclusive Economic Zone (as defined in the
United
States Oil Pollution Act 1990), obtain, retain and provide the Lender
with
a copy of, a valid Certificate of Financial Responsibility for the
Vessel
under that Act and will comply strictly with the requirements of
that
Act.
|
13.3.6 |
ISM
Code compliance
The Borrower will:
|
(a)
|
procure
that the Vessel remains for the duration of the Facility Period subject
to
a SMS;
|
(b)
|
maintain
a valid and current SMC for the Vessel throughout the Facility Period
and
provide a copy to the Lender;
|
(c)
|
procure
that the ISM Company maintains a valid and current DOC throughout
the
Facility Period and provide a copy to the Lender;
and
|
(d)
|
immediately
notify the Lender in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the SMC of the Vessel
or of
the DOC of the ISM Company.
|
13.3.7 |
ISPS
Code compliance
The Borrower will:
|
(a)
|
for
the duration of the Facility Period comply with the ISPS Code in
relation
to the Vessel and procure that the Vessel and the ISPS Company comply
with
the ISPS Code;
|
(b)
|
maintain
a valid and current ISSC for the Vessel throughout the Facility Period
and
provide a copy to the Lender; and
|
(c)
|
immediately
notify the Lender in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the
ISSC.
|
13.3.8 |
Annex
VI compliance
The Borrower will:
|
(a)
|
for
the duration of the Facility Period comply with Annex VI in relation
to the Vessel and procure that the Vessel’s master and crew are familiar
with, and that the Vessel complies with, Annex
VI;
|
(b)
|
maintain
a valid and current IAPPC for the Vessel throughout the Facility
Period
and provide a copy to the Lender;
and
|
(c)
|
immediately
notify the Lender in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the
IAPPC.
|
14
|
Events
of Default
|
14.1
|
Events
of Default
Each of the events or circumstances set out in this Clause 14.1 is an
Event of Default.
|
14.1.1 |
Non-payment
The Borrower does not pay on the due date any amount payable by it
under a
Finance Document at the place at and in the currency in which it
is
expressed to be payable.
|
14.1.2 |
Other
obligations
A
Security Party or any other person (except the Lender) does not comply
with any provision of any of the Relevant Documents to which that
Security
Party or person is a party (other than as referred to in Clause
14.1.1).
|
14.1.3 |
Misrepresentation
Any representation, warranty or statement made or deemed to be repeated
by
a Security Party in any Finance Document or any other document delivered
by or on behalf of a Security Party under or in connection with any
Finance Document is or proves to have been incorrect or misleading
in any
material respect when made or deemed to be
repeated.
|
14.1.4 |
Cross
default
Any Financial Indebtedness of a Security
Party:
|
(a)
|
is
not paid when due or within any originally applicable grace period;
or
|
(b)
|
is
declared to be, or otherwise becomes, due and payable before its
specified
maturity as a result of an event of default (however described);
or
|
(c)
|
is
declared by a creditor to be due and payable before its specified
maturity
as a result of such an event.
|
14.1.5 |
Insolvency
|
(a)
|
A
Security Party is unable or admits inability to pay its debts as
they fall
due, suspends making payments on any of its debts or, by
|
reason
of actual or anticipated financial difficulties, commences negotiations
with one or more of its creditors with a view to rescheduling any
of its
Financial Indebtedness.
|
(b)
|
The
value of the assets of a Security Party is less than its liabilities
(taking into account contingent and prospective
liabilities).
|
(c)
|
A
moratorium is declared in respect of any Financial Indebtedness of
a
Security Party.
|
14.1.6 |
Insolvency
proceedings
Any corporate action, legal proceedings or other procedure or step
is
taken for:
|
(a)
|
the
suspension of payments, a moratorium of any Financial indebtedness,
winding-up, dissolution, administration, bankruptcy or reorganisation
(by
way of voluntary arrangement, scheme of arrangement or otherwise)
of a
Security Party;
|
(b)
|
a
composition, compromise, assignment or arrangement with any creditor
of a
Security Party;
|
(c)
|
the
appointment of a liquidator, receiver, administrative receiver,
administrator, compulsory manager, or trustee or other similar officer
in
respect of any Security Party or any of its assets;
or
|
(d)
|
enforcement
of any Encumbrance over any assets of a Security
Party,
|
14.1.7 |
Creditors’
process
Any
expropriation, attachment, sequestration, distress or execution affects
any asset or assets of a Security
Party.
|
14.1.8 |
Change
in ownership or control of the Borrower or the
Managers
There is any change in the beneficial ownership or control of the
Borrower
or the Managers from that advised to the Lender by the Borrower at
the
date of this Agreement.
|
14.1.9 |
Repudiation
A
Security Party or any other person (except the Lender) repudiates
any of
the Relevant Documents to which that Security Party or person is
a party
or evidences an intention to do so.
|
14.1.10 |
Impossibility
or illegality
Any event occurs which would, or would with the passage of time,
render
performance of any of the Relevant Documents by a Security Party
or any
other party to any such document impossible, unlawful or unenforceable
by
the Lender or a Security Party.
|
14.1.11 |
Conditions
subsequent
Any of the conditions referred to in Clause 3.5 is not satisfied
within
the time reasonably required by the
Lender.
|
14.1.12 |
Revocation
or modification of authorisation
Any consent, licence, approval, authorisation, filing, registration
or
other requirement of any governmental, judicial or other public body
or
authority which is now, or which at any time during the Facility
Period
becomes, necessary to enable a Security Party or any other person
(except
the Lender) to comply with any of its obligations under any of the
Relevant Documents is not obtained, is revoked, suspended, withdrawn
or
withheld, or is modified in a manner which the Lender considers is,
or may
be, prejudicial to the interests of the Lender, or ceases to remain
in
full force and effect.
|
14.1.13 |
Curtailment
of business
A
Security Party ceases, or threatens to cease, to carry on all or
a
substantial part of its business or, as a result of intervention
by or
under the authority of any government, the business of a Security
Party is
wholly or partially curtailed or suspended, or all or a substantial
part
of the assets or undertaking of a Security Party is seized, nationalised,
expropriated or compulsorily
acquired.
|
14.1.14 |
Reduction
of capital
A
Security Party reduces its authorised or issued or subscribed
capital.
|
14.1.15 |
Loss
of Vessel
The Vessel suffers a Total Loss or is otherwise destroyed, abandoned,
confiscated, forfeited or condemned as prize, or a similar event
occurs in
relation to any other vessel which may from time to time be mortgaged
to
the Lender as security for the payment of all or any part of the
Indebtedness, except that a Total Loss, or event similar to a Total
Loss
in relation to any other vessel, shall not be an Event of Default
if:
|
(a)
|
the
Vessel or other vessel is insured in accordance with the Security
Documents; and
|
(b)
|
no
insurer has refused to meet or has disputed the claim for Total Loss
and
it is not apparent to the Lender in its discretion that any such
refusal
or dispute is likely to occur; and
|
(c)
|
payment
of all insurance proceeds in respect of the Total Loss is made in
full to
the Lender within one hundred and eighty (180) days of the occurrence
of
the casualty giving rise to the Total Loss in question or such longer
period as the Lender may in its discretion
agree.
|
14.1.16 |
Challenge
to registration
The registration of the Vessel or the Mortgage is contested or becomes
void or voidable or liable to cancellation or termination, or the
validity
or priority of the Mortgage is
contested.
|
14.1.17 |
War
The country of registration of the Vessel becomes involved in war
(whether
or not declared) or civil war or is occupied by any other power and
the
Lender in its discretion considers that, as a result, the security
conferred by the Security Documents is materially
prejudiced.
|
14.1.18 |
Master
Agreement termination
A
notice is given by the Lender under section 6(a) of the Master Agreement,
or by any person under section 6(b)(iv) of the Master Agreement,
in either
case designating an Early
|
Termination
Date for the purpose of the Master Agreement, or the Master Agreement
is
for any other reason terminated, cancelled, suspended, rescinded,
revoked
or otherwise ceases to remain in full force and
effect.
|
14.1.19 |
Material
adverse change
Any event or series of events occurs which, in the opinion of the
Lender,
is likely to have a materially adverse effect on the business, assets,
financial condition or credit worthiness of a Security
Party.
|
14.2
|
Acceleration
If
an Event of Default is continuing the Lender may by notice to the
Borrower
cancel any part of the Maximum Amount not then advanced
and:
|
14.2.1 |
declare
that the Loan, together with accrued interest, and all other amounts
accrued or outstanding under the Finance Documents are immediately
due and
payable, whereupon they shall become immediately due and payable;
and/or
|
14.2.2 |
declare
that the Loan is payable on demand, whereupon it shall immediately
become
payable on demand by the Lender.
|
15
|
Assignment
and Sub-Participation
|
15.1
|
Right
to assign
The Lender may, subject to the prior approval of the Borrower (such
approval not to be unreasonably withheld) and subject to the Lender
giving
prior notice of such intention to the Borrower, and without additional
costs to the Borrower, assign or transfer all or any of its rights
under
or pursuant to the Security Documents to any other bank or financial
institution, and may grant sub-participations in all or any part
of the
Loan. The Lender may, without the prior approval of the Borrower,
assign
or transfer all or any of its rights under or pursuant to the Security
Documents to any other branch of the Lender, and may grant
sub-participations in all or any part of the
Loan.
|
15.2
|
Borrower’s
co-operation
The Borrower will co-operate fully with the Lender in connection
with any
assignment, transfer or sub-participation; will execute and
|
procure
the execution of such documents as the Lender may require in that
connection; and irrevocably authorises the Lender to disclose to
any
proposed assignee, transferee or sub-participant (whether before
or after
any assignment, transfer or sub-participation and whether or not
any
assignment, transfer or sub- participation shall take place) all
information relating to the Security Parties, the Loan, the Relevant
Documents and the Vessel which the Lender may in its discretion consider
necessary or desirable.
|
15.3
|
Rights
of assignee or transferee
Any assignee or transferee of the Lender shall (unless limited by
the
express terms of the assignment or novation) take the full benefit
of
every provision of the Finance Documents benefitting the
Lender.
|
15.4
|
No
assignment or transfer by the Borrower
The Borrower may not assign any of its rights or transfer any of
its
rights or obligations under the Finance
Documents.
|
16
|
Set-Off
|
16.1
|
The
Lender may set off any matured obligation due from the Borrower under
any
Finance Document against any matured obligation owed by the Lender
to the
Borrower, regardless of the place of payment, booking branch or currency
of either obligation. If the obligations are in different currencies,
the
Lender may Convert either obligation at a market rate of exchange
in its
usual course of business for the purpose of the
set-off.
|
16.2
|
Master
Agreement rights
The rights conferred on the Lender by this Clause 16 shall be in
addition
to, and without prejudice to or limitation of the rights of netting
and
set-off conferred on the Lender by the Master
Agreement.
|
17
|
Payments
|
17.1
|
Payments
Each amount payable by the Borrower under a Finance Document shall
be paid
to such account at such bank as the Lender may from time to time
direct to
the Borrower in the Currency of Account and in such funds as are
customary
at the time for settlement of transactions in the relevant currency
in the
|
place
of payment. Payment shall be deemed to have been received by the
Lender on
the date on which the Lender receives authenticated advice of receipt,
unless that advice is received by the Lender on a day other than
a
Business Day or at a time of day (whether on a Business Day or not)
when
the Lender in its discretion considers that it is impossible or
impracticable for the Lender to utilise the amount received for value
that
same day, in which event the payment in question shall be deemed
to have
been received by the Lender on the Business Day next following the
date of
receipt of advice by the Lender.
|
17.2
|
No
deductions or withholdings
Each payment (whether of principal or interest or otherwise) to be
made by
the Borrower under a Finance Document shall, subject only to Clause
17.3,
be made free and clear of and without deduction for or on account
of any
Taxes or other deductions, withholdings, restrictions, conditions
or
counterclaims of any nature.
|
17.3
|
Grossing-up
If
at any time any law requires the Borrower to make any deduction or
withholding from any payment, or to change the rate or manner in
which any
required deduction or withholding is made, the Borrower will promptly
notify the Lender and, simultaneously with making that payment, will
pay
to the Lender whatever additional amount (after taking into account
any
additional Taxes on, or deductions or withholdings from, or restrictions
or conditions on, that additional amount) is necessary to ensure
that,
after making the deduction or withholding, the Lender receives a
net sum
equal to the sum which the Lender would have received had no deduction
or
withholding been made.
|
17.4
|
Evidence
of deductions
If
at any time the Borrower is required by law to make any deduction
or
withholding from any payment to be made by it under a Finance Document,
the Borrower will pay the amount required to be deducted or withheld
to
the relevant authority within the time allowed under the applicable
law
and will, no later than thirty (30) days after making that payment,
deliver to the Lender an original receipt issued by the relevant
authority, or other evidence
|
acceptable
to the Lender, evidencing the payment to that authority of all amounts
required to be deducted or
withheld.
|
17.5
|
Adjustment
of due dates
If
any payment or transfer of funds to be made under a Finance Document,
other than a payment of interest on a Drawing, or a payment under
the
Master Agreement, shall be due on a day which is not a Business Day,
that
payment shall be made on the next succeeding Business Day (unless
the next
succeeding Business Day falls in the next calendar month in which
event
the payment shall be made on the next preceding Business Day). Any
such
variation of time shall be taken into account in computing any interest
in
respect of that payment.
|
17.6
|
Control
Account
The Lender shall open and maintain on its books a control account
in the
name of the Borrower showing the advance of the Loan and the computation
and payment of interest and all other sums due under this Agreement
and
the Master Agreement. The Borrower’s obligations to repay the Loan and to
pay interest and all other sums due under this Agreement and the
Master
Agreement shall be evidenced by the entries from time to time made
in the
control account opened and maintained under this Clause 17.6 and
those
entries will, in the absence of manifest error, be conclusive and
binding.
|
18
|
Notices
|
18.1
|
Communications
in writing
Any communication to be made under or in connection with this Agreement
shall be made in writing and, unless otherwise stated, may be made
by fax
or letter.
|
18.2
|
Addresses
The address and fax number (and the department or officer, if any,
for
whose attention the communication is to be made) of each party to
this
Agreement for any communication or document to be made or delivered
under
or in connection with this Agreement
are:
|
18.2.1 |
in
the case of the Borrower, c/o Safety Management Overseas S.A., 32
Avenue
Karamanli, GR-166 05 Voula, Athens, Greece (telex no: 215050
|
answerback:
SAFE GR, fax no: +30 210 895 6900) marked for the attention of Mr
George
Papadopoulos; and
|
18.2.2 |
in
the case of the Lender, to the Lender at its address at the head
of this
Agreement (fax no: +44 207 626 5956 tel no: +44 207 621 6045) marked
for
the attention of Shipping
Department;
|
18.3
|
Delivery
Any communication or document made or delivered by one party to this
Agreement to the other under or in connection this Agreement will
only be
effective:
|
18.3.1 |
if
by way of fax, when received in legible form;
or
|
18.3.2 |
if
by way of letter, when it has been left at the relevant address or
five
(5) Business Days after being deposited in the post postage prepaid
in an
envelope addressed to it at that
address;
|
18.4
|
English
language
Any notice given under or in connection with this Agreement must
be in
English. All other documents provided under or in connection with
this
Agreement must be:
|
18.4.1 |
in
English; or
|
18.4.2 |
if
not in English, and if so required by the Lender, accompanied by
a
certified English translation and, in this case, the English translation
will prevail unless the document is a constitutional, statutory or
other
official document.
|
19
|
Partial
Invalidity
|
20
|
Remedies
and Waivers
|
21
|
Miscellaneous
|
21.1
|
No
oral variations
No
variation or amendment of a Finance Document shall be valid unless
in
writing and signed on behalf of the
Lender.
|
21.2
|
Further
Assurance
If
any provision of a Finance Document shall be invalid or unenforceable
in
whole or in part by reason of any present or future law or any decision
of
any court, or if the documents at any time held by or on behalf of
the
Lender are considered by the Lender for any reason insufficient to
carry
out the terms of this Agreement, then from time to time the Borrower
will
promptly, on demand by the Lender, execute or procure the execution
of
such further documents as in the opinion of the Lender are necessary
to
provide adequate security for the repayment of the
Indebtedness.
|
21.3
|
Rescission
of payments etc.
Any discharge, release or reassignment by the Lender of any of the
security constituted by, or any of the obligations of a Security
Party
contained in, a Finance Document shall be (and be deemed always to
have
been) void if any act (including, without limitation, any payment)
as a
result of which such discharge, release or reassignment was given
or made
is subsequently wholly or partially rescinded or avoided by operation
of
any law.
|
21.4
|
Certificates
Any certificate or statement signed by an authorised signatory of
the
Lender purporting to show the amount of the Indebtedness (or any
part of
the Indebtedness) or any other amount referred to in any Finance
Document
shall, save for manifest error or on any question of law, be conclusive
evidence as against the Borrower of that
amount.
|
21.5
|
Counterparts
This Agreement may be executed in any number of counterparts each
of which
shall be original but which shall together constitute the same
instrument.
|
21.6
|
Contracts
(Rights of Third Parties) Act 1999
A
person who is not a party to this Agreement has no right under the
Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy
the
benefit of any term of this
Agreement.
|
22
|
Law
and Jurisdiction
|
22.1
|
Governing
law
This Agreement shall in all respects be governed by and interpreted
in
accordance with English law.
|
22.2
|
Jurisdiction
For
the exclusive benefit of the Lender, the parties to this Agreement
irrevocably agree that the courts of England are to have jurisdiction
to
settle any disputes which may arise out of or in connection with
this
Agreement and that any proceedings may be brought in those
courts.
|
22.3
|
Alternative
jurisdictions
Nothing contained in this Clause 22 shall limit the right of the
Lender to
commence any proceedings against the Borrower in any other court
of
competent jurisdiction nor shall the commencement of any proceedings
against the Borrower in one or more jurisdictions preclude the
commencement of any proceedings in any other jurisdiction, whether
concurrently or not.
|
22.4
|
Waiver
of objections
The Borrower irrevocably waives any objection which it may now or
in the
future have to the laying of the venue of any proceedings in any
court
referred to in this Clause 22, and any claim that those proceedings
have
been brought in an inconvenient or inappropriate forum, and irrevocably
agrees
|
that
a judgment in any proceedings commenced in any such court shall be
conclusive and binding on it and may be enforced in the courts of
any
other jurisdiction.
|
22.5
|
Service
of process
Without prejudice to any other mode of service allowed under any
relevant
law, the Borrower:
|
22.5.1 |
irrevocably
appoints Cheeswrights Notaries Public, Bankside House, 107 Leadenhall
Street, London EC3A 4HA, United Kingdom as its agent for service
of
process in relation to any proceedings before the English courts
in
connection with this Agreement; and
|
22.5.2 |
agrees
that failure by a process agent to notify the Borrower of the process
will
not invalidate the proceedings
concerned.
|
1
|
Security
Parties
|
(a)
|
Constitutional
Documents
Copies of the constitutional documents of each Security Party together
with such other evidence as the Lender may reasonably require that
each
Security Party is duly incorporated in its country of incorporation
and
remains in existence with power to enter into, and perform its obligations
under, the Relevant Documents to which it is or is to become a
party.
|
(b)
|
Certificates
of good standing
A
certificate of good standing in respect of each Security Party (if
such a
certificate can be obtained).
|
(c)
|
Board
resolutions
A
copy of a resolution of the board of directors of each Security
Party:
|
(i)
|
approving
the terms of, and the transactions contemplated by, the Relevant
Documents
to which it is a party and resolving that it execute those Relevant
Documents; and
|
(ii)
|
authorising
a specified person or persons to execute those Relevant Documents
(and all
documents and notices to be signed and/or despatched under those
documents) on its behalf.
|
(d)
|
Officer’s
certificates
A
certificate of a duly authorised officer of each Security Party certifying
that each copy document relating to it specified in this Part I of
Schedule l is correct, complete and in full force and effect as at a
date no earlier than the date of this Agreement and setting out the
names
of the directors and officers of that Security
Party.
|
(e)
|
Powers
of attorney
The notarially attested and legalised power of attorney of each Security
Party under which any documents are to be executed or transactions
undertaken by that Security Party.
|
2
|
Security
and related documents
|
(a)
|
Vessel
documents
Photocopies, certified as true by a director or the secretary or
the duly
authorised attorney of the Borrower,
of:
|
(i)
|
the
Management Agreement;
|
(ii)
|
the
Vessel’s current Safety Construction, Safety Equipment, Safety Radio, Oil
Pollution Prevention and Load Line
Certificates;
|
(iii)
|
the
Vessel’s current Certificate of Financial Responsibility issued pursuant
to the United States Oil Pollution Act 1990 (if required for the
Vessel);
|
(iv)
|
the
Vessel’s current SMC;
|
(v)
|
the
ISM Company’s current DOC;
|
(vi)
|
the
Vessel’s current ISSC;
|
(vii)
|
the
Vessel’s current IAPPC;
|
(viii)
|
the
Vessel’s current Tonnage
Certificate;
|
(b)
|
Evidence
of Borrower’s title
Evidence that on the Drawdown Date (i) the Vessel will be at least
provisionally registered under the flag stated in Recital (A) in
the
ownership of the Borrower and (ii) the Mortgage will be capable of
being
registered against the Vessel with first
priority.
|
(c)
|
Evidence
of insurance
Evidence that the Vessel is insured in the manner required by the
Security
Documents and that letters of undertaking will be issued
|
in
the manner required by the Security Documents, together with (if
required
by the Lender) the written approval of the Insurances by an insurance
adviser appointed by the Lender.
|
(d)
|
Confirmation
of class
A
Certificate of Confirmation of Class for hull and machinery confirming
that the Vessel is classed with the highest class applicable to vessels
of
her type with Lloyd’s Register of Shipping or such other classification
society as may be acceptable to the Lender free of recommendations
affecting class.
|
(e)
|
Security
Documents
The Security Documents, together with all other assignment and/or
charge
and evidence that those notices will be duly acknowledged by the
recipients.
|
(f)
|
Mandates
Such duly signed forms of mandate, and/or other evidence of the opening
of
the Accounts, as the Lender may
require.
|
(g)
|
Managers’
confirmation
The written confirmation of the Managers that, throughout the Facility
Period unless otherwise agreed by the Lender, they will remain the
commercial and technical managers of the Vessel and that they will
not,
without the prior written consent of the Lender, sub-contract or
delegate
the commercial or technical management of the Vessel to any third
party
and confirming in terms acceptable to the Lender that, following
the
occurrence of an Event of Default, all claims of the Managers against
the
Borrower shall be subordinated to the claims of the Lender under
the
Finance Documents.
|
(h)
|
No
disputes
The written confirmation of the Borrower that there is no dispute
under
any of the Relevant Documents as between the parties to any such
document.
|
3
|
Legal
opinions
|
(a)
|
If
a Security Party is incorporated in a jurisdiction other than England
and
Wales or if any Finance Document is governed by the laws of a jurisdiction
other than England and Wales, a legal opinion of the legal advisers
to the
Lender in each relevant jurisdiction, substantially in the form or
forms
provided to the Lender prior to signing this Agreement or confirmation
satisfactory to the Lender that such an opinion will be
given.
|
4
|
Other
documents and evidence
|
(a)
|
Drawdown
Notice
A
duly completed Drawdown Notice.
|
(b)
|
Process
agent
Evidence that any process agent referred to in Clause 22.5 and any
process
agent appointed under any other Finance Document has accepted its
appointment.
|
(c)
|
Other
authorisations
A
copy of any other consent, licence, approval, authorisation or other
document, opinion or assurance which the Lender considers to be necessary
or desirable (if it has notified the Borrower accordingly) in connection
with the entry into and performance of the transactions contemplated
by
any of the Relevant Documents or for the validity and enforceability
of
any of the Relevant Documents.
|
(d)
|
Fees
Evidence that the fees, costs and expenses then due from the Borrower
under Clause 9 and Clause 10 have been paid or will be paid by the
Drawdown Date.
|
(e)
|
“
Know
your customer
”
documents
Such documentation and other evidence as is reasonably requested
by the
Lender in order for the Lender to comply with all necessary “know your
customer” or similar identification procedures in relation to the
transactions contemplated in the Finance
Documents.
|
1
|
Evidence
of Borrower’s title
Certificate of ownership and encumbrance (or equivalent) issued by
the
Registrar of Ships (or equivalent official) of the flag stated in
Recital
(A) confirming that (a) the Vessel is permanently registered under
that
flag in the ownership of the Borrower, (b) the Mortgage has been
registered with first priority against the Vessel and (c) there are
no
further Encumbrances registered against the
Vessel.
|
2
|
Letters
of undertaking
Letters of undertaking in respect of the Insurances as required by
the
Security Documents together with copies of the relevant policies
or cover
notes or entry certificates duly endorsed with the interest of the
Lender.
|
3
|
Acknowledgements
of notices
Acknowledgements of all notices of assignment and/or charge given
pursuant
to the Security Documents.
|
4
|
Legal
opinions
Such of the legal opinions specified in Part I of this Schedule 1
as have
not already been provided to the
Lender.
|
5
|
Companies
Act registrations
Evidence that the prescribed particulars of the Security Documents
have
been delivered to the Registrar of Companies of Cyprus within the
statutory time limit.
|
6
|
Mortgagee’s
Insurance Fees
Payment to the Lender of all fees in relation to inspections, valuations,
legal fees and premiums for Mortgagee’s
Insurances.
|
1
|
The
Mandatory Cost is an addition to the interest rate to compensate
the
Lender for the cost of compliance with (a) the requirements of the
Bank of
England and/or the Financial Services Authority (or, in either case,
any
other authority which replaces all or any of its functions) or (b)
the
requirements of the European Central
Bank.
|
(a)
|
On
the first day of each Interest Period (or as soon as possible thereafter)
the Lender shall calculate, as a percentage rate, a rate (the
“
Additional
Cost Rate
”)
in accordance with the paragraphs set out
below.
|
(b)
|
The
Additional Cost Rate for the Lender if lending from an office in
the
euro-zone will be the percentage notified by the Lender to the Borrower
to
be its reasonable determination of the cost (expressed as a percentage
of
the Loan) of complying with the minimum reserve requirements of the
European Central Bank as a result of making the Loan from that
office.
|
(c)
|
The
Additional Cost Rate for the Lender if lending from an office in
the
United Kingdom will be calculated by the Lender as
follows:
|
(d)
|
where
the Loan is denominated in
sterling:
|
(e)
|
where
the Loan is denominated in any currency other than
sterling:
|
B
|
is
the percentage of eligible liabilities (assuming these to be in excess
of
any stated minimum) which the Lender is from time to time required
to
maintain as an interest free cash ratio deposit with the Bank of
England
to comply with cash ratio
requirements;
|
Y
|
is
the percentage rate of interest (excluding the Margin and the Mandatory
Cost and, if the Loan is an overdue amount, the additional rate of
interest specified in Clause 7.8) payable for the relevant Interest
Period
on the Loan;
|
S
|
is
the percentage (if any) of eligible liabilities which the Lender
is
required from time to time to maintain as interest bearing special
deposits with the Bank of England;
|
Z
|
is
the interest rate per annum payable by the Bank of England to the
Lender
on special deposits; and
|
F
|
is
the charge payable by the Lender to the Financial Services Authority
under
paragraph 2.02 or 2.03 (as appropriate) of the Fees Regulations or
the
equivalent provisions in any replacement regulations (with, for this
purpose, the figure for the minimum amount in paragraph 2.02b or
such
equivalent provision deemed to be zero), expressed in pounds per
£1
million of the fee base of the
Lender.
|
2 |
For
the purpose of this Schedule:
|
(a)
|
“
eligible
liabilities
”
and “
special
deposits
”
have the meanings given to them at the time of application of the
formula
by the Bank of England;
|
(b)
|
“
fee
base
”
has the meaning given to it in the Fees
Regulations;
|
(c)
|
“
Fees
Regulations
”
means the regulations governing periodic fees contained in the FSA
Supervision Manual or such other law or regulation as may be in force
from
time to time in respect of the payment of fees for the acceptance
of
deposits.
|
3
|
In
the application of the formula B, Y, S and Z are included in the
formula
as figures and not as percentages, e.g. if B = 0.5% and Y = 15%,
BY is
calculated as 0.5. x 15. Each rate calculated in accordance with
the
formula is, if necessary, rounded upward to four decimal
places.
|
4
|
If
a change in circumstances has rendered, or will render, the formula
inappropriate, the Lender shall notify the Borrower of the manner
in which
the Mandatory Cost will subsequently be calculated. The manner of
calculation so notified by the Lender shall, in the absence of manifest
error, be binding on the Borrower.
|
Page
|
||
1
|
Definitions
and Interpretation
|
1
|
2
|
The
Loan and its Purpose
|
11
|
3
|
Conditions
of Utilisation
|
11
|
4
|
Advance
|
13
|
5
|
Currency
|
14
|
6
|
Repayment
|
14
|
7
|
Prepayment
|
15
|
8
|
Interest
|
16
|
9
|
Indemnities
|
19
|
10
|
Fees
|
23
|
11
|
Security
and Application of Moneys
|
23
|
12
|
Representations
|
28
|
13
|
Undertakings
and Covenants
|
31
|
14
|
Events
of Default
|
38
|
15
|
Assignment
and Sub-Participation
|
43
|
16
|
Set-Off
|
43
|
17
|
Payments
|
44
|
18
|
Notices
|
45
|
19
|
Partial
Invalidity
|
47
|
20
|
Remedies
and Waivers
|
47
|
21
|
Miscellaneous
|
47
|
22
|
Law
and Jurisdiction
|
48
|
SCHEDULE 1: Conditions Precedent and Subsequent |
50
|
|
Part
1: Conditions precedent
|
50
|
|
Part
II: Conditions subsequent
|
54
|
|
SCHEDULE 2: Calculation of Mandatory Cost |
55
|
|
SCHEDULE 3: Form of Drawdown Notice |
58
|
(1)
|
EFRAGEL
SHIPPING CORPORATION
,
a
company incorporated under the laws of the Republic of Liberia whose
registered office is at 80 Broad Street, Monrovia, Liberia (the
“
Borrower
”);
and
|
(2)
|
DnB
NOR BANK ASA
,
acting through its office at 20 St. Dunstan’s Hill, London EC3R 8HY,
England (the “
Lender
”).
|
(A)
|
The
Borrower is the registered owner of the Vessel which is registered
under
the flag of Cyprus.
|
(B)
|
The
Lender has agreed to advance to the Borrower a secured multi-currency
reducing revolving credit facility of up to forty two million Dollars
($42,000,000) to assist the Borrower in re-financing its Existing
Indebtedness and for its general working capital
purposes.
|
1
|
Definitions
and Interpretation
|
1.1
|
In
this Agreement:
|
(a)
|
moneys
borrowed;
|
(b)
|
any
acceptance credit;
|
(c)
|
any
bond, note, debenture, loan stock or similar
instrument;
|
(d)
|
any
finance or capital lease;
|
(e)
|
receivables
sold or discounted (other than on a non-recourse basis);
|
(f)
|
deferred
payments for assets or services;
|
(g)
|
any
derivative transaction protecting against or benefiting from fluctuations
in any rate or price (and, when calculating the value of any derivative
transaction, only the marked to market value shall be taken into
account);
|
(h)
|
any
amount raised under any other transaction (including any forward
sale or
purchase agreement) having the commercial effect of a
borrowing;
|
(i)
|
any
counter-indemnity obligation in respect of a guarantee, indemnity,
bond,
standby or documentary letter of credit or any other instrument issued
by
a bank or financial institution;
and
|
(j)
|
the
amount of any liability in respect of any guarantee or indemnity
for any
of the items referred to in paragraphs (a) to (i)
above.
|
(a)
|
the
applicable Screen Rate; or
|
(b)
|
(if
no Screen Rate is available for any Interest Period) the arithmetic
mean
of the rates (rounded upwards to four decimal places) quoted to the
Lender
in the London interbank market,
|
(a)
|
an
actual, constructive, arranged, agreed or compromised total loss
of the
Vessel; or
|
(b)
|
the
requisition for title or compulsory acquisition of the Vessel by
any
government or other competent authority (other than by way of requisition
for hire); or
|
(c)
|
the
capture, seizure, arrest, detention or confiscation of the Vessel
by any
government or by persons acting or purporting to act on behalf of
any
government, unless the Vessel is released and returned to the possession
of the Borrower within one month after the capture, seizure, arrest,
detention or confiscation in
question.
|
1.2
|
In
this Agreement:
|
1.2.1 |
words
denoting the plural number include the singular and vice
versa;
|
1.2.2 |
words
denoting persons include corporations, partnerships, associations
of
persons (whether incorporated or not) or governmental or
quasi-governmental bodies or authorities and vice
versa;
|
1.2.3 |
references
to Recitals, Clauses and Schedules are references to recitals, clauses
and
schedules to or of this Agreement;
|
1.2.4 |
references
to this Agreement include the Recitals and the
Schedules;
|
1.2.5 |
the
headings and contents page(s) are for the purpose of reference only,
have
no legal or other significance, and shall be ignored in the interpretation
of this Agreement;
|
1.2.6 |
references
to any document (including, without limitation, to all or any of
the
Relevant Documents) are, unless the context otherwise requires, references
to that document as amended, supplemented, novated or replaced from
time
to time;
|
1.2.7 |
references
to statutes or provisions of statutes are references to those statutes,
or
those provisions, as from time to time amended, replaced or
re-enacted;
|
1.2.8 |
references
to the Lender include its successors, transferees and
assignees;
|
1.2.9 |
a
time of day (unless otherwise specified) is a reference to London
time;
and
|
1.2.10 |
words
and expressions defined in the Master Agreement, unless the context
otherwise requires, have the same
meaning.
|
1.3
|
Offer
letter
|
2
|
The
Loan and its Purpose
|
2.1
|
Amount
Subject to the terms of this Agreement, the Lender agrees to make
available to the Borrower a revolving credit in an aggregate amount
not
exceeding the Maximum Amount at any one
time.
|
2.2
|
Purpose
The Borrower shall apply the Loan for the purpose referred to in
Recital
(B).
|
2.3
|
Monitoring
The Lender shall not be bound to monitor or verify the application
of any
amount borrowed under this
Agreement.
|
3
|
Conditions
of Utilisation
|
3.1
|
Conditions
precedent
The Borrower is not entitled to have any Drawing advanced unless
the
Lender has received all of the documents and other evidence listed
in Part
I of Schedule 1.
|
3.2
|
Further
conditions precedent
The Lender will only be obliged to advance a Drawing if on the date
of the
Drawdown Notice and on the proposed Drawdown
Date:
|
3.2.1 |
no
Default is continuing or would result from the advance of that Drawing;
and
|
3.2.2 |
the
representations made by the Borrower under Clause 12 are true in
all
material respects.
|
3.3
|
Drawing
limit
The Lender will only be obliged to advance a Drawing
if:
|
3.3.1 |
no
other Drawing has been made on the same Business
Day;
|
3.3.2 |
that
Drawing is not less than one million Dollars ($1,000,000) or, if
in excess
of one million Dollars ($1,000,000), integral multiples of five hundred
thousand Dollars ($500,000); and
|
3.3.3 |
that
Drawing will not increase the outstanding amount of the Loan to a
sum in
excess of the Maximum Amount.
|
3.4
|
Reduction
of Maximum Amount
The Maximum Amount:
|
3.4.1 |
shall
be reduced by twenty (20) reduction amounts, the first six (6) reduction
amounts on each of the Reduction Dates, each reduction amount in
the
amount of seven hundred and fifty thousand Dollars ($750,000), the
following six (6) reduction amounts each in the amount of one million
Dollars ($1,000,000), the following seven (7) reduction amounts each
in
the amount of one million six hundred and eighty seven thousand five
hundred Dollars ($1,687,500) and the final reduction amount in the
amount
of nineteen million six hundred and eighty seven thousand five hundred
Dollars ($19,687,500)(comprising of a reduction amount of one million
six
hundred and eighty seven thousand five hundred Dollars ($1,687,500)
and a
balloon reduction of eighteen million Dollars ($18,000,000)), the
first
Reduction Date being the date which is six (6) calendar months from
the
date of this Agreement and subsequent Reduction Dates being at consecutive
intervals of six (6) calendar months thereafter, with the last Reduction
Date being on the Final Maturity Date;
and
|
3.4.2 |
may
(in addition to any reduction required under Clause 3.4.1) be reduced
by
the Borrower by five hundred thousand Dollars ($500,000) or an integral
multiple of that amount with effect from any Business Day by written
notice to the Lender given not fewer than fourteen (14) days prior
to that
Business Day, which notice shall be irrevocable. Any voluntary reduction
in the Maximum Amount shall be in addition to, and without prejudice
to,
the mandatory reductions in the Maximum Amount made pursuant to Clause
3.4.1 and may not be reversed. Any reduction under this Clause 3.4.2
shall
satisfy the
|
obligations
under Clause 3.4.1 in order of maturity. Amounts repaid by the Borrower
pursuant to this Clause shall not be available for
reborrowing.
|
3.5
|
Conditions
subsequent
The Borrower undertakes to deliver or to cause to be delivered to
the
Lender on, or as soon as practicable after, the first Drawdown Date
the
additional documents and other evidence listed in Part II of
Schedule 1.
|
3.6
|
No
Waiver
If
the Lender in its sole discretion agrees to advance a Drawing to
the
Borrower before all of the documents and evidence required by Clause
3.1
have been delivered to or to the order of the Lender, the Borrower
undertakes to deliver all outstanding documents and evidence to or
to the
order of the Lender no later than the date specified by the
Lender.
|
3.7
|
Form
and content
All documents and evidence delivered to the Lender under this Clause
3
shall:
|
3.7.1 |
be
in form and substance acceptable to the
Lender;
|
3.7.2 |
if
required by the Lender, be certified, notarised, legalised or attested
in
a manner acceptable to the Lender;
and
|
3.7.3 |
if
copies, be certified as true and complete copies by a director or
the
secretary or the legal advisor or a duly authorised attorney-in-fact
of
the Borrower.
|
4
|
Advance
|
5
|
Currency
|
5.1
|
Conversion
The Borrower may Convert all or any part of the Loan into a Permitted
Currency not later than five (5) Business Days before the Drawdown
Date or
at any time during the Facility Period, subject to there being no
Event of
Default which is continuing and subject to the Permitted Currency
being
available to the Lender. Upon conversion, that part of the Loan shall
remain denominated in, and shall be repayable in, the Permitted Currency
until the end of the relevant Interest Payment Date. Clause 3.4 shall
be
amended so that the Maximum Amount of the Loan shall be reduced in
the
Permitted Currency or Permitted Currencies selected under this Clause,
provided that the Reduction Dates specified in Clause 3.4 shall not
be
changed.
|
5.2
|
Indemnity
The Borrower shall indemnify the Lender from time to time on demand
against all Break Costs, other losses, costs, claims, damages and
expenses
which the Lender may from time to time suffer, incur or sustain by
reason
of the Lender agreeing to and/or implementing the terms of this Clause
(including, without limitation, all costs and expenses incurred by
the
Lender in effecting any
conversion).
|
6
|
Repayment
|
6.1
|
Repayment
of each Drawing
The Borrower agrees to repay each Drawing to the Lender on the last
day of
the Interest Period in respect of that Drawing. On the Final Maturity
Date
the Borrower shall repay to the Lender all amounts then outstanding
under
or pursuant to this Agreement. Without limitation to the repayments
required by Clause 3.4, in addition the Borrower may repay any Drawing
in
whole or in part in integral multiples of five hundred thousand Dollars
($500,000) (or the equivalent in the Permitted Currency in which
the
Drawing in question is then denominated) and no repayment shall be
made in
an amount which is less than one million Dollars ($1,000,000) (or
the
equivalent in the Permitted Currency in which the Drawing in question
is
then denominated) (or as otherwise may be agreed by the Lender) provided
that it has first given to the Lender not fewer than two (2) Business
Days’ prior written notice expiring on a Business Day of its intention
to
do so. Any notice pursuant to this Clause once given shall be irrevocable
and shall oblige the Borrower to make the
|
repayment
referred to in the notice on the Business Day specified in the notice,
together with all interest accrued on the amount repaid up to and
including that Business Day.
|
6.2
|
Reborrowing
Amounts of the Loan which are repaid or prepaid shall be available
for
reborrowing in accordance with Clause 3 prior to the Availability
Termination Date.
|
7
|
Prepayment
|
7.1
|
Illegality
If
it becomes unlawful in any jurisdiction for the Lender to perform
any of
its obligations as contemplated by this Agreement or to fund or maintain
the Loan:
|
7.1.1 |
the
Lender shall promptly notify the Borrower of that event;
and
|
7.1.2 |
the
Borrower shall repay any Drawing on the last day of its current Interest
Period or, if earlier, the date specified by the Lender in the notice
delivered to the Borrower (being no earlier than the last day of
any
applicable grace period permitted by
law).
|
7.2
|
Voluntary
prepayment of Loan
The Borrower may prepay the whole or any part of a Drawing (but,
if in
part, being an amount that reduces that Drawing by a minimum amount
of
five hundred thousand Dollars ($500,000) or an integral multiple
of that
amount (or as otherwise may be agreed by the Lender) provided that
it
gives the Lender not less than fourteen (14) Business Days’ (or such
shorter period of the notice as the Lender may agree) prior notice.
Amounts prepaid by the Borrower pursuant to this Clause shall be
available
for reborrowing. Any prepayment under this Clause 7.2 shall satisfy
the
obligations under Clause 6.1 in order of
maturity.
|
7.3
|
Mandatory
prepayment on sale or Total Loss
Upon the sale or Total Loss of the Vessel, the Maximum Amount shall
reduce
to zero and the Borrower shall repay the Indebtedness in full, in
the case
of a sale of the Vessel, by not later than the date of the sale of
the
Vessel or, in the case of a Total Loss, by not later than the date
falling
one hundred and eighty (180) days from the date of the casualty giving
rise to the Total Loss (or such longer period as the Lender may in
its
|
discretion
agree). Amounts prepaid by the Borrower pursuant to this Clause shall
not
be available for reborrowing.
|
7.4
|
Mandatory
prepayment on reduction of Maximum Amount
If
the Maximum Amount is reduced in accordance with Clause 3.4 to an
amount
which is less than the aggregate amount of the Drawings then outstanding,
the Borrower shall, simultaneously with that reduction, prepay one
or more
outstanding Drawings to the extent required to ensure that the aggregate
amount of the Drawings outstanding does not exceed the reduced Maximum
Amount.
|
7.5
|
Restrictions
Any notice of prepayment given under this Clause 7 shall be irrevocable
and, unless a contrary indication appears in this agreement, shall
specify
the date or dates upon which the relevant prepayment is to be made
and the
amount of that prepayment.
|
8
|
Interest
|
8.1
|
Interest
Periods
The period during which each Drawing shall be outstanding under this
Agreement shall be an Interest Period of one (1), three (3), six
(6), nine
(9) or twelve (12) months’ duration, as selected by the Borrower in the
Drawdown Notice in respect of the Drawing in question, or such other
duration as may be agreed by the
Lender.
|
8.2
|
Beginning
and end of Interest Periods
Each Interest Period shall start on the Drawdown Date of the Drawing
in
question and end on the date which numerically corresponds to that
Drawdown Date in the relevant calendar month except that, if there
is no
numerically corresponding date in that calendar month, the Interest
Period
shall end on the last Business Day in that
month.
|
8.3
|
Interest
Periods to meet Maturity Date
If
an Interest Period for a Drawing would otherwise expire after the
Maturity
Date, the Interest Period for that Drawing shall expire on the Maturity
Date.
|
8.4
|
Non-Business
Days
If
an Interest Period would otherwise end on a day which is not a Business
Day, that Interest Period will instead end on the next Business Day
in
that calendar month (if there is one) or the preceding Business Day
(if
there is not).
|
8.5
|
Interest
rate
During
each Interest Period interest shall accrue on the relevant Drawing
at the
rate determined by the Lender to be the aggregate of (a) the Margin,
(b)
LIBOR and (c) the Mandatory Cost, if
any.
|
8.6
|
Failure
to select Interest Period
If
the Borrower at any time fails to select or agree to an Interest
Period in
accordance with Clause 8.1, the interest rate applicable shall be
the rate
determined by the Lender in accordance with Clause 8.5 for an Interest
Period of such duration (not exceeding six months) as the Lender
may
select.
|
8.7
|
Accrual
and payment of interest
Interest shall accrue from day to day, shall be calculated on the
basis of
a 360 day year and the actual number of days elapsed (or, in any
circumstance where market practice differs, in accordance with the
prevailing market practice) and shall be paid by the Borrower to
the
Lender on the last day of each Interest Period and, if the Interest
Period
is longer than six (6) months, on the dates falling at six (6) monthly
intervals after the first day of that Interest
Period.
|
8.8
|
Default
interest
If
the Borrower fails to pay any amount payable by it under a Finance
Document on its due date, interest shall accrue on the overdue amount
from
the due date up to the date of actual payment (both before and after
judgment) at a rate which is one per cent (1%) higher than the rate
which
would have been payable if the overdue amount had, during the period
of
non-payment, constituted a Drawing in the currency of the overdue
amount
for successive Interest Periods, each selected by the Lender (acting
reasonably). Any interest accruing under this Clause 8.8 shall be
immediately payable by the Borrower on demand by the Lender. If unpaid,
any such interest will be compounded with the overdue amount at the
end of
each Interest Period applicable to that overdue amount but will remain
immediately due and payable.
|
8.9
|
Changes
in market circumstances
If
at any time the Lender determines (which determination shall be final
and
conclusive and binding on the Borrower) that, by reason of changes
affecting the London interbank market, adequate and fair means do
not
exist for determining the rate of interest on a Drawing for any Interest
Period:
|
8.9.1 |
the
Lender shall give notice to the Borrower of the occurrence of such
event;
and
|
8.9.2 |
the
rate of interest on the relevant Drawing for that Interest Period
shall be
the rate per annum which is the sum
of:
|
(a) |
the
Margin; and
|
(b) |
the
rate which expresses as a percentage rate per annum the cost to the
Lender
of funding the relevant Drawing from whatever source it may reasonably
select; and
|
(c) |
the
Mandatory Cost, if any,
|
8.9.3 |
the
Lender will negotiate with the Borrower in good faith with a view
to
modifying this Agreement to provide a substitute basis for determining
the
rate of interest which is financially a substantial equivalent to
the
basis provided for in this
Agreement;
|
8.9.4 |
any
substitute basis agreed pursuant to Clause 8.9.3 shall be binding
on the
parties to this Agreement; and
|
8.9.5 |
if,
within thirty (30) days of the giving of the notice referred to in
Clause
8.9.1, the Borrower and the Lender fail to agree in writing on a
substitute basis for determining the rate of interest in respect
of the
relevant Drawing, the Lender shall cease to be obliged to advance
that
Drawing, but, if it has already been advanced, the Borrower will
|
immediately
prepay it, together with any Break Costs, and the Maximum Amount
shall be
reduced by the amount of that
Drawing.
|
8.10
|
Determinations
conclusive
The Lender shall promptly notify the Borrower of the determination
of a
rate of interest under this Clause 8 and each such determination
shall
(save in the case of manifest error) be final and
conclusive.
|
9
|
Indemnities
|
9.1
|
Transaction
expenses
The Borrower will, within fourteen (14) days of the Lender’s written
demand, pay the Lender the amount of all costs and expenses (including
legal fees and Value Added Tax or any similar or replacement tax
if
applicable) incurred by the Lender in connection with:
|
9.1.1 |
the
negotiation, preparation, printing, execution and registration of
the
Finance Documents (whether or not any Finance Document is actually
executed or registered and whether or not a Drawing is
advanced);
|
9.1.2 |
any
amendment, addendum or supplement to any Finance Document (whether
or not
completed); and
|
9.1.3 |
any
other document which may at any time be required by the Lender to
give
effect to any Finance Document or which the Lender is entitled to
call for
or obtain under any Finance Document (including, without limitation,
all
premiums and other sums from time to time payable by the Lender in
relation to the Mortgagee’s
Insurances).
|
9.2
|
Funding
costs
The Borrower shall indemnify the Lender on the Lender’s written demand
against all losses and costs incurred or sustained by the Lender
if, for
any reason, a Drawing is not advanced to the Borrower after the relevant
Drawdown Notice has been given to the Lender, or is advanced on a
date
other than that requested in the Drawdown Notice (unless, in either
case,
as a result of any default by the
Lender).
|
9.3
|
Break
Costs
The Borrower shall indemnify the Lender on the Lender’s written demand
against all costs, losses, premiums or penalties incurred by the
Lender as
a result of its receiving any prepayment of all or any part of a
Drawing
(whether
|
pursuant
to Clause 7 or otherwise) on a day other than the last day of an
Interest
Period for that Drawing, or any other payment under or in relation
to the
Finance Documents on a day other than the due date for payment of
the sum
in question, including (without limitation) any losses or costs incurred
in liquidating or re- employing deposits from third parties acquired
to
effect or maintain all or any part of a Drawing, and any liabilities,
expenses or losses incurred by the Lender in terminating or reversing,
or
otherwise in connection with, any Transaction or any other interest
rate
and/or currency swap, transaction or arrangement entered into by
the
Lender to hedge any exposure arising under this Agreement, or in
terminating or reversing, or otherwise in connection with, any open
position arising under this Agreement or the Master
Agreement.
|
9.4
|
Currency
indemnity
In
the event of the Lender receiving or recovering any amount payable
under a
Finance Document in a currency other than the Currency of Account,
and if
the amount received or recovered is insufficient when Converted into
the
Currency of Account at the date of receipt to satisfy in full the
amount
due, the Borrower shall, on the Lender’s written demand, pay to the Lender
such further amount in the Currency of Account as is sufficient to
satisfy
in full the amount due and that further amount shall be due to the
Lender
as a separate debt under this
Agreement.
|
9.5
|
Increased
costs (subject to Clause 9.6)
If, by reason of the introduction of any law, or any change in any
law, or
any change in the interpretation or administration of any law, or
compliance with any request or requirement from any central bank
or any
fiscal, monetary or other authority occurring after the date of this
Agreement:
|
9.5.1 |
the
Lender (or the holding company of the Lender) shall be subject to
any Tax
with respect to payment of all or any part of the Indebtedness (other
than
Tax on overall net income); or
|
9.5.2 |
the
basis of Taxation of payments to the Lender in respect of all or
any part
of the Indebtedness shall be changed;
or
|
9.5.3 |
any
reserve requirements shall be imposed, modified or deemed applicable
against assets held by or deposits in or for the account of or loans
by
any branch of the Lender; or
|
9.5.4 |
the
manner in which the Lender allocates capital resources to its obligations
under this Agreement and/or the Master Agreement or any ratio (whether
cash, capital adequacy, liquidity or otherwise) which the Lender
is
required or requested to maintain shall be affected;
or
|
9.5.5 |
there
is imposed on the Lender (or on the holding company of the Lender)
any
other condition in relation to the Indebtedness or the Finance
Documents;
|
9.6
|
Exceptions
to increased costs
Clause 9.5 does not apply to the extent any additional cost or reduced
return referred to in that Clause
is:
|
9.6.1 |
compensated
for by a payment made under Clause 9.10;
or
|
9.6.2 |
compensated
for by a payment made under Clause 17.3;
or
|
9.6.3 |
compensated
for by the payment of the Mandatory Cost;
or
|
9.6.4 |
attributable
to the wilful breach by the Lender (or the holding company of the
Lender)
of any law or regulation.
|
9.7
|
Events
of Default
The Borrower shall indemnify the Lender from time to time on the
Lender’s
written demand against all losses, costs and liabilities incurred
or
sustained by the Lender as a consequence of any Event of
Default.
|
9.8
|
Enforcement
costs
The Borrower shall pay to the Lender on the Lender’s written demand the
amount of all costs and expenses (including legal fees) incurred
by the
Lender in connection with the enforcement of, or the preservation
of any
rights under, any Finance Document including (without limitation)
any
losses, costs and expenses which the Lender may from time to time
sustain,
incur or become liable for by reason of the Lender being mortgagee
of the
Vessel and/or a lender to the Borrower, or by reason of the Lender
being
deemed by any court or authority to be an operator or controller,
or in
any way concerned in the operation or control, of the
Vessel.
|
9.9
|
Other
costs
The Borrower shall pay to the Lender on the Lender’s written demand the
amount of all sums which the Lender may pay or become actually or
contingently liable for on account of the Borrower in connection
with the
Vessel (whether alone or jointly or jointly and severally with any
other
person) including (without limitation) all sums which the Lender
may pay
or guarantees which it may give in respect of the Insurances, any
expenses
incurred by the Lender in connection with the maintenance or repair
of the
Vessel or in discharging any lien, bond or other claim relating in
any way
to the Vessel, and any sums which the Lender may pay or guarantees
which
it may give to procure the release of the Vessel from arrest or
detention.
|
9.10
|
Taxes
The Borrower shall pay all Taxes to which all or any part of the
Indebtedness or any Finance Document may be at any time subject (other
than Tax on the Lender’s overall net income) and shall indemnify the
Lender on the Lender’s written demand against all liabilities, costs,
claims and expenses resulting from any omission to pay or delay in
paying
any such Taxes.
|
10
|
Fees
|
10.1
|
Commitment
fee
The Borrower shall pay to the Lender a fee computed at the rate of
zero
point two per cent (0.2%) per annum on the undrawn Maximum Amount
from
time to time from the date of this Agreement until the Availability
Termination Date. The accrued commitment fee is payable on the last
day of
each successive period of three (3) months from the date of this
Agreement
and on the Availability Termination
Date.
|
10.2
|
Arrangement
fee
The Borrower shall pay to the Lender on the date of this Agreement
an
arrangement fee in the amount of sixty two thousand five hundred
Dollars
($62,500).
|
11
|
Security
and Application of Moneys
|
11.1
|
Security
Documents
As
security for the payment of the Indebtedness, the Borrower shall
execute
and deliver to the Lender or cause to be executed and delivered to
the
Lender the following documents in such forms and containing such
terms and
conditions as the Lender shall
require:
|
11.1.1 |
a
first priority Cypriot statutory mortgage over the Vessel together
with a
collateral deed of covenants;
|
11.1.2 |
a
first priority deed of assignment of the Insurances, Earnings and
Requisition Compensation of the Vessel;
and
|
11.1.3 |
a
first priority deed of charge over the Cash Collateral Account and
all
amounts from time to time standing to the credit of the Cash Collateral
Account.
|
11.2
|
Accounts
The Borrower shall maintain the Accounts with the Lender for the
duration
of the Facility Period free of Encumbrances and rights of set off
other
than those created by or under the Finance
Documents.
|
11.3
|
Earnings
The Borrower shall procure that all Earnings and any Requisition
Compensation are credited to the Operating
Account.
|
11.4
|
Application
of Operating Account
The Borrower shall procure that there is transferred from the Operating
Account to the Lender:
|
11.4.1 |
on
the due date for repayment of each Drawing, the amount of that Drawing;
and
|
11.4.2 |
on
each Interest Payment Date in respect of a Drawing, the amount of
interest
due in respect of that Drawing,
|
11.5
|
Borrower’s
obligations not affected
If
for any reason the amount standing to the credit of the Operating
Account
is insufficient to repay any Drawing or to make any payment of interest
when due, the Borrower’s obligation to repay that Drawing or to make that
payment of interest shall not be
affected.
|
11.6
|
Release
of surplus
Any amount remaining to the credit of the Operating Account following
the
making of any transfer required by Clause 11.4 shall (unless a Default
shall have occurred and be continuing) be released to or to the order
of
the Borrower, subject to an amount of one hundred and fifty thousand
Dollars ($150,000) remaining credited to the Operating Account at
all
times during the Facility Period.
|
11.7
|
Relocation
of Accounts
At
any time following the occurrence and during the continuation of
a
Default, the Lender may without the consent of the Borrower relocate
either or both of the Accounts to any other branch of the Lender,
without
prejudice to the continued application of this Clause 11 and the
rights of
the Lender under the Finance
Documents.
|
11.8
|
Application
after acceleration
From and after the giving of notice to the Borrower by the Lender
under
Clause 14.2, the Borrower shall procure that all sums from time to
time
standing to the credit of either of the Accounts are immediately
transferred to the Lender for application in accordance with
Clause 11.14 and the Borrower irrevocably authorises the Lender to
make those transfers.
|
11.9
|
General
application of moneys
The Borrower, subject to Clause 11.10, irrevocably authorises the
Lender
to apply all sums which the Lender may
receive:
|
11.9.1 |
pursuant
to a sale or other disposition of the Vessel or any right, title
or
interest in the Vessel; or
|
11.9.2 |
by
way of payment of any sum in respect of the Insurances, Earnings
or
Requisition Compensation; or
|
11.9.3 |
by
way of transfer of any sum from either of the Accounts;
or
|
11.9.4 |
otherwise
arising under or in connection with any Security
Document,
|
11.10 |
Application
of moneys on sale or Total Loss
The Borrower irrevocably
authorises the Lender to apply all sums which the Lender may receive
pursuant to a sale by the Borrower of the Vessel or a Total Loss
in or
towards satisfaction of the prepayment due and payable by virtue
of that
sale or Total Loss under Clause 7.3, but the Borrower’s obligation to make
that prepayment shall not be affected if those sums are insufficient
to
satisfy that obligation.
|
11.11
|
Determination
of market value
For the purpose of the Security Documents, the market value of the
Vessel
shall be the average value certified by the Brokers, who shall report
directly to the Lender and shall be appointed by the Borrower not
later
than five (5) days after the Lender’s request for the Borrower to appoint
such Brokers. In the event that the Borrower fails to appoint such
Brokers
within five (5) days after the Lender’s request so to do or if a Broker
appointed by the Borrower is not approved by the Lender and the Borrower
fails to appoint an alternative Broker who is approved by the Lender
within such five (5) day period, the Borrower irrevocably authorises
the
Lender to appoint a Broker in its discretion to conduct such valuations.
All valuations pursuant to this Clause shall be made on the basis
of a
sale of the Vessel for prompt delivery for cash at arm’s length on normal
commercial terms by a willing seller to a willing buyer and free
of any
existing charter or-other contract of employment. The
Borrower-
|
agrees
to accept each valuation obtained pursuant to this Clause as conclusive
evidence of the Vessel’s market value at the date of such
valuation.
|
11.12
|
Cost
of valuation
The Borrower shall be liable for all costs and expenses incurred
by the
Lender in obtaining up to two valuations in each year of the Facility
Period one upon each anniversary of the date of this Agreement and
the
other six (6) months after every calendar year unless there is an
Event of
Default in which case the Borrower shall be liable for all costs
and
expenses incurred by the Lender in obtaining any number of valuations
required by it pursuant to Clause 11.11 and shall reimburse the Lender
in
respect of all such costs and expenses on
demand.
|
11.13
|
Provision
of information
The Borrower undertakes promptly to supply the Lender with such
information concerning the Vessel’s condition, location and employment as
the Lender may reasonably require.
|
11.14
|
Additional
security
If
and so often as the aggregate of the market value of the Vessel
(determined in accordance with Clause 11.11) plus the value of any
additional security for the time being provided to the Lender pursuant
to
this Clause shall be less than (a) one hundred per cent (100%) of
the
amount of the Loan, for the period commencing on the first Drawdown
Date
and ending on the third anniversary of the first Drawdown Date, (b)
one
hundred and ten per cent (110%) of the amount of the Loan from the
third
anniversary of the first Drawdown Date until the sixth anniversary
of the
first Drawdown Date and (c) one hundred and twenty per cent (120%)
of the
amount of the Loan thereafter, the Borrower will, within fourteen
(14)
days of the request of the Lender to do so, at the Borrower’s
option:-
|
(a)
|
pay
to the credit of the Cash Collateral Account such amount as shall
be
necessary to establish that the aggregate of the market value of
the
Vessel (determined in accordance with Clause 11.11) plus the value
of any
additional security for the time being provided to the Lender pursuant
to
this Clause shall be no less than (a) one hundred per cent (100%)
of the
amount of the Loan, for the period commencing on the first
|
Drawdown
Date and ending on the third anniversary of the first Drawdown Date,
(b)
one hundred and ten per cent (110%) of the amount of the Loan from
the
third anniversary of the first Drawdown Date until the sixth anniversary
of the first Drawdown Date and (c) one hundred and twenty per cent
(120%)
of the amount of the Loan thereafter;
or
|
(b)
|
give
to the Lender other security in amount and form acceptable to the
Lender
in its discretion; or
|
(c)
|
repay
such amount of the Loan as shall be necessary to establish that the
aggregate of the market value of the Vessel (determined in accordance
with
Clause 11.11) plus the value of any additional security for the time
being
provided to the Lender pursuant to this Clause shall be no less than
(a)
one hundred per cent (100%) of the amount of the Loan, for the period
commencing on the first Drawdown Date and ending on the third anniversary
of the first Drawdown Date, (b) one hundred and ten per cent (110%)
of the
amount of the Loan from the third anniversary of the first Drawdown
Date
until the sixth anniversary of the first Drawdown Date and (c) one
hundred
and twenty per cent (120%) of the amount of the Loan
thereafter.
|
11.15
|
Return
of additional security
If
and so often as the aggregate of the market value of the Vessel
(determined in accordance with Clause 11.11) plus the value of any
additional security for the time being provided to the Lender pursuant
to
Clause 11.14 shall exceed (a) one hundred per cent (100%) of the
amount of
the Loan, for the period commencing on the first Drawdown Date and
ending
on the third anniversary of the first Drawdown Date, (b) one hundred
and
ten per cent (110%) of the amount of the Loan from the third anniversary
of the first Drawdown Date until the sixth anniversary of the first
Drawdown Date and (c) one hundred and twenty per cent (120%) of the
amount
of the Loan thereafter, then the Lender shall, within fourteen (14)
days
of the request of the Borrower to do so, release to the Borrower
such
portion of the amount standing to the credit
|
of
the Cash Collateral Account in accordance with Clause 11.14 and/or
such
amount of the security referred to in Clause 11.14(b) as shall be
required
to ensure that the aggregate of the market value of the Vessel (determined
as aforesaid) plus the value of any additional security for the time
being
provided to the Lender pursuant to Clause 11.14 is equal to, but
not less
than (a) one hundred per cent (100%) of the amount of the Loan, for
the
period commencing on the first Drawdown Date and ending on the third
anniversary of the first Drawdown Date, (b) one hundred and ten per
cent
(110%) of the amount of the Loan from the third anniversary of the
first
Drawdown Date until the sixth anniversary of the first Drawdown Date
and
(c) one hundred and twenty per cent (120%) of the amount of the Loan
thereafter.
|
12
|
Representations
|
12.1
|
Representations
The Borrower makes the representations and warranties set out in
this
Clause 12.1 to the Lender on the date of this
Agreement.
|
12.1.1 |
Status
Each Security Party (which is not an individual) which is a corporation,
duly incorporated and validly existing under the law of its jurisdiction
of incorporation and has the power to own its assets and carry on
its
business as it is being conducted.
|
12.1.2 |
Binding
obligations
The obligations expressed to be assumed by each Security Party in
each
Finance Document to which it is a party are legal, valid, binding
and
enforceable obligations.
|
12.1.3 |
Non-conflict
with other obligations
The entry into and performance by each Security Party of, and the
transactions contemplated by, the Finance Documents do not conflict
with:
|
12.1.4 |
Power
and authority
Each Security Party has the power to enter into, perform and deliver
and
has taken all necessary action to authorise its entry into, performance
and delivery of, the Finance Documents to which it is a party and
the
transactions contemplated by those Finance
Documents.
|
12.1.5 |
Validity
and admissibility in evidence
All consents, licences, approvals, authorisations, filings and
registrations required or
desirable:
|
(a) |
to
enable each Security Party lawfully to enter into, exercise its rights
and
comply with its obligations in the Finance Documents to which it
is a
party or to enable the Lender to enforce and exercise all its rights
under
the Finance Documents; and
|
(b) |
to
make the Finance Documents to which any Security Party is a party
admissible in evidence in its jurisdiction of
incorporation,
|
12.1.6 |
Governing
law and enforcement
The choice of English law as the governing law of any Finance Document
expressed to be governed by English law will be recognised and enforced
in
the jurisdiction of incorporation of each relevant Security Party,
and any
judgment obtained in England in relation to any such Finance Document
will
be recognised and enforced in the jurisdiction of incorporation of
each
relevant Security Party.
|
12.1.7 |
Deduction
of Tax
No
Security Party is required under the law of its jurisdiction of
incorporation to make any deduction for or on account of Tax from
any
payment it may make under any Finance
Document.
|
12.1.8 |
No
filing or stamp taxes
Under the law of jurisdiction of incorporation of each relevant Security
Party it is not necessary that the Finance Documents be filed, recorded
or
enrolled with any court or other authority in that jurisdiction or
that
any stamp, registration or similar tax be paid on or in relation
to the
Finance Documents or the transactions contemplated by the Finance
Documents.
|
12.1.9 |
No
default
No
Event of Default is continuing or might reasonably be expected to
result
from the advance of a Drawing.
|
12.1.10 |
No
misleading information
Any factual information provided by any Security Party to the Lender
was
true and accurate in all material respects as at the date is was
provided.
|
12.1.11 |
Pari
passu ranking
The payment obligations of each Security Party under the Finance
Documents
to which it is a party rank at least pari passu with the claims of
all its
other unsecured and unsubordinated creditors, except for obligations
mandatorily preferred by law applying to companies
generally.
|
12.1.12 |
No
proceedings pending or threatened
No
litigation, arbitration or administrative proceedings of or before
any
court, arbitral body or agency have been started or (to the best
of the
Borrower’s knowledge threatened) which, if adversely determined, might
reasonably be expected to have a materially adverse effect on the
business, assets, financial condition or credit worthiness of any
Security
Party.
|
12.1.13 |
Disclosure
of material facts
The Borrower is not aware of any material facts or circumstances
which
have not been disclosed to the Lender and which might, if disclosed,
have
adversely affected the decision of a person considering whether or
not to
make loan facilities of the nature contemplated by this Agreement
available to the Borrower.
|
12.1.14 |
No
established place of business in the UK or US
No
Security Party has an established place of business in the United
Kingdom
or the United States of America.
|
12.1.15 |
Completeness
of Relevant Documents
The copies of any Relevant Documents provided or to be provided by
the
Borrower to the Lender in accordance with Clause 3 are, or will be,
true
and accurate copies of the originals and represent, or will represent,
the
full agreement between the parties to those Relevant Documents in
relation
to the subject matter of those Relevant Documents and there are no
commissions, rebates, premiums or other payments due or to become
due in
connection with the subject matter of those Relevant Documents other
than
in the ordinary course of business or as disclosed to, and approved
in
writing by, the Lender.
|
12.2
|
Repetition
Each representation and warranty in Clause 12.1 is deemed to be repeated
by the Borrower by reference to the facts and circumstances then
existing
on the date of each Drawdown Notice and the first day of each Interest
Period.
|
13
|
Undertakings
and Covenants
|
13.1
|
Information
Undertakings
|
13.1.1 |
Financial
statements
The Borrower or the Managers will supply to the Lender, on request
within
sixty (60) days of the end of each calendar year during the Facility
Period the unaudited management accounts for the Vessel prepared
by the
Managers showing the income and expenditure for the Vessel for such
calendar year, with the first such accounts to be supplied by not
later
than sixty (60) days of the end of
2007.
|
13.1.2 |
Information:
miscellaneous
The Borrower shall supply to the
Lender:
|
(a) |
promptly
upon becoming aware of them, details of any litigation, arbitration
or
administrative proceedings which are current, threatened or pending
against any Security Party, and which might, if adversely determined,
have
a materially adverse effect on the business, assets, financial condition
or credit worthiness of that Security Party;
and
|
(b) |
promptly,
such further information regarding the financial condition, business
and
operations of any Security Party as the Lender may reasonably request
including, without limitation, cash flow analyses and details of
the
operating costs of the Vessel.
|
13.1.3 |
Notification
of default
|
(a) |
The
Borrower shall notify the Lender of any Default (and the steps, it
any,
being taken to remedy it) promptly upon becoming aware of its
occurrence.
|
(b) |
Promptly
upon a request by the Lender, the Borrower shall supply to the Lender
a
certificate signed by two of its directors or senior officers on
its
behalf certifying that no Default is continuing (or if a Default
is
continuing, specifying the Default and the steps, if any, being taken
to
remedy it).
|
13.1.4 |
“Know
your customer” checks
If:
|
(a) |
the
introduction of or any change in (or in the interpretation, administration
or application of) any law or regulation made after the date of this
Agreement;
|
(b) |
any
change in the status of the Borrower after the date of this Agreement;
or
|
(c) |
a
proposed assignment or transfer by the Lender of any of its rights
and
obligations under this Agreement,
|
13.2
|
General
undertakings
|
13.2.1 |
Authorisations
The Borrower shall promptly:
|
(a) |
obtain,
comply with and do all that is necessary to maintain in full force
and
effect; and
|
(b) |
supply
certified copies to the Lender of,
|
13.2.2 |
Compliance
with laws
The
Borrower shall comply in all respects with all laws to which it may
be
subject, if failure so to comply would materially impair its ability
to
perform its obligations under the Finance
Documents.
|
13.2.3 |
Conduct
of business
The Borrower shall carry on and conduct its business in a proper
and
efficient manner, file all requisite tax returns and pay all tax
which
becomes due and payable (except where contested in good
faith).
|
13.2.4 |
Evidence
of good standing
The Borrower will from time to time if requested by the Lender provide
the
Lender with evidence in form and substance satisfactory to the Lender
that
the Security Parties and all corporate shareholders of any Security
Party
remain in good standing.
|
13.2.5 |
Liquidity
The Borrower will throughout the Facility Period maintain or procure
that
the Managers maintain in the Operating Account at all times a minimum
positive account balance free of any Encumbrances (other than in
favour of
the Lender) of not less than one hundred and fifty thousand Dollars
($150,000). Any undrawn amounts under this Agreement may be included
for
the purpose of this calculation and this calculation shall exclude
cash
deposited with the Lender as security for any other facility or in
connection with Clause 5.
|
13.2.6 |
Negative
pledge and no disposals
The Borrower shall not create nor permit to subsist any Encumbrance
or
other third party rights over any of its present or future assets
or
undertaking nor dispose of any those assets or of all or part of
that
undertaking.
|
13.2.7 |
Merger
The Borrower shall not without the prior written consent of the Lender
enter into any amalgamation, demerger, merger or corporate
reconstruction.
|
13.2.8 |
Change
of business
The Borrower shall not without the prior written consent of the Lender
make any substantial change to the general nature of its business
from
that carried on at the date of this
Agreement.
|
13.2.9 |
No
other business
The Borrower shall not without the prior written consent of the Lender
engage in any business other than the ownership, operation, chartering
and
management of the Vessel.
|
13.2.10 |
No
place of business in UK or US
The Borrower shall not have an established place of business in the
United
Kingdom or the United States of America at any time during the Facility
Period.
|
13.2.11 |
No
borrowings
The Borrower shall not without the prior written consent of the Lender
borrow any money (except for the Loan and unsecured Financial Indebtedness
subordinated to the Loan) nor incur any obligations under
leases.
|
13.2.12 |
No
substantial liabilities
Except
in the ordinary course of business, the Borrower shall not without
the
prior written consent of the Lender incur any liability to any third
party
which is in the Lender’s opinion of a substantial
nature.
|
13.2.13 |
No
loans or other financial commitments
The Borrower shall not without the prior written consent of the Lender
make any loan nor enter into any guarantee or indemnity or otherwise
voluntarily assume any actual or contingent liability in respect
of any
obligation of any other person.
|
13.2.14 |
No
dividends
The Borrower shall not without the prior written consent of the Lender
pay
any dividends or make any other distributions to shareholders or
issue any
new shares.
|
13.2.15 |
Inspection
of records
The Borrower will permit the inspection of its financial records
and
accounts from time to time by the Lender or its
nominee.
|
13.2.16 |
No
change in Relevant Documents
The Borrower shall procure that, without the prior written consent
of the
Lender, there shall be no termination of, alteration to, or waiver
of any
term of, any of the Relevant
Documents.
|
13.2.17 |
No
change in ownership or control of the Borrower or the Managers
The
Borrowers shall not permit any change in its beneficial ownership
and
|
control
and the beneficial ownership and control of the Managers from that
advised
to the Lender at the date of this
Agreement.
|
13.2.18 |
No
purchase of a vessel
The
Borrower shall not purchase any vessel or any shares in any
vessel.
|
13.2.19 |
No
dealings with Master Agreement
The
Borrower shall not assign, novate or encumber or in any other way
transfer
any of its rights or obligations under the Master Agreement, nor
enter
into any interest rate exchange or hedging agreement with anyone
other
than the Lender.
|
13.3
|
Vessel
undertakings
|
13.3.1 |
No
sale of Vessel
The Borrower shall not sell or otherwise dispose of the Vessel or
any
shares in the Vessel nor agree to do so without the prior written
consent
of the Lender.
|
13.3.2 |
No
chartering after Event of Default
Following the occurrence and during the continuation of an Event
of
Default the Borrower shall not without the prior written consent
of the
Lender let the Vessel on charter or renew or extend any charter or
other
contract of employment of the Vessel (nor agree to do
so).
|
13.3.3 |
No
change in management
The Borrower shall procure that, without the prior written consent
of the
Lender, there shall be no termination of, alteration to, or waiver
of any
term of, the Management Agreement and the Borrower shall not without
the
prior written consent of the Lender permit the Managers to sub-contract
or
delegate the commercial or technical management of the Vessel to
any third
party.
|
13.3.4 |
Registration
of Vessel
The Borrower undertakes to maintain the registration of the Vessel
under
the flag stated in Recital (A) for the duration of the Facility Period
unless the Lender agrees otherwise in
writing.
|
13.3.5 |
Evidence
of current COFR
The Borrower will, if and for so long as the Vessel trades in the
United
States of America and Exclusive Economic Zone (as defined in the
United
States Oil Pollution Act 1990), obtain, retain and provide the Lender
with
a copy of, a valid Certificate of Financial Responsibility for the
Vessel
under that Act and will comply strictly with the requirements of
that
Act.
|
13.3.6 |
ISM
Code compliance
The Borrower will:
|
(a) |
procure
that the Vessel remains for the duration of the Facility Period subject
to
a SMS;
|
(b) |
maintain
a valid and current SMC for the Vessel throughout the Facility Period
and
provide a copy to the Lender;
|
(c) |
procure
that the ISM Company maintains a valid and current DOC throughout
the
Facility Period and provide a copy to the Lender;
and
|
(d) |
immediately
notify the Lender in writing of any actual or `threatened withdrawal,
suspension, cancellation or modification of the SMC of the Vessel
or of
the DOC of the ISM Company.
|
13.3.7 |
ISPS
Code compliance
The Borrower will:
|
(a) |
for
the duration of the Facility Period comply with the ISPS Code in
relation
to the Vessel and procure that the Vessel and the ISPS Company comply
with
the ISPS Code;
|
(b) |
maintain
a valid and current ISSC for the Vessel throughout the Facility Period
and
provide a copy to the Lender; and
|
(c) |
immediately
notify the Lender in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the
ISSC.
|
13.3.8 |
Annex
VI compliance
The Borrower will:
|
(a) |
for
the duration of the Facility Period comply with Annex VI in relation
to
the Vessel and procure that the Vessel’s master and crew are familiar
with, and that the Vessel complies with, Annex
VI;
|
(b) |
maintain
a valid and current IAPPC for the Vessel throughout the Facility
Period
and provide a copy to the Lender;
and
|
(c) |
immediately
notify the Lender in writing of any actual or threatened withdrawal,
suspension, cancellation or modification of the
IAPPC.
|
14
|
Events
of Default
|
14.1
|
Events
of Default
Each of the events or circumstances set out in this Clause 14.1 is
an
Event of Default.
|
14.1.1 |
Non-payment
The Borrower does not pay on the due date any amount payable by it
under a
Finance Document at the place at and in the currency in which it
is
expressed to be payable.
|
14.1.2 |
Other
obligations
A
Security Party or any other person (except the Lender) does not comply
with any provision of any of the Relevant Documents to which that
Security
Party or person is a party (other than as referred to in Clause
14.1.1).
|
14.1.3 |
Misrepresentation
Any representation, warranty or statement made or deemed to be repeated
by
a Security Party in any Finance Document or any other document delivered
by or on behalf of a Security Party under or in connection with any
Finance Document is or proves to have been incorrect or misleading
in any
material respect when made or deemed to be
repeated.
|
14.1.4 |
Cross
default
Any Financial Indebtedness of a Security
Party:
|
(a) |
is
not paid when due or within any originally applicable grace period;
or
|
(b) |
is
declared to be, or otherwise becomes, due and payable before its
specified
maturity as a result of an event of default (however
described);
or
|
(c) |
is
declared by a creditor to be due and payable before its specified
maturity
as a result of such an event.
|
14.1.5 |
Insolvency
|
(a) |
A
Security Party is unable or admits inability to pay its debts as
they fall
due, suspends making payments on any of its debts or, by reason of
actual
or anticipated financial difficulties, commences negotiations with
one or
more of its creditors with a view to rescheduling any of its Financial
Indebtedness.
|
(b) |
The
value of the assets of a Security Party is less than its liabilities
(taking into account contingent and prospective
liabilities).
|
(c) |
A
moratorium is declared in respect of any Financial Indebtedness of
a
Security Party.
|
14.1.6 |
Insolvency
proceedings
Any corporate action, legal proceedings or other procedure or step
is
taken for:
|
(a) |
the
suspension of payments, a moratorium of any Financial Indebtedness,
winding-up, dissolution, administration, bankruptcy or reorganisation
(by
way of voluntary arrangement, scheme of arrangement or otherwise)
of a
Security Party;
|
(b) |
a
composition, compromise, assignment or arrangement with any creditor
of a
Security Party;
|
(c) |
the
appointment of a liquidator, receiver, administrative receiver,
administrator, compulsory manager, or trustee or other
|
similar
officer in respect of any Security Party or any of its assets;
or
|
(d) |
enforcement
of any Encumbrance over any assets of a Security Party,
|
14.1.7 |
Creditors’
process
Any expropriation, attachment, sequestration, distress or execution
affects any asset or assets of a Security
Party.
|
14.1.8 |
Change
in ownership or control of the Borrower or the
Managers
There is any change in the beneficial ownership or control of the
Borrower
or the Managers from that advised to the Lender by the Borrower at
the
date of this Agreement.
|
14.1.9 |
Repudiation
A
Security Party or any other person (except the Lender) repudiates
any of
the Relevant Documents to which that Security Party or person is
a party
or evidences an intention to do so.
|
14.1.10 |
Impossibility
or illegality
Any event occurs which would, or would with the passage of time,
render
performance of any of the Relevant Documents by a Security Party
or any
other party to any such document impossible, unlawful or unenforceable
by
the Lender or a Security Party.
|
14.1.11 |
Conditions
subsequent
Any of the conditions referred to in Clause 3.5 is not satisfied
within
the time reasonably required by the
Lender.
|
14.1.12 |
Revocation
or modification of authorization
Any consent, license, approval, authorization, filing, registration
or
other requirement of any governmental, judicial or other public body
or
authority which is now, or which at any time during the Facility
Period
becomes, necessary to enable a Security Party or any other person
(except
the Lender) to comply with any of its obligations under any of the
Relevant Documents is not obtained, is revoked, suspended, withdrawn
or
withheld, or is modified in a manner which the Lender considers is,
or
|
may
be, prejudicial to the interests of the Lender, or ceases to remain
in
full force and effect.
|
14.1.13 |
Curtailment
of business
A
Security Party ceases, or threatens to cease, to carry on all or
a
substantial part of its business or, as a result of intervention
by or
under the authority of any government, the business of a Security
Party is
wholly or partially curtailed or suspended, or all or a substantial
part
of the assets or undertaking of a Security Party is seized, nationalised,
expropriated or compulsorily
acquired.
|
14.1.14 |
Reduction
of capital
A
Security Party reduces its authorised or issued or subscribed
capital.
|
14.1.15 |
Loss
of Vessel
The Vessel suffers a Total Loss or is otherwise destroyed, abandoned,
confiscated, forfeited or condemned as prize, or a similar event
occurs in
relation to any other vessel which may from time to time be mortgaged
to
the Lender as security for the payment of all or any part of the
Indebtedness, except that a Total Loss, or event similar to a Total
Loss
in relation to any other vessel, shall not be an Event of Default
if:
|
(a) |
the
Vessel or other vessel is insured in accordance with the Security
Documents; and
|
(b) |
no
insurer has refused to meet or has disputed the claim for Total Loss
and
it is not apparent to the Lender in its discretion that any such
refusal
or dispute is likely to occur; and
|
(c) |
payment
of all insurance proceeds in respect of the Total Loss is made in
full to
the Lender within one hundred and eighty (180) days of the occurrence
of
the casualty giving rise to the Total Loss in question or such longer
period as the Lender may in its discretion
agree.
|
14.1.16 |
Challenge
to registration
The registration of the Vessel or the Mortgage is contested or becomes
void or voidable or liable to cancellation or termination, or the
validity
or priority of the Mortgage is
contested.
|
14.1.17 |
War
The country of registration of the Vessel becomes involved in war
(whether
or not declared) or civil war or is occupied by any other power and
the
Lender in its discretion considers that, as a result, the security
conferred by the Security Documents is materially
prejudiced.
|
14.1.18 |
Master
Agreement termination
A
notice is given by the Lender under section 6(a) of the Master Agreement,
or by any person under section 6(b)(iv) of the Master Agreement,
in either
case designating an Early Termination Date for the purpose of the
Master
Agreement, or the Master Agreement is for any other reason terminated,
cancelled, suspended, rescinded, revoked or otherwise ceases to remain
in
full force and effect.
|
14.1.19 |
Material
adverse change
Any event or series of events occurs which, in the opinion of the
Lender,
is likely to have a materially adverse effect on the business, assets,
financial condition or credit worthiness of a Security
Party.
|
14.2
|
Acceleration
If
an Event of Default is continuing the Lender may by notice to the
Borrower
cancel any part of the Maximum Amount not then advanced
and:
|
14.2.1 |
declare
that the Loan, together with accrued interest, and all other amounts
accrued or outstanding under the Finance Documents are immediately
due and
payable, whereupon they shall become immediately due and payable;
and/or
|
14.2.2 |
declare
that the Loan is payable on demand, whereupon it shall immediately
become
payable on demand by the Lender.
|
15
|
Assignment
and Sub-Participation
|
15.1
|
Right
to assign
The Lender may, subject to the prior approval of the Borrower (such
approval not to be unreasonably withheld) and subject to the Lender
giving
prior notice of such intention to the Borrower, and without additional
costs to the Borrower, assign or transfer all or any of its rights
under
or pursuant to the Security Documents to any other bank or financial
institution, and may grant sub- participations in all or any part
of the
Loan. The Lender may, without the prior approval of the Borrower,
assign
or transfer all or any of its rights under or pursuant to the Security
Documents to any other branch of the Lender, and may grant
sub-participations in all or any part of the
Loan:
|
15.2
|
Borrower’s
co-operation
The Borrower will co-operate fully with the Lender in connection
with any
assignment, transfer or sub-participation; will execute and procure
the
execution of such documents as the Lender may require in that connection;
and irrevocably authorises the Lender to disclose to any proposed
assignee, transferee or sub-participant (whether before or after
any
assignment, transfer or sub-participation and whether or not any
assignment, transfer or sub- participation shall take place) all
information relating to the Security Parties, the Loan, the Relevant
Documents and the Vessel which the Lender may in its discretion consider
necessary or desirable.
|
15.3
|
Rights
of assignee or transferee
Any assignee or transferee of the Lender shall (unless limited by
the
express terms of the assignment or novation) take the full benefit
of
every provision of the Finance Documents benefitting the
Lender.
|
15.4
|
No
assignment or transfer by the Borrower
The Borrower may not assign any of its rights or transfer any of
its
rights or obligations under the Finance
Documents.
|
16
|
Set-Off
|
16.1
|
The
Lender may set off any matured obligation due from the Borrower under
any
Finance Document against any matured obligation owed by the Lender
to the
Borrower, regardless of the place of payment, booking branch or currency
of either obligation. If the obligations are in different currencies,
the
Lender may
|
Convert
either obligation at a market rate of exchange in its usual course
of
business for the purpose of the
set-off.
|
16.2
|
Master
Agreement rights
The rights conferred on the Lender by this Clause 16 shall be in
addition
to, and without prejudice to or limitation of, the rights of netting
and
set off conferred on the Lender by the Master
Agreement.
|
17
|
Payments
|
17.1
|
Payments
Each amount payable by the Borrower under a Finance Document shall be paid
to such account at such bank as the Lender may from time to time
direct to
the Borrower in the Currency of Account and in such funds as are
customary
at the time for settlement of transactions in the relevant currency
in the
place of payment. Payment shall be deemed to have been received by
the
Lender on the date on which the Lender receives authenticated advice
of
receipt, unless that advice is received by the Lender on a day other
than
a Business Day or at a time of day (whether on a Business Day or
not) when
the Lender in its discretion considers that it is impossible or
impracticable for the Lender to utilise the amount received for value
that
same day, in which event the payment in question shall be deemed
to have
been received by the Lender on the Business Day next following the
date of
receipt of advice by the Lender.
|
17.2
|
No
deductions or withholdings
Each payment (whether of principal or interest or otherwise) to be
made by
the Borrower under a Finance Document shall, subject only to Clause
17.3,
be made free and clear of and without deduction for or on account
of any
Taxes or other deductions, withholdings, restrictions, conditions
or
counterclaims of any nature.
|
17.3
|
Grossing-up
If
at any time any law requires the Borrower to make any deduction
or
withholding from any payment, or to change the rate or manner in
which any
required deduction or withholding is made, the Borrower will promptly
notify the Lender and, simultaneously with making that payment,
will pay
to the Lender whatever additional amount (after taking into account
any
additional Taxes on, or deductions or withholdings from, or restrictions
or conditions on, that additional amount) is necessary to ensure
that,
after making the deduction or withholding, the Lender receives
a net sum
equal to the sum
|
which
the Lender would have received had no deduction or withholding been
made.
|
17.4
|
Evidence
of deductions
If
at any time the Borrower is required by law to make any deduction
or
withholding from any payment to be made by it under a Finance Document,
the Borrower will pay the amount required to be deducted or withheld
to
the relevant authority within the times allowed under the applicable
law
and will, no later than thirty (30) days after making that payment,
deliver to the Lender an original receipt issued by the relevant
authority, or other evidence acceptable to the Lender, evidencing
the
payment to that authority of all amounts required to be deducted
or
withheld.
|
17.5 |
Adjustment
of due dates
If
any payment or transfer of funds to be made under a Finance Document,
other than a payment of interest on a Drawing, or a payment under
the
Master Agreement, shall be due on a day which is not a Business
Day, that
payment shall be made on the next succeeding Business Day (unless
the next
succeeding Business Day falls in the next calendar month in which
event
the payment shall be made on the next preceding Business Day).
Any such
variation of time shall be taken into account in computing any
interest in
respect of that payment.
|
17.6
|
Control
Account
The Lender shall open and maintain on its books a control account
in the
name of the Borrower showing the advance of the Loan and the computation
and payment of interest and all other sums due under this Agreement
and
the Master Agreement. The Borrower’s obligations to repay the Loan and to
pay interest and all other sums due under this Agreement and the
Master
Agreement shall be evidenced by the entries from time to time made
in the
control account opened and maintained under this Clause 17.6 and
those
entries will, in the absence of manifest error, be conclusive and
binding.
|
18
|
Notices
|
18.1
|
Communications
in writing
Any communication to be made under or in connection with this Agreement
shall be made in writing and, unless otherwise stated, may be made
by fax
or letter.
|
18.2
|
Addresses
The address and fax number (and the department or officer, if any,
for
whose attention the communication is to be made) of each party to
this
Agreement for any communication or document to be made or delivered
under
or in connection with this Agreement
are:
|
18.2.1 |
in
the case of the Borrower, c/o Safety Management Overseas S.A., 32
Avenue
Karamanli, GR-166 05 Voula, Athens, Greece (telex no: 215050 answerback:
SAFE GR, fax no: +30 210 895 6900) marked for the attention of Mr
George
Papadopoulos; and
|
18.2.2 |
in
the case of the Lender, to the Lender at its address at the head
of this
Agreement (fax no: +44 207 626 5956 tel no: +44 207 621 6045) marked
for
the attention of: Shipping
Department;
|
18.3
|
Delivery
Any communication or document made or delivered by one party to this
Agreement to the other under or in connection this Agreement will
only be
effective:
|
18.3.1 |
if
by way of fax, when received in legible form;
or
|
18.3.2 |
if
by way of letter, when it has been left at the relevant address or
five
(5) Business Days after being deposited in the post postage prepaid
in an
envelope addressed to it at that
address;
|
18.4
|
English
language
Any notice given under or in connection with this Agreement must
be in
English. All other documents provided under or in connection with
this
Agreement must be:
|
18.4.1 |
in
English; or
|
18.4.2 |
if
not in English, and if so required by the Lender, accompanied by
a
certified English translation and, in this case, the English translation
will prevail unless the document is a constitutional, statutory or
other
official document.
|
19
|
Partial
Invalidity
|
20
|
Remedies
and Waivers
|
21
|
Miscellaneous
|
21.1
|
No
oral variations
No
variation or amendment of a Finance Document shall be valid unless
in
writing and signed on behalf of the
Lender.
|
21.2
|
Further
Assurance
If
any provision of a Finance Document shall be invalid or unenforceable
in
whole or in part by reason of any present or future law or any decision
of
any court, or if the documents at any time held by or on behalf of
the
Lender are considered by the Lender for any reason insufficient to
carry
out the terms of this Agreement, then from time to time the Borrower
will
promptly, on demand by the Lender, execute or procure the execution
of
such further
|
documents
as in the opinion of the Lender are necessary to provide adequate
security
for the repayment of the
Indebtedness.
|
21.3
|
Rescission
of payments etc.
Any discharge, release or reassignment by the Lender of any of the
security constituted by, or any of the obligations of a Security
Party
contained in, a Finance Document shall be (and be deemed always to
have
been) void if any act (including, without limitation, any payment)
as a
result of which such discharge, release or reassignment was given
or made
is subsequently wholly or partially rescinded or avoided by operation
of
any law.
|
21.4
|
Certificates
Any certificate or statement signed by an authorised signatory of
the
Lender purporting to show the amount of the Indebtedness (or any
part of
the Indebtedness) or any other amount referred to in any Finance
Document
shall, save for manifest error or on any question of law, be conclusive
evidence as against the Borrower of that
amount.
|
21.5
|
Counterparts
This Agreement may be executed in any number of counterparts each
of which
shall be original but which shall together constitute the same
instrument.
|
21.6
|
Contracts
(Rights of Third Parties) Act 1999
A
person who is not a party to this Agreement has no right under the
Contracts (Rights Of Third Parties) Act 1999 to enforce or to enjoy
the
benefit of any term of this
Agreement.
|
22
|
Law
and Jurisdiction
|
22.1
|
Governing
law
This Agreement shall in all respects be governed by and interpreted
in
accordance with English law.
|
22.2
|
Jurisdiction
For the exclusive benefit of the Lender, the parties to this Agreement
irrevocably agree that the courts of England are to have jurisdiction
to
settle any disputes which may arise out of or in connection with
this
Agreement and that any proceedings may be brought in those
courts.
|
22.3
|
Alternative
jurisdictions
Nothing contained in this Clause 22 shall limit the right of the
Lender to
commence any proceedings against the Borrower in any other court
of
competent jurisdiction nor shall the commencement of any
|
proceedings
against the Borrower in one or more jurisdictions preclude the
commencement of any proceedings in any other jurisdiction, whether
concurrently or not.
|
22.4
|
Waiver
of objections
The Borrower irrevocably waives any objection which it may now or
in the
future have to the laying of the venue of any proceedings in any
court
referred to in this Clause 22, and any claim that those proceedings
have
been brought in an inconvenient or inappropriate forum, and irrevocably
agrees that a judgment in any proceedings commenced in any such court
shall be conclusive and binding on it and may be enforced in the
courts of
any other jurisdiction.
|
22.5
|
Service
of process
Without prejudice to any other mode of service allowed under any
relevant
law, the Borrower:
|
22.5.1 |
irrevocably
appoints Cheeswrights Notaries Public, Bankside House, 107 Leadenhall
Street, London EC3A 4HA, United Kingdom as its agent for service
of
process in relation to any proceedings before the English courts
in
connection with this Agreement; and
|
22.5.2 |
agrees
that failure by a process agent to notify the Borrower of the process
will
not invalidate the proceedings
concerned.
|
1 |
Security
Parties
|
(a) |
Constitutional
Documents
Copies of the constitutional documents of each Security Party together
with such other evidence as the Lender may reasonably require that
each
Security Party is duly incorporated in its country of incorporation
and
remains in existence with power to enter into, and perform its obligations
under, the Relevant Documents to which it is or is to become a
party.
|
(b) |
Certificates
of good standing
A
certificate of good standing in respect of each Security Party (if
such a
certificate can be obtained).
|
(c) |
Board
resolutions
A
copy of a resolution of the board of directors of each Security
Party:
|
(i)
|
approving
the terms of, and the transactions contemplated by, the Relevant
Documents
to which it is a party and resolving that it execute those Relevant
Documents; and
|
(ii)
|
authorising
a specified person or persons to execute those Relevant Documents
(and all
documents and notices to be signed and/or despatched under those
documents) on its behalf.
|
(d) |
Officer’s
certificates
A
certificate of a duly authorised officer of each Security Party certifying
that each copy document relating to it specified in this Part I of
Schedule 1 is correct, complete and in full force and effect as at
a date
no earlier than the date of this Agreement and setting out the names
of
the directors and officers of that Security
Party.
|
(e) |
Powers
of attorney
The notarially attested and legalised power of attorney of each Security
Party under which any documents are to be executed or transactions
undertaken by that Security Party.
|
2 |
Security
and related documents
|
(a) |
Vessel
documents
Photocopies, certified as true by a director or the secretary or
the duly
authorised attorney of the Borrower, of:
|
(i) |
the
Management Agreement;
|
(ii) |
the
Vessel’s current Safety Construction, Safety Equipment, Safety Radio, Oil
Pollution Prevention and Load Line
Certificates;
|
(iii) |
the
Vessel’s current Certificate of Financial Responsibility issued pursuant
to the United States Oil Pollution Act 1990 (if required for the
Vessel);
|
(iv) |
the
Vessel’s current SMC;
|
(v) |
the
ISM Company’s current DOC;
|
(vi) |
the
Vessel’s current ISSC;
|
(vii) |
the
Vessel’s current IAPPC;
|
(viii) |
the
Vessel’s current Tonnage
Certificate;
|
(b) |
Evidence
of Borrower’s title
Evidence that on the Drawdown Date (i) the Vessel will be at least
provisionally registered under the flag stated in Recital (A) in
the
ownership of the Borrower and (ii) the Mortgage will be capable of
being
registered against the Vessel with first
priority.
|
(c) |
Evidence
of insurance
Evidence that the Vessel is insured in the manner required by the
Security
Documents and that letters of undertaking will be issued in the manner
required by the Security Documents, together with (if required by
the
Lender) the written approval of the Insurances by an insurance adviser
appointed by the Lender.
|
(d) |
Confirmation
of class
A
Certificate of Confirmation of Class for hull and machinery confirming
that the Vessel is classed with the highest class applicable
|
to
vessels of her type with Lloyd’s Register of Shipping or such other
classification society as may be acceptable to the Lender free of
recommendations affecting class.
|
(e) |
Security
Documents
The Security Documents, together with all other documents-required-by
any
of them, including, without limitation, all notices of assignment
and/or
charge and evidence that those notices will be duly acknowledged
by the
recipients.
|
(f) |
Mandates
Such duly signed forms of mandate, and/or other evidence of the opening
of
the Accounts, as the Lender may
require.
|
(g) |
Managers’
confirmation
The written confirmation of the Managers that, throughout the Facility
Period unless otherwise agreed by the Lender, they will remain the
commercial and technical managers of the Vessel and that they will
not,
without the prior written consent of the Lender, sub-contract or
delegate
the commercial or technical management of the Vessel to any third
party
and confirming in terms acceptable to the Lender that, following
the
occurrence of an Event of Default, all claims of the Managers against
the
Borrower shall be subordinated to the claims of the Lender under
the
Finance Documents.
|
(h) |
No
disputes
The written confirmation of the Borrower that there is no dispute
under
any of the Relevant Documents as between the parties to any such
document.
|
3
|
Legal
opinions
|
(a) |
If
a Security Party is incorporated in a jurisdiction other than England
and
Wales or if any Finance Document is governed by the laws of a jurisdiction
other than England and Wales, a legal opinion of the legal advisers
to the
Lender in each relevant jurisdiction, substantially in the form or
forms
provided to the Lender prior to signing this Agreement or confirmation
satisfactory to the Lender that such an opinion will be
given.
|
4 |
Other
documents and evidence
|
(a) |
Drawdown
Notice
A
duly completed Drawdown Notice.
|
(b) |
Process
agent
Evidence that any process agent referred to in Clause 22.5 and any
process
agent appointed under any other Finance Document has accepted its
appointment.
|
(c) |
Other
authorisations
A
copy of any other consent, licence, approval, authorisation or other
document, opinion or assurance which the Lender considers to be necessary
or desirable (if it has notified the Borrower accordingly) in connection
with the entry into and performance of the transactions contemplated
by
any of the Relevant Documents or for the validity and enforceability
of
any of the Relevant Documents.
|
(d) |
Fees
Evidence that the fees, costs and expenses then due from the Borrower
under Clause 9 and Clause 10 have been paid or will be paid by the
Drawdown Date.
|
(e) |
“Know
your customer” documents
Such
documentation and other evidence as is reasonably requested by the
Lender
in order for the Lender to comply with all necessary “know your customer”
or similar identification procedures in relation to the transactions
contemplated in the Finance
Documents.
|
1 |
Evidence
of Borrower’s title
Certificate of ownership and encumbrance (or equivalent) issued by
the
Registrar of Ships (or equivalent official) of the flag stated in
Recital
(A) confirming that (a) the Vessel is permanently registered
under that flag in the ownership of the Borrower, (b) the Mortgage
has been registered with first priority against the Vessel and
(c) there are no further Encumbrances registered against the
Vessel.
|
2 |
Letters
of undertaking
Letters of undertaking in respect of the Insurances as required by
the
Security Documents together with copies of the relevant policies
or cover
notes or entry certificates duly endorsed with the interest of the
Lender.
|
3 |
Acknowledgements
of notices
Acknowledgements of all notices of assignment and/or charge given
pursuant
to the Security Documents.
|
4 |
Legal
opinions
Such of the legal opinions specified in Part I of this Schedule
1 as have
not already been provided to the
Lender.
|
5 |
Companies
Act registrations
Evidence that the prescribed particulars of the Security Documents
have
been delivered to the Registrar of Companies of Cyprus within the
statutory time limit.
|
6 |
Mortgagee’s
Insurance Fees
Payment to the Lender of all fees in relation to inspections, valuations,
legal fees and premiums for Mortgagee’s
Insurances.
|
1 |
The
Mandatory Cost is an addition to the interest rate to compensate
the
Lender for the cost of compliance with (a) the requirements of the
Bank of
England and/or the Financial Services Authority (or, in either case,
any
other authority which replaces all or any of its functions) or (b)
the
requirements of the European Central
Bank.
|
(a) |
On
the first day of each Interest Period (or as soon as possible thereafter)
the Lender shall calculate, as a percentage rate, a rate (the
“
Additional
Cost Rate
”)
in accordance with the paragraphs set out
below.
|
(b) |
The
Additional Cost Rate for the Lender if lending from an office in
the
euro-zone will be the percentage notified by the Lender to the Borrower
to
be its reasonable determination of the cost (expressed as a percentage
of
the Loan) of complying with the minimum reserve requirements of the
European Central Bank as a result of making the Loan from that
office.
|
(c) |
The
Additional Cost Rate for the Lender if lending from an office in
the
United Kingdom will be calculated by the Lender as
follows:
|
(d) |
where
the Loan is denominated in
sterling:
|
(e) |
where
the Loan is denominated in any currency other than
sterling:
|
B |
is
the percentage of eligible liabilities (assuming these to be in excess
of
any stated minimum) which the Lender is from time to time required
to
maintain as an interest free cash ratio deposit with the Bank of
England
to comply with cash ratio
requirements;
|
Y |
is
the percentage rate of interest (excluding the Margin and the Mandatory
Cost and, if the Loan is an overdue amount, the additional rate of
interest specified in Clause 7.8) payable for the relevant Interest
Period
on the Loan;
|
S |
is
the percentage (if any) of eligible liabilities which the Lender
is
required from time to time to maintain as interest bearing special
deposits with the Bank of England;
|
Z |
is
the interest rate per annum payable by the Bank of England to the
Lender
on special deposits; and
|
F |
is
the charge payable by the Lender to the Financial Services Authority
under
paragraph 2.02 or 2.03 (as appropriate) of the Fees Regulations or
the
equivalent provisions in any replacement regulations (with, for this
purpose, the figure for the minimum amount in paragraph 2.02b or
such
equivalent provision deemed to be zero), expressed in pounds per
£l
million of the fee base of the
Lender.
|
2 |
For
the purpose of this Schedule:
|
(a) |
“
eligible
liabilities
”
and “
special
deposits
”
have the meanings given to them at the time of application of the
formula
by the Bank of England;
|
(b) |
“
fee
base
”
has the meaning given to it in the Fees
Regulations;
|
(c) |
“
Fees
Regulations
”
means the regulations governing periodic fees contained in the FSA
Supervision Manual or such other law or regulation as may be in force
from
time to time in respect of the payment of fees for the acceptance
of
deposits.
|
3 |
In
the application of the formula B, Y, S and Z are included in the
formula
as figures and not as percentages, e.g. if B = 0.5% and Y = 15%,
BY is
calculated as 0.5. x 15. Each rate calculated in accordance with
the
formula is, if necessary, rounded upward to four decimal
places.
|
4 |
If
a change in circumstances has rendered, or will render, the formula
inappropriate, the Lender shall notify the Borrower of the manner
in which
the Mandatory Cost will subsequently be calculated. The manner of
calculation so
|
notified
by the Lender shall, in the absence of manifest error, be binding
on the
Borrower.
|
EXHIBIT 10.28
DATED 17 APRIL 2008
AVSTES SHIPPING CORPORATION
(as Borrower)
-and-
DnB NOR BANK ASA
(as Lender)
____________________________________
US$36,000,000 SECURED
MULTI-CURRENCY REDUCING REVOLVING
CREDIT FACILITY AGREEMENT
____________________________________
m.v. VASSOS
STEPHENSON HARWOOD
One St. Paul’s Churchyard
London EC4M 8SH
Tel: 020 7329 4422
Fax: 020 7329 7100
Ref: 04.134
CONTENTS | ||||
Page | ||||
1 | Definitions and Interpretation | 1 | ||
2 | The Loan and its Purpose | 13 | ||
3 | Conditions of Utilisation | 13 | ||
4 | Advance | 15 | ||
5 | Currency | 16 | ||
6 | Repayment | 16 | ||
7 | Prepayment | 17 | ||
8 | Interest | 18 | ||
9 | Indemnities | 21 | ||
10 | Fees | 26 | ||
11 | Security and Application of Moneys | 26 | ||
12 | Representations | 32 | ||
13 | Undertakings and Covenants | 35 | ||
14 | Events of Default | 43 | ||
15 | Assignment and Sub-Participation | 49 | ||
16 | Set-Off | 50 | ||
17 | Payments | 50 | ||
18 | Notices | 52 | ||
19 | Partial Invalidity |
53
|
|||
20 | Remedies and Waivers |
54
|
|||
21 | Miscellaneous |
54
|
|||
22 | Law and Jurisdiction |
55
|
|||
SCHEDULE 1: Conditions Precedent and Subsequent |
57
|
||||
Part I: | Conditions precedent |
57
|
|||
Part II: | Conditions subsequent |
62
|
|||
SCHEDULE 2: Calculation of Mandatory Cost |
63
|
||||
SCHEDULE 3: Form of Drawdown Notice |
66
|
LOAN AGREEMENT
Dated: 17 APRIL 2008
BETWEEN:
(1) |
AVSTES SHIPPING CORPORATION , a company incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Liberia (the Borrower ”); and |
||
(2) |
DnB NOR BANK ASA , acting through its office at 20 St. Dunstan’s Hill, London EC3R 8HY, England (the Lender ”). |
||
WHEREAS: | |||
(A) |
The Borrower is the registered owner of the Vessel which is registered under the flag of Cyprus. |
||
(B) | The Lender has agreed to advance to the Borrower a secured multi-currency reducing revolving credit facility of up to thirty six million Dollars ($36,000,000) to provide the Borrower with working capital for general corporate purposes. | ||
IT IS AGREED as follows: | |||
1 |
Definitions and Interpretation |
||
1.1 |
|
In this Agreement: “ Accounts ” means the Operating Account and the Cash Collateral Account. “ Account Charge ” means the deed of charge referred to in Clause 11.1.3. “ Administration ” has the meaning given to it in paragraph 1.1.3 of the ISM Code. |
1
“ Annex VI ” means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as modified in 1978 and 1997). “ Assignment ” means the deed of assignment referred to in Clause 11.1.2. “ Availability Termination Date ” means three (3) months prior to the Final Maturity Date or such later date as the Lender may in its discretion agree. “ Break Costs ” means all sums payable by the Borrower from time to time under Clause 9.3. “ Broker ” means any one of Arrow Chartering (UK), Braemer Seascope Group, Clarksons PLC and Fearnleys and “ Brokers ” means more than one of them. “ Business Day ” means a day (other than a Saturday or Sunday) on which banks are open for general business in New York and London and Tokyo (only if an amount in Japanese Yen is involved) and Zurich (only if an amount in Swiss Francs is involved) and any other financial centre which the Lender may consider appropriate for the operation of the provisions of this Agreement, and in the case of Euro, a day on which the Trans- European Automated Real Time Gross Settlement Express Transfer Payment System (TARGET) is operating. “ Cash Collateral Account ” means the bank account to be opened (if and when required) in the name of the Borrower with the Lender and designated “ Avstes Shipping Corporation Cash Collateral Account ”. “ Charters ” means the Existing Charters and any other time charter or other contact of employment in respect of the Vessel which shall not exceed thirteen (13) months duration without the prior written consent of the Lender and “ Charter ” means either of them. |
2
“ Charterer ” means Daiichi Chuo Kisen Kaisha of Tokyo, Japan or any other charterer who has entered into or shall enter into a Charter and “ Charterers ” means more than one of them. “ Converted ” means actually or notionally (as the case may require) converted by the Lender at the rate at which the Lender, in accordance with its usual practice, is able in the London Interbank market to purchase the Permitted Currency in which any part of the Loan is to be denominated with the Permitted Currency in which the Loan is then denominated, on the second Business Day before the value date for that conversion pursuant to Clause 5, and the words “ Convert ” and “ Conversion ” shall be interpreted accordingly. “ Credit Support Document ” means any document described as such in the Master Agreement and, where the context permits, any other document referred to in any Credit Support Document which has the effect of creating an Encumbrance in favour of the Lender. “ Credit Support Provider ” means any person (other than the Borrower) described as such in the Master Agreement. “ Currency of Account ” means, in relation to any payment to be made to the Lender under a Finance Document, the currency in which that payment is required to be made by the terms of that Finance Document. “ Deed of Covenants ” means the deed of covenants referred to in Clause 11.1.1. “ Default ” means an Event of Default or any event or circumstance specified in Clause 14.1 which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default. |
3
“ DOC ” means, in relation to the ISM Company, a valid Document of Compliance issued for the ISM Company by the Administration under paragraph 13.2 of the ISM Code. “ Dollars ” and “ $ ” each means available and freely transferable and convertible funds in lawful currency of the United States of America. “ Drawdown Date ” means the date on which a Drawing is advanced under Clause 4. “ Drawdown Notice ” means a notice substantially in the form set out in Schedule 3. “ Drawing ” means any one amount advanced or to be advanced pursuant to a Drawdown Notice or, where the context permits, the amount advanced and for the time being outstanding and “Drawings” means more than one of them. “ Earnings ” means all hires, freights, pool income and other sums payable to or for the account of the Borrower in respect of the Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of the Vessel. “ Encumbrance ” means a mortgage, charge, assignment, pledge, lien, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect. “ Euro ” and “ ” means the single currency of the Participating Member States. |
4
“ Event of Default ” means any of the events or circumstances set out in Clause 14.1. “ Existing Charters ” means the Initial Charter and the Subsequent Charter, and “ Existing Charter ” means either of them. “ Facility Period ” means the period beginning on the date of this Agreement and ending on the date when the whole of the Indebtedness has been paid in full and the Security Parties have ceased to be under any further actual or contingent liability to the Lender under or in connection with the Finance Documents. “ Final Maturity Date ” means the date falling on the earlier of (a) ten (10) years from the date of this Agreement and (b) 31 May 2018. “ Finance Documents ” means this Agreement, the Master Agreement, the Security Documents and any other document designated as such by the Lender and the Borrower and “ Finance Document ” means any one of them. “ Financial Indebtedness ” means any obligation for the payment or repayment of money, whether present or future, actual or contingent, in respect of: (a) moneys borrowed; (b) any acceptance credit; (c) any bond, note, debenture, loan stock or similar instrument; (d) any finance or capital lease; (e) receivables sold or discounted (other than on a non-recourse basis); (f) deferred payments for assets or services; |
5
(g) any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, when calculating the value or any derivative transaction, only the marked to market value shall be taken into account); (h) any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing; (i) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and (j) the amount of any liability in respect of any guarantee or indemnity for many of the items referred to in paragraphs (a) to (i) above. “ IAPPC ” means a valid international air pollution prevention certificate for the Vessel issued under Annex VI. “ Indebtedness ” means the aggregate from time to time of: the amount of the Loan outstanding; all accrued and unpaid interest on the Loan; and all other sums of any nature (together with all accrued and unpaid interest on any of those sums) payable to the Lender under all or any of the Finance Documents. “ Initial Charter ” means in respect of the Vessel the time charter dated 2 May 2007 as amended and supplemented by Addendum No. 1 dated 2 May 2007, each made between the Borrower and the Charterer. “ Insurances ” means all policies and contracts of insurance (including all entries in protection and indemnity or war risks associations) which are from time to time taken out or entered into in respect of or in connection with the Vessel or her increased value or the Earnings and (where the |
6
“ Interest Payment Date ” means each date for the payment of interest in accordance with Clause 8.7.
“ Interest Period ” means each period for the determination and payment of interest selected by the Borrower or agreed or selected by the Lender pursuant to Clause 8.
“ ISM Code ” means the International Management Code for the Safe Operation of Ships and for Pollution Prevention.
“ ISM Company ” means, at any given time, the company responsible for the Vessel’s compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.
“ ISPS ” Code ” means the International Ship and Port Facility Security Code.
“ ISPS Company ” means, at any given time, the company responsible for the Vessels compliance with the ISPS Code.
“ ISSC ” means a valid international ship security certificate for the Vessel issued under the ISPS Code.
“ LIBOR ” means:
(a) the applicable Screen Rate; or
(b) (if no Screen Rate is available for any Interest Period) the arithmetic mean of the rates (rounded upwards to four decimal places) quoted to the Lender in the London interbank market,
at 11.00 a. m. two (2) Business Days before the first day of the relevant Interest Period for the offering of deposits in Dollars or its equivalent in a
7
“ Loan ” means the aggregate amount advanced or to be advanced by the Lender to the Borrower under Clause 4 or, where the context permits, the amount advanced and for the time being outstanding.
“ Management Agreement ” means the agreement(s) for the commercial and/or technical management of the Vessel between the Borrower and the Managers.
“ Managers ” means Safety Management Overseas S. A. , or such other commercial and/or technical managers of the Vessel nominated by the Borrower as the Lender may approve.
“ Mandatory Cost ” means the percentage rate per annum calculated by the Lender in accordance with Schedule 2.
“ Margin ” means zero point eighty per cent (0.80%) per annum.
“ Master Agreement ” means any ISDA Master Agreement (or any other form of master agreement relating to interest or currency exchange transactions) entered into between the Lender and the Borrower during the Facility Period, including each Schedule to any Master Agreement and each Confirmation exchanged pursuant to any Master Agreement.
“ Maximum Amount ” means thirty six million Dollars ($36,000,000) reduced from time to time in accordance with Clause 3.4 and/or Clause 7.4 and/or Clause 8.9.5.
“ Mortgage ” means the first priority statutory mortgage referred to in Clause 11.1.1 together with the Deed of Covenants.
8
“ Operating Account ” means the bank account opened in the name of the Managers with the Lender and designated “Safety Management Overseas S. A. -Operating Account” with account number 60204001.
“ Participating Member States ” means any member state of the European Community that adopts or has adopted the Euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.
“ Permitted Currency ” means Japanese Yen, Swiss Francs, Euro and Dollars.
“ Reduction Date ” means each date falling at consecutive six monthly intervals after the first Drawdown Date.
“ Relevant Documents ” means the Finance Documents, the Management Agreement and the Managers’ confirmation specified in Part I of Schedule 1.
“ Requisition Compensation ” means all compensation or other money which may from time to time be payable to the Borrower as a result of the Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).
“ Screen Rate ” means in relation to LIBOR, the British Bankers’ Association Interest Settlement Rate for the relevant currency and period displayed on the appropriate page of the Reuters screen. If the agreed page is replaced or the service ceases to be available, the Lender may specify another page or service displaying the appropriate rate after consultation with the Borrower.
9
“ SMC ” means a valid safety management certificate issued for the Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.
“ SMS ” means a safety management system for the Vessel developed and implemented in accordance with the ISM Code.
“ Subsequent Charter ” means in respect of the Vessel, the time charter dated 20 September 2007 made between the Borrower and the Charterer.
“ Swiss Francs ” and “ SFr ” means available and freely transferable and convertible funds in non-resident currency of Switzerland.
“ Tax ” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).
“ Total Loss ” means:
(a) an actual, constructive, arranged, agreed or compromised total loss of the Vessel; or
10
11
1.2.4 |
references to this Agreement include the Recitals and the Schedules; | ||
1.2.5 |
the headings and contents page(s) are for the purpose of reference only, have no legal or other significance, and shall be ignored in the interpretation of this Agreement; | ||
1.2.6 |
references to any document (including, without limitation, to all or any of the Relevant Documents) are, unless the context otherwise requires, references to that document as amended, supplemented, novated or replaced from time to time; | ||
1.2.7 |
references to statutes or provisions of statutes are references to those statutes, or those provisions, as from time to time amended, replaced or re enacted; | ||
1.2.8 |
references to the Lender include its successors, transferees and assignees; | ||
1.2.9 |
a time of day (unless otherwise specified) is a reference to London time; and | ||
1.2.10 |
words and expressions defined in the Master Agreement, unless the context otherwise requires, have the same meaning. | ||
1.3 |
Offer letter |
||
This Agreement supersedes the terms and conditions contained in any correspondence relating to the subject matter of this Agreement exchanged between the Lender and the Borrower or their representatives prior to the date of this Agreement. |
|||
12
2 |
The Loan and its Purpose |
||
2.1 |
Amount Subject to the terms of this Agreement, the Lender agrees to make available to the Borrower a revolving credit facility in an aggregate amount not exceeding the Maximum Amount at any one time. |
||
2.2 |
Purpose The Borrower shall apply the Loan for the purpose referred to in Recital (B). |
||
2.3 |
Monitoring The Lender shall not be bound to monitor or verify the application of any amount borrowed under this Agreement. |
||
3 |
Conditions of Utilisation |
||
3.1 |
Conditions precedent The Borrower is not entitled to have any Drawing advanced unless the Lender has received all of the documents and other evidence listed in Part I of Schedule 1. |
||
3.2 |
Further conditions precedent The Lender will only be obliged to advance a Drawing if on the date of the Drawdown Notice and on the proposed Drawdown Date: |
||
3.2.1 |
no Default is continuing or would result from the advance of that Drawing; and |
||
3.2.2 |
the representations made by the Borrower under Clause 12 are true in all material respects. |
||
3.3 |
Drawing limit The Lender will only be obliged to advance a Drawing if: |
||
3.3.1 |
no other Drawing has been made on the same Business Day; |
||
3.3.2 |
that Drawing is not less than one million Dollars ($1,000,000) or, if in excess of one million Dollars ($1,000,000), integral multiples of five hundred thousand Dollars ($500,000); and |
13
14
15
5 |
Currency |
|
5.1 |
Conversion The Borrower may Convert all or any part of the Loan into a Permitted Currency not later than five (5) Business Days before the Drawdown Date or at any time during the Facility Period, subject to there being no Event of Default which is continuing and subject to the Permitted Currency being available to the Lender. Upon conversion, that part of the Loan shall remain denominated in, and shall be repayable in, the Permitted Currency until the end of the relevant Interest Payment Date. Clause 3.4 shall be amended so that the Maximum Amount of the Loan shall be reduced in the Permitted Currency or Permitted Currencies selected under this Clause, provided that the Reduction Dates specified in Clause 3.4 shall not be changed. |
|
5.2 |
Indemnity The Borrower shall indemnify the Lender from time to time on demand against all Break Costs, other losses, costs, claims, damages and expenses which the Lender may from time to time suffer, incur or sustain by reason of the Lender agreeing to and/or implementing the terms of this Clause (including, without limitation, all costs and expenses incurred by the Lender in effecting any conversion). |
|
6 |
Repayment |
|
6.1 |
Repayment of each Drawing The Borrower agrees to repay each Drawing to the Lender on the last day of the Interest Period in respect of that Drawing. On the Final Maturity Date the Borrower shall repay to the Lender all amounts then outstanding under or pursuant to this Agreement. |
|
Without limitation to the repayments required by Clause 3.4, in addition the Borrower may repay any Drawing in whole or in part in integral multiples of five hundred thousand Dollars ($500,000) (or the equivalent in the Permitted Currency in which the Drawing in question is then denominated) and no repayment shall be made in an amount which is less than one million Dollars ($1,000,000) (or the equivalent in the Permitted |
||
16
17
under this Clause 7.2 shall satisfy the obligations under Clause 6.1 in order of maturity. |
|||
7.3 |
Mandatory prepayment on sale or Total Loss Upon the sale or Total Loss of the Vessel, the Maximum Amount shall reduce to zero and the Borrower shall repay the Indebtedness in full, in the case of a sale of the Vessel, by not later than the date of the sale of the Vessel or, in the case of a Total Loss, by not later than the date falling one hundred and eighty (180) days from the date of the casualty giving rise to the Total Loss (or such longer period as the Lender may in its discretion agree). Amounts prepaid by the Borrower pursuant to this Clause shall not be available for reborrowing. |
||
7.4 |
Mandatory prepayment on reduction of Maximum Amount If the Maximum Amount is reduced in accordance with Clause 3.4 to an amount which is less than the aggregate amount of the Drawings then outstanding, the Borrower shall, simultaneously with that reduction, prepay one or more outstanding Drawings to the extent required to ensure that the aggregate amount of the Drawings outstanding does not exceed the reduced Maximum Amount. |
||
7.5 |
Restrictions Any notice of prepayment given under this Clause 7 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant prepayment is to be made and the amount of that prepayment. |
||
Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty. |
|||
8 |
Interest |
||
8.1 |
Interest Periods The period during which each Drawing shall be outstanding under this Agreement shall be an Interest Period of one (1), |
18
three (3), six (6), nine (9) or twelve (1-2) months’ duration, as selected by the Borrower in the Drawdown Notice in respect of the Drawing in question, or such other duration as may be agreed by the Lender. |
||
8.2 |
Beginning and end of Interest Periods Each Interest Period shall start on the Drawdown Date of the Drawing in question and end on the date which numerically corresponds to that Drawdown Date in the relevant calendar month except that, if there is no numerically corresponding date in that calendar month, the Interest Period shall end on the last Business Day in that month. |
|
8.3 |
Interest Periods to meet Maturity Date If an Interest Period for a Drawing would otherwise expire after the Maturity Date, the Interest Period for that Drawing shall expire on the Maturity Date. |
|
8.4 |
Non Business Days If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not). |
|
8.5 |
Interest rate During each Interest Period interest shall accrue on the relevant Drawing at the rate determined by the Lender to be the aggregate of (a) the Margin, (b) LIBOR and (c) the Mandatory Cost, if any. |
|
8.6 |
Failure to select Interest Period If the Borrower at any time fails to select or agree an Interest Period in accordance with Clause 8.1, the interest rate applicable shall be the rate determined by the Lender in accordance with Clause 8.5 for an Interest Period of such duration (not exceeding six months) as the Lender may select. |
|
8.7 |
Accrual and payment of interest Interest shall accrue from day to day, shall be calculated on the basis of a 360 day year and the actual number of days elapsed (or, in any circumstance where market practice differs, in accordance with the prevailing market practice) and shall be paid by the |
|
19
20
(c) the Mandatory Cost, if any, |
|||
PROVIDED THAT if the resulting rate of interest is not acceptable to the Borrower: |
|||
8.9.3 |
the Lender will negotiate with the Borrower in good faith with a view to modifying this Agreement to provide a substitute basis for determining the rate of interest which is financially a substantial equivalent to the basis provided for in this Agreement; | ||
8.9.4 |
any substitute basis agreed pursuant to Clause 8.9.3 shall be binding on the parties to this Agreement; and | ||
8.9.5 |
if, within thirty (30) days of the giving of the notice referred to in Clause 8.9.1, the Borrower and the Lender fail to agree in writing on a substitute basis for determining the rate of interest in respect of the relevant Drawing, the Lender shall cease to be obliged to advance that Drawing, but, if it has already been advanced, the Borrower will immediately prepay it, together with any Break Costs, and the Maximum Amount shall be reduced by the amount of that Drawing. | ||
8.10 |
Determinations conclusive The Lender shall promptly notify the Borrower of the determination of a rate of interest under this Clause 8 and each such determination shall (save in the case of manifest error) be final and conclusive. |
||
9 |
Indemnities |
||
9.1 |
Transaction expenses The Borrower will, within fourteen (14) days of the Lender’s written demand, pay the Lender the amount of all costs and expenses (including legal fees and Value Added Tax or any similar or replacement tax if applicable) incurred by the Lender in connection with: |
||
21
22
23
24
9.6.4 |
attributable to the wilful breach by the Lender (or the holding company of the Lender) of any law or regulation. |
||
9.7 |
Events of Default The Borrower shall indemnify the Lender from time to time on the Lender’s written demand against all losses, costs and liabilities incurred or sustained by the Lender as a consequence of any Event of Default. |
||
9.8 |
Enforcement costs The Borrower shall pay to the Lender on the Lender’s written demand the amount of all costs and expenses (including legal fees) incurred by the Lender in connection with the enforcement of, or the preservation of any rights under, any Finance Document including (without limitation) any losses, costs and expenses which the Lender may from time to time sustain, incur or become liable for by reason of the Lender being mortgagee of the Vessel and/or a lender to the Borrower, or by reason of the Lender being deemed by any court or authority to be an operator or controller, or in any way concerned in the operation or control, of the Vessel. |
||
9.9 |
Other costs The Borrower shall pay to the Lender on the Lender’s written demand the amount of all sums which the Lender may pay or become actually or contingently liable for on account of the Borrower in connection with the Vessel (whether alone or jointly or jointly and severally with any other person) including (without limitation) all sums which the Lender may pay or guarantees which it may give in respect of the Insurances, any expenses incurred by the Lender in connection with the maintenance or repair of the Vessel or in discharging any lien, bond or other claim relating in any way to the Vessel, and any sums which the Lender may pay or guarantees which it may give to procure the release of the Vessel from arrest or detention. |
||
9.10 |
Taxes The Borrower shall pay all Taxes to which all or any part of the Indebtedness or any Finance Document may be at any time subject (other |
25
26
27
28
11.11 |
Determination of market value For the purpose of the Security Documents, the market value of the Vessel shall be the average value certified by two of the Brokers, who shall report directly to the Lender and shall be appointed by the Borrower not later than five (5) days after the Lender’s request for the Borrower to appoint such Brokers. In the event that the Borrower fails to appoint such Brokers within five (5) days after the Lender’s request so to do or if a Broker appointed by the Borrower is not approved by the Lender and the Borrower fails to appoint an alternative Broker who is approved by the Lender within such five (5) day period, the Borrower irrevocably authorises the Lender to appoint a Broker in its discretion to conduct such valuations. All valuations pursuant to this Clause shall be made on the basis of a sale of the Vessel for prompt delivery for cash at arm’s length on normal commercial terms by a willing seller to a willing buyer and free of any existing charter or other contract of employment. The Borrower agrees to accept each valuation obtained pursuant to this Clause as conclusive evidence of the Vessel’s market value at the date of such valuation. |
|
11.12 |
Cost of valuation The Borrower shall be liable for all costs and expenses incurred by the Lender in obtaining up to two valuations in each year of the Facility Period one upon each anniversary of the date of this Agreement and the other six (6) months after the date of this Agreement and upon each anniversary of such date unless there is an Event of Default in which case the Borrower shall be liable for all costs and expenses incurred by the Lender in obtaining any number of valuations required by it pursuant to Clause 11.11 and shall reimburse the Lender in respect of all such costs and expenses on demand. |
|
11.13 |
Provision of information The Borrower undertakes promptly to supply the Lender with such information concerning the Vessel’s condition, location and employment as the Lender may reasonably require. |
|
29
11.14 |
Additional security If and so often as the aggregate of the market value of the Vessel (determined in accordance with Clause 11.11) plus the value of any additional security for the time being provided to the Lender pursuant to this Clause shall be less than (a) one hundred per cent (100%) of the amount of the Loan, for the period commencing on the first Drawdown Date and ending on the third anniversary of the first Drawdown Date or (b) one hundred and ten per cent (110%) of the amount of the Loan from the third anniversary of the first Drawdown Date until the sixth anniversary of the first Drawdown Date or (c) one hundred and twenty per cent (120%) of the amount of the Loan thereafter, the Borrower will, within fourteen (14) days of the request of the Lender to do so, at the Borrower’s option:- |
||
11.14.1 |
pay to the credit of the Cash Collateral Account such amount as shall be necessary to establish that the aggregate of the market value of the Vessel (determined in accordance with Clause 11.11) plus the value of any additional security for the time being provided to the Lender pursuant to this Clause shall be no less than (a) one hundred per cent (100%) of the amount of the Loan, for the period commencing on the first Drawdown Date and ending on the third anniversary of the first Drawdown Date, or (b) one hundred and ten per cent (110%) of the amount of the Loan from the third anniversary of the First Drawdown Date until the sixth anniversary of the first Drawdown Date or (c) one hundred and twenty per cent (120%) of the amount of the Loan thereafter; or |
||
11.14.2 |
give to the Lender other security in amount and form acceptable to the Lender in its discretion; or |
||
11.14.3 |
repay such amount of the Loan as shall be necessary to establish that the aggregate of the market value of the Vessel (determined |
30
|
in accordance with Clause 11.11) plus the value of any additional security for the time being provided to the Lender pursuant to this Clause shall be no less than (a) one hundred per cent (100%) of the amount of the Loan, for the period commencing on the first Drawdown Date and ending on the third anniversary of the first Drawdown Date, or (b) one hundred and ten per cent (110%) of the amount of the Loan from the third anniversary of the first Drawdown Date until the sixth anniversary of the first Drawdown Date or (c) one hundred and twenty per cent (120%) of the amount of the Loan thereafter. | ||
Clauses 7.2, 7.3 and 7.4 shall apply, mutatis mutandis, to any repayment made pursuant to this Clause and the value of any additional security provided pursuant to this Clause shall be determined by the Lender in its discretion. |
|||
11.15 |
Return of additional security If and so often as the aggregate of the market value of the Vessel (determined in accordance with Clause 11.11) plus the value of any additional security for the time being provided to the Lender pursuant to Clause 11.14 shall exceed (a) one hundred per cent (100%) of the amount of the Loan, for the period commencing on the first Drawdown Date and ending on the third anniversary of the first Drawdown Date, or (b) one hundred and ten per cent (110%) of the amount of the Loan from the third anniversary of the first Drawdown Date until the sixth anniversary of the first Drawdown Date or (c) one hundred and twenty per cent (120%) of the amount of the Loan thereafter, then the Lender shall, within fourteen (14) days of the request of the Borrower to do so, release to the Borrower such portion of the amount standing to the credit of the Cash Collateral Account in accordance with Clause 11.14 and/or such amount of the security referred to in Clause 11.14.2 as shall be required to ensure that the aggregate of the market value of the Vessel (determined as aforesaid) plus the value of any additional security for the |
31
32
12.1.4 |
Power and authority Each Security Party has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is a party and the transactions contemplated by those Finance Documents. |
|||
12.1.5 |
Validity and admissibility in evidence All consents, licences, approvals, authorisations, filings and registrations required or desirable: |
|||
(a) |
to enable each Security Party lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party or to enable the Lender to enforce and exercise all its rights under the Finance Documents; and |
|||
(b) |
to make the Finance Documents to which any Security Party is a party admissible in evidence in its jurisdiction of incorporation, |
|||
have been obtained or effected and are in full force and effect, with the exception only of the registrations referred to in Part II of Schedule I. |
||||
12.1.6 |
Governing law and enforcement The choice of English law as the governing law of any Finance Document expressed to be governed by English law will be recognised and enforced in the jurisdiction of incorporation of each relevant Security Party, and any judgment obtained in England in relation to any such Finance Document will be recognised and enforced in the jurisdiction of incorporation of each relevant Security Party. |
|||
12.1.7 |
Deduction of Tax No Security Party is required under the law of its jurisdiction of incorporation to make any deduction for or |
33
on account of Tax from any payment it may make under any Finance Document. |
|||
12.1.8 |
No filing or stamp taxes Under the law of jurisdiction of incorporation of each relevant Security Party it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents. |
||
12.1.9 |
No default No Event of Default is continuing or might reasonably be expected to result from the advance of a Drawing. |
||
12.1.10 |
No misleading information Any factual information provided by any Security Party to the Lender was true and accurate in all material respects as at the date is was provided. |
||
12.1.11 |
Pari passu ranking The payment obligations of each Security Party under the Finance Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally. |
||
12.1.12 |
No proceedings pending or threatened No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency have been started or (to the best of the Borrower’s knowledge threatened) which, if adversely determined, might reasonably be expected to have a materially adverse effect on the business, assets, financial condition or credit worthiness of any Security Party. |
||
12.1.13 |
Disclosure of material facts The Borrower is not aware of any material facts or circumstances which have not been disclosed to |
||
34
35
13.1.1 |
Financial statements The Borrower or the Managers will supply to the Lender, on request within sixty (60) days of the end of each calendar year during the Facility Period the unaudited management accounts for the Vessel prepared by the Managers showing the income and expenditure for the Vessel for such calendar year, with the first such accounts to be supplied by not later than 60 (sixty) days of the end of 2007. |
|||
13.1.2 |
Information: miscellaneous The Borrower shall supply to the Lender: |
|||
(a) |
promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any Security Party, and which might, if adversely determined, have a materially adverse effect on the business, assets, financial condition or credit worthiness of that Security Party; and |
|||
(b) |
promptly, such further information regarding the financial condition, business and operations of any Security Party as the Lender may reasonably request including, without limitation, cash flow analyses and details of the operating costs of the Vessel. |
|||
13.1.3 |
Notification of default |
|||
(a) |
The Borrower shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence. |
|||
(b) |
Promptly upon a request by the Lender, the Borrower shall supply to the Lender a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, |
36
specifying the Default and the steps, if any, being taken to remedy it). |
|||||
13.1.4 |
“Know your customer” checks If: |
||||
(a) |
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement; |
||||
(b) |
any change in the status of the Borrower after the date of this Agreement; or |
||||
(c) |
a proposed assignment or transfer by the Lender of any of its rights and obligations under this Agreement, |
||||
obliges the Lender (or, in the case of (c) above, any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrower shall promptly upon the request of the Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Lender (for itself or, in the case of (c) above, on behalf of any prospective new Lender) in order for the Lender (or, in the case of (c) above, any prospective new Lender) to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents. |
|||||
|
|||||
13.2 |
General undertakings |
||||
13.2.1 |
Authorisations The Borrower shall promptly: |
||||
(a) |
obtain, comply with and do all that is necessary to maintain in full force and effect; and |
37
(b) |
supply certified copies to the Lender of, any consent, licence, approval or authorisation required under any law or regulation to enable each Security Party to perform its obligations under the Finance Documents to which it is a party and to ensure the legality, validity, enforceability or admissibility in evidence in the jurisdiction of incorporation of each relevant Security Party of any Finance Document. |
|||
13.2.2 |
Compliance with laws The Borrower shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Finance Documents. |
|||
13.2.3 |
Conduct of business The Borrower shall carry on and conduct its business in a proper and efficient manner, file all requisite tax returns and pay all tax which becomes due and payable (except where contested in good faith). |
|||
13.2.4 |
Evidence of good standing The Borrower will from time to time if requested by the Lender provide the Lender with evidence in form and substance satisfactory to the Lender that the Security Parties and all corporate shareholders of any Security Party remain in good standing. |
|||
13.2.5 |
Liquidity The Borrower will throughout the Facility Period maintain or procure that the Managers maintain in the Operating Account at all times a minimum positive account balance free of any Encumbrances (other than in favour of the Lender) of not less than one hundred and fifty thousand Dollars ($150,000). Any undrawn amounts under this Agreement may be included for the purpose of this calculation and this calculation shall |
38
exclude cash deposited with the Lender as security for any other facility or in connection with Clause 5. |
|||
13.2.6 |
Negative pledge and no disposals The Borrower shall not create nor permit to subsist any Encumbrance or other third party rights over any of its present or future assets or undertaking nor dispose of any those assets or of all or part of that undertaking. |
||
13.2.7 |
Merger The Borrower shall not without the prior written consent of the Lender enter into any amalgamation, demerger, merger or corporate reconstruction. |
||
13.2.8 |
Change of business The Borrower shall not without the prior written consent of the Lender make any substantial change to the general nature of its business from that carried on at the date of this Agreement. |
||
13.2.9 |
No other business The Borrower shall not without the prior written consent of the Lender engage in any business other than the ownership, operation, chartering and management of the Vessel. |
||
13.2.10 |
No place of business in UK or US The Borrower shall not have an established place of business in the United Kingdom or the United States of America at any time during the Facility Period. |
||
13.2.11 |
No borrowings The Borrower shall not without the prior written consent of the Lender borrow any money (except for the Loan and unsecured Financial Indebtedness subordinated to the Loan) nor incur any obligations under leases. |
||
13.2.12 |
No substantial liabilities Except in the ordinary course of business, the Borrower shall not without the prior written |
||
39
consent of the Lender incur any liability to any third party which is in the Lender’s opinion of a substantial nature. |
|||
13.2.13 |
No loans or other financial commitments The Borrower shall not without the prior written consent of the Lender make any loan nor enter into any guarantee or indemnity or otherwise voluntarily assume any actual or contingent liability in respect of any obligation of any other person. |
||
13.2.14 |
No dividends The Borrower shall not without the prior written consent of the Lender pay any dividends or make any other distributions to the shareholders or issue any new shares. |
||
13.2.15 |
Inspection of records The Borrower will permit the inspection of its financial records and accounts from time to time by the Lender or its nominee. |
||
13.2.16 |
No change in Relevant Documents The Borrower shall procure that, without the prior written consent of the Lender, there shall be no termination of, alteration to, or waiver of any term of, any of the Relevant Documents. |
||
13.2.17 |
No change in ownership or control of the Borrower or the Managers The Borrower shall not permit any change in its beneficial ownership and control and the beneficial ownership and control of the Managers from that advised to the Lender at the date of this Agreement. |
||
13.2.18 |
No purchase of a vessel The Borrower shall not purchase any vessel or any shares in any vessel. |
||
13.2.19 |
No dealings with Master Agreement The Borrower shall not assign, novate or encumber or in any other way transfer any of its rights or obligations under the Master Agreement, nor enter |
40
into any interest rate exchange or hedging agreement with anyone other than the Lender. |
||||
13.2.20 |
Charters The Borrower shall not without the prior written consent of the Lender enter into any Charter (other than the Existing Charters) and shall not extend or otherwise amend or supplement a Charter without the prior written consent of the Lender. |
|||
13.3 |
Vessel undertakings |
|||
13.3.1 |
No sale of Vessel The Borrower shall not sell or otherwise dispose of the Vessel or any shares in the Vessel nor agree to do so without the prior written consent of the Lender. |
|||
13.3.2 |
No chartering after Event of Default Following the occurrence and during the continuation of an Event of Default the Borrower shall not without the prior written consent of the Lender let the Vessel on charter or renew or extend any charter or other contract of employment of the Vessel (nor agree to do so). |
|||
13.3.3 |
No change in management The Borrower shall procure that, without the prior written consent of the Lender, there shall be no termination of, alteration to, or waiver of any term of, the Management Agreement and the Borrower shall not without the prior written consent of the Lender permit the Managers to sub- contract or delegate the commercial or technical management of the Vessel to any third party. |
|||
13.3.4 |
Registration of Vessel The Borrower undertakes to maintain the registration of the Vessel under the flag stated in Recital (A) (or such other flag acceptable to the Lender in its discretion) for |
41
the duration of the Facility Period unless the Lender agrees otherwise in writing. |
||||
13.3.5 |
Evidence of current COFR The Borrower will, if and for so long as the Vessel trades in the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990), obtain, retain and provide the Lender with a copy of, a valid Certificate of Financial Responsibility for the Vessel under that Act and will comply strictly with the requirements of that Act. |
|||
13.3.6 |
ISM Code compliance The Borrower will: |
|||
(a) |
procure that the Vessel remains for the duration of the Facility Period subject to a SMS; |
|||
(b) |
maintain a valid and current SMC for the Vessel throughout the Facility Period and provide a copy to the Lender; |
|||
(c) |
procure that the ISM Company maintains a valid and current DOC throughout the Facility Period and provide a copy to the Lender; and |
|||
(d) |
immediately notify the Lender in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the SMC of the Vessel or of the DOC of the ISM Company. |
|||
13.3.7 |
ISPS Code compliance The Borrower will: |
|||
(a) |
for the duration of the Facility Period comply with the ISPS Code in relation to the Vessel and procure that the Vessel and the ISPS Company comply with the ISPS |
|||
Code; |
42
43
Relevant Documents to which that Security Party or person is a party (other than as referred to in Clause 14.1.1). |
||||
14.1.3 |
Misrepresentation Any representation, warranty or statement made or deemed to be repeated by a Security Party in any Finance Document or any other document delivered by or on behalf of a Security Party under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be repeated. |
|||
14.1.4 |
Cross default Any Financial Indebtedness of a Security Party: |
|||
(a) |
is not paid when due or within any originally applicable grace period; or |
|||
(b) |
is declared to be, or otherwise becomes, due and payable before its specified maturity as a result of an event of default (however described); or |
|||
(c) |
is declared by a creditor to be due and payable before its specified maturity as a result of such an event. |
|||
14.1.5 |
Insolvency |
|||
(a) |
A Security Party is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its Financial Indebtedness. |
|||
(b) |
The value of the assets of a Security Party is less than its liabilities (taking into account contingent and prospective liabilities). |
44
(c) |
A moratorium is declared in respect of any Financial Indebtedness of a Security Party. |
|||
14.1.6 |
Insolvency proceedings Any corporate action, legal proceedings or other procedure or step is taken for: |
|||
(a) |
the suspension of payments, a moratorium of any Financial Indebtedness, winding-up, dissolution, administration, bankruptcy or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of a Security Party; |
|||
(b) |
a composition, compromise, assignment or arrangement with any creditor of a Security Party; |
|||
(c) |
the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager, or trustee or other similar officer in respect of any Security Party or any of its assets; or |
|||
(d) |
enforcement of any Encumbrance over any assets of a Security Party, |
|||
or any analogous procedure or step is taken in any jurisdiction. |
||||
14.1.7 |
Creditors’ process Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of a Security Party. |
|||
14.1.8 |
Change in ownership or control of the Borrower or the Managers There is any change in the beneficial ownership or control of the Borrower or the Managers from that advised to the Lender by the Borrower at the date of this Agreement. |
45
14.1.9 |
Repudiation A Security Party or any other person (except the Lender) repudiates any of the Relevant Documents to which that Security Party or person is a party or evidences an intention to do so. |
||
14.1.10 |
Impossibility or illegality Any event occurs which would, or would with the passage of time, render performance of any of the Relevant Documents by a Security Party or any other party to any such document impossible, unlawful or unenforceable by the Lender or a Security Party. |
||
14.1.11 |
Conditions subsequent Any of the conditions referred to in Clause 3.5 is not satisfied within the time reasonably required by the Lender. |
||
14.1.12 |
Revocation or modification of authorisation Any consent, licence, approval, authorisation, filing, registration or other requirement of any governmental, judicial or other public body or authority which is now, or which at any time during the Facility Period becomes, necessary to enable a Security Party or any other person (except the Lender) to comply with any of its obligations under any of the Relevant Documents is not obtained, is revoked, suspended, withdrawn or withheld, or is modified in a manner which the Lender considers is, or may be, prejudicial to the interests of the Lender, or ceases to remain in full force and effect. |
||
14.1.13 |
Curtailment of business A Security Party ceases, or threatens to cease, to carry on all or a substantial part of its business or, as a result of intervention by or under the authority of any government, the business of a Security Party is wholly or partially curtailed or suspended, or all or a substantial part of the |
46
assets or undertaking of a Security Party is seized, nationalised, expropriated or compulsorily acquired. |
||||
14.1.14 |
Reduction of capital A Security Party reduces its authorised or issued or subscribed capital. |
|||
14.1.15 |
Loss of Vessel The Vessel suffers a Total Loss or is otherwise destroyed, abandoned, confiscated, forfeited or condemned as prize, or a similar event occurs in relation to any other vessel which may from time to time be mortgaged to the Lender as security for the payment of all or any part of the Indebtedness, except that a Total Loss, or event similar to a Total Loss in relation to any other vessel, shall not be an Event of Default if: |
|||
(a) |
the Vessel or other vessel is insured in accordance with the Security Documents; and |
|||
(b) |
no insurer has refused to meet or has disputed the claim for Total Loss and it is not apparent to the Lender in its discretion that any such refusal or dispute is likely to occur; and |
|||
(c) |
payment of all insurance proceeds in respect of the Total Loss is made in full to the Lender within one hundred and eighty (180) days of the occurrence of the casualty giving rise to the Total Loss in question or such longer period as the Lender may in its discretion agree. |
|||
14.1.16 |
Challenge to registration The registration of the Vessel or the Mortgage is contested or becomes void or voidable or liable to cancellation or termination, or the validity or priority of the Mortgage is contested. |
|||
47
14.1.17 |
War The country of registration of the Vessel becomes involved in war (whether or not declared) or civil war or is occupied by any other power and the Lender in its discretion considers that, as a result, the security conferred by the Security Documents is materially prejudiced. |
|
14.1.18 |
Master Agreement termination A notice is given by the Lender under section 6(a) of the Master Agreement, or by any person under section 6(b)(iv) of the Master Agreement, in either case designating an Early Termination Date for the purpose of the Master Agreement, or the Master Agreement is for any other reason terminated, cancelled, suspended, rescinded, revoked or otherwise ceases to remain in full force and effect. |
|
14.1.19 |
Material adverse change Any event or series of events occurs which, in the opinion of the Lender, is likely to have a materially adverse effect on the business, assets, financial condition or credit worthiness of a Security Party. |
|
14.2 |
Acceleration If an Event of Default is continuing the Lender may by notice to the Borrower cancel any part of the Maximum Amount not then advanced and: |
|
14.2.1 |
declare that the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents are immediately due and payable, whereupon they shall become immediately due and payable; and/or |
|
14.2.2 |
declare that the Loan is payable on demand, whereupon it shall immediately become payable on demand by the Lender. |
48
15 |
Assignment and Sub Participation |
|
15.1 |
Right to assign The Lender may, subject to the prior approval of the Borrower (such approval not to be unreasonably withheld) and subject to the Lender giving prior notice of such intention to the Borrower, and without additional costs to the Borrower, assign or transfer all or any of its rights under or pursuant to the Security Documents to any other bank or financial institution, and may grant sub-participations in all or any part of the Loan. The Lender may, without the prior approval of the Borrower, assign or transfer all or any of its rights under or pursuant to the Security Documents to any other branch of the Lender, and may grant sub- participations in all or any part of the Loan. |
|
15.2 |
Borrower’s co-operation The Borrower will co-operate fully with the Lender in connection with any assignment, transfer or sub-participation; will execute and procure the execution of such documents as the Lender may require in that connection; and irrevocably authorises the Lender to disclose to any proposed assignee, transferee or sub-participant (whether before or after any assignment, transfer or sub-participation and whether or not any assignment, transfer or subparticipation shall take place) all information relating to the Security Parties, the Loan, the Relevant Documents and the Vessel which the Lender may in its discretion consider necessary or desirable. |
|
15.3 |
Rights of assignee or transferee Any assignee or transferee of the Lender (unless limited by the express terms of the assignment or novation) take the benefit of every provision of the Finance Documents benefitting the Lender. |
|
15.4 |
No assignment or transfer by the Borrower The Borrower may not assign any of its rights or transfer any of its rights or obligations under the Finance Documents. |
49
16 |
Set-Off |
|
16.1 |
The Lender may set off any matured obligation due from the Borrower under any Finance Document against any matured obligation owed by the Lender to the Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender may Convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set off. |
|
16.2 |
Master Agreement rights The rights conferred on the Lender by this Clause 16 shall be in addition to, and without prejudice to or limitation of, the rights of netting and set off conferred on the Lender by the Master Agreement. |
|
17 |
Payments |
|
17.1 |
Payments Each amount payable by the Borrower under a Finance Document shall be paid to such account at such bank as the Lender may from time to time direct to the Borrower in the Currency of Account and in such funds as are customary at the time for settlement of transactions in the relevant currency in the place of payment. Payment shall be deemed to have been received by the Lender on the date on which the Lender receives authenticated advice of receipt, unless that advice is received by the Lender on a day other than a Business Day or at a time of day (whether on a Business Day or not) when the Lender in its discretion considers that it is impossible or impracticable for the Lender to utilise the amount received for value that same day, in which event the payment in question shall be deemed to have been received by the Lender on the Business Day next following the date of receipt of advice by the Lender. |
|
17.2 |
No deductions or withholdings Each payment (whether of principal or interest or otherwise) to be made by the Borrower under a Finance Document shall, subject only to Clause 17.3, be made free and clear of and |
50
without deduction for or on account of any Taxes or other deductions, withholdings, restrictions, conditions or counterclaims of any nature. |
||
17.3 |
Grossing up If at any time any law requires the Borrower to make any deduction or withholding from any payment, or to change the rate or manner in which any required deduction or withholding is made, the Borrower will promptly notify the Lender and, simultaneously with making that payment, will pay to the Lender whatever additional amount (after taking into account any additional Taxes on, or deductions or withholdings from, or restrictions or conditions on, that additional amount) is necessary to ensure that, after making the deduction or withholding, the Lender receives a net sum equal to the sum which the Lender would have received had no deduction or withholding been made. |
|
17.4 |
Evidence of deductions If at any time the Borrower is required by law to make any deduction or withholding from any payment to be made by it under a Finance Document, the Borrower will pay the amount required to be deducted or withheld to the relevant authority within the time allowed under the applicable law and will, no later than thirty (30) days after making that payment, deliver to the Lender an original receipt issued by the relevant authority, or other evidence acceptable to the Lender, evidencing the payment to that authority of all amounts required to be deducted or withheld. |
|
17.5 |
Adjustment of due dates If any payment or transfer of funds to be made under a Finance Document, other than a payment of interest on a Drawing, or a payment under the Master Agreement, shall be due on a day which is not a Business Day, that payment shall be made on the next succeeding Business Day (unless the next succeeding Business Day falls in the next calendar month in which event the payment shall be made on the next preceding Business Day). Any such variation of time shall be taken into account in computing any interest in respect of that payment. |
51
52
53
54
55
56
SCHEDULE 1: Conditions Precedent and Subsequent
Part I: Conditions precedent
1 |
Security Parties |
||
(a) |
Constitutional Documents Copies of the constitutional documents of each Security Party together with such other evidence as the Lender may reasonably require that each Security Party is duly incorporated in its country of incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is to become a party. |
||
(b) |
Certificates of good standing A certificate of good standing in respect of each Security Party (if such a certificate can be obtained). |
||
(c) |
Board resolutions A copy of a resolution of the board of directors of each Security Party: |
||
(i) |
approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party and resolving that it execute those Relevant Documents; and |
||
(ii) |
authorising a specified person or persons to execute those Relevant Documents (and all documents and notices to be signed and/or despatched under those documents) on its behalf. |
||
(d) |
Officer’s certificates A certificate of a duly authorised officer of each Security Party certifying that each copy document relating to it specified in this Part I of Schedule 1 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement and setting out the names of the directors and officers of that Security Party. |
57
(e) |
Powers of attorney The notarially attested and legalised power of attorney of each Security Party under which any documents are to be executed or transactions undertaken by that Security Party. |
||
2 |
Security and related documents |
||
(a) |
Vessel documents Photocopies, certified as true by a director or the secretary or the duly authorised attorney of the Borrower, of: |
||
(i) |
the Management Agreement; |
||
(ii) |
the Vessel’s current Safety Construction, Safety Equipment, Safety Radio, Oil Pollution Prevention and Load Line Certificates; |
||
(iii) |
the Vessel’s current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990 (if required for the Vessel); |
||
(iv) |
the Vessel’s current SMC; |
||
(v) |
the ISM Company’s current DOC; |
||
(vi) |
the Vessel’s current ISSC; |
||
(vii) |
the Vessel’s current IAPPC; |
||
(viii) |
the Vessel’s current Tonnage Certificate; |
||
(ix) |
the Existing Charters; |
||
in each case together with all addenda, amendments or supplements. |
|||
(b) |
Evidence of Borrower’s title Evidence that on the Drawdown Date (i) the Vessel will be at least provisionally registered under the flag stated in Recital (A) in the ownership of the Borrower and (ii) the Mortgage will be capable of being registered against the Vessel with first priority. |
||
58
(c) |
Evidence of insurance Evidence that the Vessel is insured in the manner required by the Security Documents by not later than fifteen (15) days prior to the first Drawdown Date and that letters of undertaking will be issued in the manner required by the Security Documents, together with (if required by the Lender) the written approval of the Insurances by an insurance adviser appointed by the Lender. |
|
(d) |
Confirmation of class A Certificate of Confirmation of Class for hull and machinery confirming that the Vessel is classed +100A1+LMC with Lloyd’s Register of Shipping or such other classification society as may be acceptable to the Lender in its absolute discretion free of recommendations affecting class. |
|
(e) |
Security Documents The Security Documents, together with all other documents required by any of them, including, without limitation, all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients. |
|
(f) |
Mandates Such duly signed forms of mandate, and/or other evidence of the opening of the Accounts, as the Lender may require. |
|
(g) |
Managers’ confirmation The written confirmation of the Managers that, throughout the Facility Period unless otherwise agreed by the Lender, they will remain the commercial and technical managers of the Vessel and that they will not, without the prior written consent of the Lender, sub contract or delegate the commercial or technical management of the Vessel to any third party and confirming in terms acceptable to the Lender that, following the occurrence of an Event of Default, all claims of the Managers against the Borrower shall be subordinated to the claims of the Lender under the Finance Documents. |
|
59
(h) |
No disputes The written confirmation of the Borrower that there is no dispute under any of the Relevant Documents as between the parties to any such document. |
|
3 |
Legal opinions |
|
(a) |
If a Security Party is incorporated in a jurisdiction other than England and Wales or if any Finance Document is governed by the laws of a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Lender in each relevant jurisdiction, substantially in the form or forms provided to the Lender prior to signing this Agreement or confirmation satisfactory to the Lender that such an opinion will be given. |
|
4 |
Other documents and evidence |
|
(a) |
Drawdown Notice A duly completed Drawdown Notice. |
|
(b) |
Process agent Evidence that any process agent referred to in Clause 22.5 and any process agent appointed under any other Finance Document has accepted its appointment. |
|
(c) |
Other authorisations A copy of any other consent, licence, approval, authorisation or other document, opinion or assurance which the Lender considers to be necessary or desirable (if it has notified the Borrower accordingly) in connection with the entry into and performance of the transactions contemplated by any of the Relevant Documents or for the validity and enforceability of any of the Relevant Documents. |
|
(d) |
Fees Evidence that the fees, costs and expenses then due from the Borrower under Clause 9 and Clause 10 have been paid or will be paid by the Drawdown Date. |
|
(e) |
“Know your customer” documents Such documentation and other evidence as is reasonably requested by the Lender in order for the Lender to comply with all necessary “know your customer” or similar |
|
60
identification procedures in relation to the transactions contemplated in the Finance Documents.
61
Part II: Conditions subsequent
1 |
Evidence of Borrower’s title Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the flag stated in Recital (A) confirming that (a) the Vessel is permanently registered under that flag in the ownership of the Borrower, (b) the Mortgage has been registered with first priority against the Vessel and (c) there are no further Encumbrances registered against the Vessel. |
2 |
Letters of undertaking Letters of undertaking in respect of the Insurances as required by the Security Documents together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Lender. |
3 |
Acknowledgements of notices Acknowledgements of all notices of assignment and/or charge given pursuant to the Security Documents. |
4 |
Legal opinions Such of the legal opinions specified in Part I of this Schedule 1 as have not already been provided to the Lender. |
5 |
Companies Act registrations Evidence that the prescribed particulars of the Security Documents have been delivered to the Registrar of Companies of Cyprus within the statutory time limit. |
6 |
Mortgagee’s Insurance Fees Payment to the Lender of all fees in relation to inspections, valuations, legal fees and premiums for Mortgagee’s Insurances. |
62
SCHEDULE 2: Calculation of Mandatory Cost
1 |
The Mandatory Cost is an addition to the interest rate to compensate the Lender for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank. |
||
(a) |
On the first day of each Interest Period (or as soon as possible thereafter) the Lender shall calculate, as a percentage rate, a rate (the “ Additional Cost Rate ”) in accordance with the paragraphs set out below. |
||
(b) |
The Additional Cost Rate for the Lender if lending from an office in the euro-zone will be the percentage notified by the Lender to the Borrower to be its reasonable determination of the cost (expressed as a percentage of the Loan) of complying with the minimum reserve requirements of the European Central Bank as a result of making the Loan from that office. |
||
(c) |
The Additional Cost Rate for the Lender if lending from an office in the United Kingdom will be calculated by the Lender as follows: |
||
(d) |
where the Loan is denominated in sterling: |
||
BY + S(Y - Z) + F x 0.01 per cent per annum |
|||
100 - (B + S) | |||
(e) |
where the Loan is denominated in any currency other than sterling: |
||
F x 0.01 per cent per annum |
|||
300 | |||
where: |
63
64
3 |
In the application of the formula B, Y, S and Z are included in the formula as figures and not as percentages, e.g. if B=0.5% and Y = 15%, BY is calculated as 0.5. x 15. Each rate calculated in accordance with the formula is, if necessary, rounded upward to four decimal places. |
4 |
If a change in circumstances has rendered, or will render, the formula inappropriate, the Lender shall notify the Borrower of the manner in which the Mandatory Cost will subsequently be calculated. The manner of calculation so notified by the Lender shall, in the absence of manifest error, be binding on the Borrower. |
65
SCHEDULE 3: Form of Drawdown Notice
To: DNB NOR BANK ASA
From: AVSTES SHIPPING CORPORATION
2008
Dear Sirs,
Drawdown Notice
We refer to the Loan Agreement dated 2008 made between ourselves and yourselves (the “ Agreement ”).
Words and phrases defined in the Agreement have the same meaning when used in this Drawdown Notice.
Pursuant to Clause 4 of the Agreement, we irrevocably request that you advance a Drawing in the sum of [ ] to us on 200 , which is a Business Day, by paying the amount of the advance to [ ].
We warrant that the representations and warranties contained in Clause 12.1 of the Agreement are true and correct at the date of this Drawdown Notice and will be true and correct on 200 , that no Default has occurred and is continuing, and that no Default will result from the advance of the sum requested in this Drawdown Notice.
We select the period of [ ] months as the Interest Period in respect of the said Drawing.
For and on behalf of
AVSTES SHIPPING CORPORATION
66
IN WITNESS of which the parties to this Agreement have executed this Agreement the
day and year first before written.
SIGNED by |
)
|
duly authorised for and on behalf |
)
|
of AVSTES SHIPPING |
)
|
CORPORATION |
)
|
SIGNED by |
)
|
duly authorised for and on behalf |
)
|
of DnB NOR BANK ASA |
)
|
67
PAGE
|
||
PREAMBLE
|
P-1
|
|
ARTICLE
I — SPECIFICATIONS AND CLASS OF VESSEL
|
||
1.
|
Specifications
|
P-2
|
2.
|
Principal
Particulars
|
P-2
|
3.
|
Class
and Rules
|
P-3
|
4.
|
Places
of Assembly and Construction
|
P-4
|
5.
|
Subcontracting
|
P-4
|
6.
|
Registration
of Vessel
|
P-4
|
7.
|
Obligations
of the Builder
|
P-4
|
ARTICLE
II — CONTRACT PRICE AND TERMS OF PAYMENT
|
||
1.
|
Contract
Price
|
P-5
|
2.
|
Adjustment
of Contract Price
|
P-5
|
3.
|
Currency
|
P-5
|
4.
|
Due
Date and Due Amount of Payment
|
P-5
|
5.
|
Method
of Payment
|
P-6
|
6.
|
Notice
of Payment
|
P-7
|
7.
|
Performance
Guarantee
|
P-7
|
8.
|
Prepayment
|
P-8
|
ARTICLE
III —ADJUSTMENT OF CONTRACT PRICE
|
||
1.
|
Delayed
Delivery
|
P-9
|
2.
|
Insufficient
Speed
|
P-10
|
3.
|
Excessive
Fuel Consumption
|
P-10
|
4.
|
Deficiency
in Deadweight
|
P-11
|
5.
|
Duty
to Mitigate
|
P-11
|
6.
|
Expedited
Delivery
|
P-11
|
ARTICLE
IV — MODIFICATIONS AND CHANGES
|
||
1.
|
Modifications
to Specifications
|
P-13
|
2.
|
Changes
in Class, etc
|
P-13
|
3.
|
Substitution
of Materials
|
P-15
|
ARTICLE
V — APPROVAL OF DRAWINGS AND INSPECTION
|
||
1.
|
Appointment
of Buyer’s Representative
|
P-16
|
2.
|
Approval
of Drawings
|
P-16
|
3.
|
Inspection
by Buyer
|
P-16
|
4.
|
Facilities
|
P-17
|
5.
|
Liability
of Seller and/or Builder
|
P-18
|
6.
|
Responsibility
of Buyer
|
P-18
|
ARTICLE
VI — SEA TRIAL
|
||
1.
|
Notice
|
P-19
|
2.
|
Weather
Condition
|
P-19
|
3.
|
How
conducted
|
P-19
|
4.
|
Method
of Acceptance or Rejection
|
P-20
|
5.
|
Effect
of Acceptance
|
P-20
|
6.
|
Disposition
of Remaining Consumable Stores
|
P-21
|
ARTICLE
VII —DELIVERY
|
||
1.
|
Time
and Place
|
P-22
|
2.
|
When
and How Effected
|
P-22
|
3.
|
Documents
to be Delivered to Buyer
|
P-22
|
4.
|
Title
and Risk
|
P-23
|
5.
|
Removal
of Vessel
|
P-23
|
ARTICLE
VIII — DELAY AND EXTENSION OF TIME FOR DELIVERY (FORCE
MAJEURE)
|
||
1.
|
Clause
of Delay
|
P-24
|
2.
|
Notice
|
P-24
|
3.
|
Right
to Rescind for Excessive Permissible Delay
|
P-25
|
4.
|
Right
to Rescind for Excessive Delay
|
P-25
|
5.
|
Definition
of Permissible Delay
|
P-26
|
ARTICLE
IX — WARRANTY
|
||
1.
|
Warranty
and Warranty Period
|
P-27
|
2.
|
Notice
of Defects
|
P-27
|
3.
|
Extent
of Seller’s and Builder’s Liability
|
P-27
|
4.
|
Remedy
of Defects Covered by Warranty
|
P-28
|
5.
|
Freight
Charges
|
P-28
|
6.
|
Conditions
of Warranty
|
P-29
|
7.
|
Warranty
to be Exclusive
|
P-29
|
8.
|
Assignment
of Rights
|
P-29
|
9.
|
Arbitration
|
P-29
|
ARTICLE
X — RESCISSION BY BUYER
|
||
1.
|
Notice
|
P-30
|
2.
|
Refund
to Buyer
|
P-30
|
3.
|
Discharge
of Obligations
|
P-30
|
4.
|
Refund
Guarantee
|
P-30
|
ARTICLE
XI — BUYER’S DEFAULT
|
||
1.
|
Definition
of Default
|
P-32
|
2.
|
Interest
and Charge
|
P-32
|
3.
|
Effect
of Default
|
P-32
|
4.
|
Disposal
of Vessel
|
P-33
|
ARTICLE
XII — BUILDER’S INSURANCE
|
||
1.
|
Extent
of Insurance Coverage
|
P-34
|
2.
|
Application
of Recovered Amount
|
P-34
|
3.
|
Termination
of Seller’s and Builder’s Obligation to Insure
|
P-35
|
ARTICLE
XIII — DISPUTES AND ARBITRATION
|
||
1.
|
Disputes
|
P-36
|
2.
|
Arbitration
|
P-36
|
3.
|
Alteration
of Expected Delivery Date
|
P-36
|
ARTICLE
XIV — RIGHT OF ASSIGNMENT
|
P-38
|
|
ARTICLE
XV — TAXES AND DUTIES
|
||
1.
|
Taxes
and Duties Imposed in Japan
|
P-39
|
2.
|
Taxes
and Duties Imposed outside Japan
|
P39
|
ARTICLE
XVI — PATENTS, TRADEMARKS AND COPYRIGHTS, ETC.
|
||
1.
|
Patents,
Trademarks and Copyrights
|
P-40
|
2.
|
Specifications,
Plans and Drawings
|
P-40
|
ARTICLE
XVII — BUYER’S SUPPLIES
|
||
1.
|
Responsibility
of Buyer
|
P-41
|
2.
|
Responsibility
of Seller and/or Builder
|
P-41
|
3.
|
Running
Spares, Stores, Provisions and Other Supplies
|
P-42
|
ARTICLE
XVIII — NOTICE
|
P-43
|
|
ARTICLE
XIX — EFFECTIVE DATE OF CONTRACT
|
P-44
|
|
ARTICLE
XX — SELLER’S AND/OR BUILDER’S DEFAULT
|
P-45
|
|
ARTICLE
XXI — INTERPRETATION
|
||
1.
|
Law
and Regulations Applicable
|
P-46
|
2.
|
Discrepancies
|
P-46
|
3.
|
Entire
Agreement
|
P-46
|
END
OF CONTRACT
|
P-47
|
|
EXHIBIT
“A” — Stage Certificate
|
EXHIBIT
“B” — Performance Guarantee
|
||
EXHIBIT
“C” — Refund Guarantee
|
1. |
Specifications
:
|
2. |
Principal
Particulars
:
|
(a) |
Hull:
|
Length
overall
|
approx. |
229.00
m
|
Length
between perpendiculars
|
219.90
m
|
|
Breadth,
moulded
|
36.50
m
|
|
Depth,
moulded
|
19.90
m
|
|
Designed
draught, moulded
|
12.40
m
|
|
Scantling
draught, moulded
|
14.10
m
|
(b) |
Propelling
Machinery:
|
Type
|
DU
WARTSILA 6RTA58T
|
No.
of Set
|
One
(1)
|
Normal
Output
|
8,550
KW at about 89.3 RPM
|
Maximum
Continuous Output
|
10,300
KW at about 95.0 RPM
|
(c) |
Deadweight:
|
(d) |
Speed:
|
(e) |
Fuel
Consumption:
|
3. |
Class
and Rules
:
|
4. |
Places
of Assembly and Construction
:
|
5. |
Subcontracting
:
|
6. |
Registration
of Vessel
:
|
7. |
Obligations
of the Builder
:
|
1. |
Contract
Price
:
|
2. |
Adjustment
of Contract Price
:
|
3. |
Currency
:
|
4. |
Due
Date and Due Amount of Payment
:
|
(a) |
First
Instalment:
|
(b) |
Second
Instalment
|
(c) |
Third
Instalment:
|
(d) |
Fourth
Instalment:
|
(e) |
Fifth
Instalment:
|
5. |
Method
of Payment
:
|
(a) |
First
Instalment:
|
(b) |
Second
Instalment:
|
(c) |
Third
Instalment:
|
(d) |
Fourth
Instalment
|
(e) |
Fifth
Instalment:
|
6. |
Notice
of Payment
:
|
7. |
Performance
Guarantee:
|
8. |
Prepayment
:
|
1. |
Delayed
Delivery
:
|
(a)
|
No
adjustment shall be made and the Contract Price shall remain unchanged
for
the first thirty (30) days of delay in delivery of the Vessel beyond
the
Expected Delivery Date (as defined in Article VII hereof) as postponed
and/or extended under the provisions of this Contract (ending as
of twelve
o’clock midnight of the thirtieth (30
th
)
day of delay).
|
(b)
|
If
delivery of the Vessel is delayed more than thirty (30) days after
the
Expected Delivery Date as postponed and/or extended under the provisions
of this Contract, the Contract Price shall be reduced by deducting
therefrom the amount of One Million One Hundred Eighty Three Thousand
Japanese Yen (JPY1,183,000) for each day of delay over the aforesaid
grace
of thirty (30) days. However, the maximum reduction in the Contract
Price
shall in no event be more than the amount in the case of a delay
of one
hundred eighty (180) days after the aforesaid grace of thirty (30)
days.
|
(c)
|
If
delay in delivery of the Vessel continues for a period of one hundred
eighty (180) days from the thirty-first (31
st
)
day after the Expected Delivery Date as postponed and/or extended
under
the provisions of this Contract, then, the Buyer shall have the option
either to accept the Vessel at a maximum reduction in the Contract
Price
as above provided or to rescind this Contract in accordance with
the
provisions of Article X hereof as alternative to receiving the aforesaid
liquidated damages. At any time after the expiry of the aforementioned
one
hundred eighty (180) day period of delay in delivery the Seller may,
if
the Buyer has not served notice of rescission, propose a new delivery
date
and demand in writing that the Buyer shall make an election, in which
case
the Buyer shall, within fifteen (15) days after such proposal and
demand
is received by the Buyer, notify the Seller of its intention either
to
rescind this Contract or to consent to delivery of the Vessel at
a future
date to be mutually agreed failing which it will be deemed that it
has
elected that the delivery of the Vessel takes place on the proposed
new
delivery date; it being understood and agreed upon by the parties
hereto
that (i) if the Buyer does not elect to rescind the Contract it shall
be
without prejudice to its right to accrued liquidated damages; and
(ii) if
the Vessel is not delivered by such future date (agreed or proposed),
the
Buyer shall have the same right of rescission to take effect immediately
after the said further date upon the same terms as hereinabove
provided.
|
(d)
|
For
the purpose of this Article, the delivery of the Vessel shall be
deemed to
be delayed when and if the Vessel, after taking into full account
all
postponements of the Expected Delivery Date by reason of
permissible
|
delays defined in Article VIII hereof and/or extension of the Expected Delivery Date by other reasons under this Contract, is not delivered by the Expected Delivery Date so postponed or extended. |
2. |
Insufficient
Speed
:
|
(a)
|
The
Contract Price shall not be affected or changed by reason of the
trial
speed, as determined in accordance with the Specifications, being
less
than the Guaranteed Speed, if such deficiency is not more than
three-tenths (3/10) of a knot.
|
(b)
|
However,
if such deficiency is more than three-tenths (3/10) of a knot, then,
the
Contract Price shall be reduced by deducting therefrom the amount
of Seven
Million One Hundred Thousand Japanese Yen (JPY7,100,000) per one-tenth
(1/10) of a knot or deficiency over the aforesaid grace of three-tenths
(3/10) of a knot (fractions of one-tenth (1/10) of a knot to be prorated).
However, the maximum reduction in the Contract Price shall in no
event be
more than the amount in the case of a deficiency of seven-tenths
(7/10) of
a knot below the Guaranteed Speed.
|
(c)
|
If
deficiency in the trial speed of the Vessel (as so determined) is
more
than seven-tenths (7/10) of a knot below the Guaranteed Speed, then,
the
Buyer shall have the option either to accept the Vessel at a maximum
reduction in the Contract Price as above provided or to reject the
Vessel
and to rescind this Contract in accordance with provisions of Article
X
hereof as alternative to receiving the aforesaid liquidated
damages.
|
3. |
Excessive
Fuel Consumption
:
|
(a)
|
The
Contract Price shall not be affected or changed, by reason of the
fuel
consumption of the main engine, as determined in accordance with
the
Specifications, being more than the Guaranteed Fuel Consumption,
if such
excess is not more than three percent (3%) over the Guaranteed Fuel
Consumption.
|
(b)
|
However,
if such excess is more than three percent (3%), then, the Contract
Price
shall be reduced by deducting therefrom the amount of Seven Million
One
Hundred Thousand Japanese Yen (JPY7,100,000) for each one percent
(1%)
increase in fuel consumption above the aforesaid grace of three percent
(3%) (fractions of one percent (1%) to be prorated). However, the
maximum
reduction in the Contract Price shall in no event be more than the
amount
in the case of an excess of eight percent (8%) over the aforesaid
Guaranteed Fuel Consumption.
|
(c)
|
If
the fuel consumption of the main engine exceeds the Guaranteed Fuel
Consumption by more than eight percent (8%), then, the Buyer shall
have
the option either to accept the Vessel at a maximum reduction in
the
Contract Price as above provided or to reject the Vessel and to rescind
this Contract in accordance with provisions of Article X hereof as
alternative to receiving the aforesaid liquidated
damages.
|
4. |
Deficiency
in Deadweight
:
|
(a)
|
The
Contract Price shall not be affected or changed by reason of the
deadweight of the Vessel, as determined in accordance with the
Specifications, being less than the Guaranteed Deadweight, if such
deficiency is not more than 800 metric tons of the Guaranteed
Deadweight.
|
(b)
|
However,
if such deficiency is more than 800 metric tons, the Contract Price
shall
be reduced by deducting therefrom the amount of Fifty Five Thousand
Two
Hundred Japanese Yen (JPY55,200) for each full metric ton of such
deficiency over the aforesaid grace of 800 metric tons (in this case
disregarding fractions of one (1) metric ton).
|
However,
the maximum reduction in the Contract Price shall in no event be
more than
the amount in the case of a deficiency of 1,800 metric tons below
the
Guaranteed Deadweight.
|
|
(c)
|
In
the event that such deficiency in the Vessel’s deadweight is more than
1,800 metric tons the Buyer shall have the option either to accept
the
Vessel at a maximum reduction in the contract Price as above provided
or
to reject the Vessel and to rescind this Contract in accordance with
provisions of Article X hereof as alternative to receiving the aforesaid
liquidated damages.
|
5. |
Duty
to Mitigate
:
|
6. |
Expedited
Delivery
:
|
(a)
|
If
the Buyer requests in writing that the delivery of the Vessel be
made
earlier than the Expected Delivery Date and if the Vessel is delivered,
in
response to such request of the Buyer, then, in such event, the Contract
Price shall be increased by adding thereto the amount of One Million
One
Hundred Eighty Three Thousand Japanese Yen (JPY1,183,000) for each
day
that such earlier delivery is effected in advance of the Expected
Delivery
Date or from an earlier delivery date as declared in writing by the
Seller
to the Buyer if such earlier delivery date is already declared before
being so requested by the Buyer; it being understood that acceptance
by
the Seller of the Buyer’s request for earlier delivery shall, in no way,
be construed as change of the Expected Delivery
Date.
|
(b)
|
Should
the Builder deliver the Vessel earlier than the Expected Delivery
Date
without request by the Buyer, the Buyer shall accept such earlier
delivery
of the Vessel, always provided that the Seller or the Builder has
given
the Buyer three (3) months notice in writing or by fax or telex of
the
proposed earlier delivery date.
|
1. |
Modifications
to Specifications
:
|
(a)
|
Upon
the Buyer’s request in writing, the Specifications may be modified and /or
changed provided that such modifications or changes or an accumulation
of
such modifications or changes will in the Builder’s reasonable judgment
neither adversely affect the Builder’s design of the Vessel nor adversely
affect the Builder’s construction schedule of the Vessel or program in
relation to the Builder’s other binding commitments, provided always that
the Buyer shall first agree, before such modifications or changes
are
carried out, to adjustments reasonably required by the Seller and/or
the
Builder to the Contract Price, the Expected Delivery Date, the Guaranteed
Speed, the Guaranteed Fuel Consumption, the Guaranteed Deadweight
and/or
other terms and conditions of this Contract and the Specifications,
if
any, caused by such modifications or changes. Such modifications
or
changes and adjustment shall be confirmed by written agreement between
the
parties hereto, or by exchange of fax messages and thereafter effected
by
the Builder. The Builder will exert its best efforts to accommodate
such
request of the Buyer so that the said changes and modifications shall
be
made at the Builder’s lowest possible cost and within the shortest period
of time as is reasonably possible.
|
(b)
|
Without
impairing the intent of the Specifications, the Builder may make
minor
modifications or changes to the Specifications if found necessary
for the
introduction of improved design, construction methods or otherwise,
provided that there shall be no change in the Contract Price as a
result
of such changes unless otherwise agreed upon between the parties
hereto
and that the Seller shall first obtain the Buyer’s approval in writing
which shall not be unreasonably
withheld.
|
2. |
Changes
in Class. etc.
:
|
(a)
|
If,
after the date of this Contract, any requirements as to class, to
which
the construction of the Vessel is required to conform, are altered
or
changed by the Classification Society, and the classification certificate
cannot be obtained without conformity with such alterations or changes,
then, any Party (including the Builder) who becomes aware of the
change
shall forthwith transmit such information in full to the other in
writing
and then the Builder shall promptly incorporate such alterations
or
changes into the construction of the Vessel, provided that the Buyer
shall
first agree to adjustments reasonably required by the Seller and/or
the
Builder in the Contract Price, the Expected Delivery Date, the Guaranteed
Speed, the Guaranteed Fuel Consumption, the Guaranteed Deadweight
and
other terms and conditions of this Contract and the Specifications,
if
any, caused by the application of such alterations or
changes.
|
Such
alterations or changes and adjustments shall be confirmed by written
agreement between the parties hereto, or by exchange of
faxes.
|
Notwithstanding
the foregoing provisions, the Buyer may, at its sole discretion first
apply to the Classification Society for a formal waiver of compliance
with
such alterations or changes provided however that the Buyer shall
take
into account the Builder’s request that the Buyer applies for a
waiver.
|
|
(b)
|
If,
after the date of this Contract, any requirements under the rules
and
regulations other than those of the Classification Society, to which
the
construction of the Vessel is required in the Specifications to conform,
are altered or changed by the regulatory bodies authorized to make
such
alterations or changes, and the certificates of such regulatory bodies
cannot be obtained without conformity with such alterations or changes,
then any Party (including the Builder) who becomes aware of the change
shall forthwith transmit such information in full to the other in
writing
and then the Builder shall promptly incorporate such alterations
or
changes into the construction of the Vessel, provided that the Buyer
shall
first agree to the adjustment reasonably required by the Seller and/or
the
Builder in the Contract Price, the Expected Delivery Date, the Guaranteed
Speed, the Guaranteed Fuel Consumption, the Guaranteed Deadweight
and
other terms and conditions of this Contract and the Specifications
if any,
caused by the application of such alterations or
changes.
|
Such
alterations or changes and adjustments shall be confirmed by written
agreement between the parties hereto, or by exchange of
faxes.
|
|
Notwithstanding
the foregoing provisions, the Buyer may, at its sole discretion first
apply to such regulatory body or bodies for a formal waiver of compliance
with such alterations or changes provided however that the Buyer
shall
take into account the Builder’s request that the Buyer applies for a
waiver.
|
|
(c)
|
If,
after the date of this Contract, any requirements as to class, or
under
the other rules and regulations which are irrelevant to or unnecessary
in
obtaining the classification certificates or the certificates of
such
other regulatory bodies are altered or changed by the Classification
Society or such other regulatory bodies, and the Buyer desires to
incorporate such alterations or changes into the construction of
the
Vessel, then, the Buyer shall give a written notice of such intention
to
the Seller and the Builder. The Builder will in the Builder’s reasonable
judgment accept such alterations or changes, if those alterations
or
changes will neither adversely affect the Builder’s design of the Vessel
nor adversely affect the Builder’s construction schedule of the Vessel
and/or program in relation to the Builder’s other binding commitments,
provided always that the Buyer shall first agree to adjustments reasonably
required by the Seller and/or the Builder in the Contract Price,
the
Expected Delivery Date, the Guaranteed Speed, the Guaranteed Fuel
Consumption, the Guaranteed Deadweight and other terms and conditions
of
this Contract and the Specifications, if any, caused by application
of
such alterations or changes.
|
Such
alterations or changes and adjustments shall be confirmed by written
agreement between the parties hereto, or by exchange of letters or
cables
confirmed in writing.
|
3. |
Substitution
of Materials
:
|
1. |
Appointment
of Buyer’s Representative
:
|
2. |
Approval
of Drawings
:
|
(a)
|
The
Builder shall submit to the Head Office of the Buyer at its address
as set
out in Article XVIII for its approval three (3) copies each of the
drawings listed in the Specifications in hard copy. The Buyer shall,
as
soon as possible but within twenty one (21) days after dispatch thereof
by
the Builder at the latest, return to the Builder one (1) copy of
such
drawings with its approval or comments written thereon. Any alteration
to
the specifications resulting from such comments shall be dealt with
in
accordance with Article IV hereof. A list of the Plans and Drawings
to be
so submitted to the Buyer and the order of submission thereof shall
be
mutually agreed upon between the Builder and the Buyer.
|
(b)
|
In
the event that the Buyer shall fail to return the drawings to the
Builder
within the time limit hereinabove provided, the said drawings shall
be
deemed to have been approved without any
comments.
|
3. |
Inspection
by Buyer
:
|
4. |
Facilities
:
|
5. |
Liability
of Seller and/or Builder
:
|
6. |
Responsibility
of Buyer
:
|
(a)
|
The
Buyer undertakes and assures that the Representative shall attend
tests
and inspections in the manner provided in the Inspection Standards
and
also in such a way as will neither increase building costs nor cause
delay
or disturbance in the construction and delivery of the
Vessel.
|
(b)
|
In
the event that the Seller and/or the Builder considers any act or
acts of
the Representative to be an abuse of his or the Buyer’s rights under the
terms of this Contract, the Seller and/or the Builder may request
the
Buyer to replace such Representative by written notice, whereupon
the
Buyer shall investigate the matter and if such Seller’s and/or Builder’s
request is found justified, the Buyer shall effect such
replacement.
|
(c)
|
The
Buyer may not entrust the approval of plans and drawings or attendance
to
the inspections, tests and trials to any firm(s) or person(s) outside
its
organization unless prior written consent of the Seller and/or the
Builder
are given.
|
1. |
Notice
:
|
2. |
Weather
Condition
:
|
3. |
How
Conducted
:
|
(a)
|
All
expenses in connection with the sea trial of the Vessel shall be
for the
account of the Builder who during the sea trial shall provide necessary
crew for safe navigation. The sea trial shall be conducted by the
Builder
in Japanese waters in the manner prescribed in the
Specifications.
|
(b)
|
Notwithstanding
the foregoing, fuel oil, lubricating oils and greases necessary for
the
sea trial of the Vessel shall be supplied by the Buyer
at
|
the
Shipyard at the time designated by the Builder prior to the sea trial,
and
the Seller shall pay to the Buyer the cost of the quantities thereof
consumed during the sea trial at the original purchase price. In
measuring
the consumed quantity, lubricating oils and greases remaining in
the main
engine, other machinery, their sumps and pipes, stern tube and the
like,
shall be excluded. Payment therefore shall be effected as provided
in
Paragraph 2 of Article II hereof. The specifications of fuel oil,
lubricating oils and greases shall be in accordance with the
Specifications and also the instruction of the
Builder.
|
4. |
Method
of Acceptance or Rejection
:
|
(a)
|
Upon
completion of the sea trial, the Builder shall give the Buyer’s
Representative a sea trial report containing the results of all tests
performed during such trial as per the Specification (“the Sea Trial
Reports”). Thereafter the Buyer shall, within three (3) days after receipt
of such report from the Builder, notify the Seller and the Builder
by
cable confirmed in writing of its acceptance or rejection of the
Vessel.
|
(b)
|
If
the Buyer rejects the Vessel, the Buyer shall indicate in its notice
in
what respect the Vessel or any part thereof does not conform to this
Contract and/or the Specifications. If the Seller and the Builder
are in
agreement with the Buyer’s contention as to such non-conformity, the
Builder shall make such alterations or corrections as may be necessary
to
rectify such non-conformity and shall arrange a further sea trial
or test
whichever is appropriate to demonstrate that the Vessel conforms
to the
Specifications to be attended by the Buyer’s Representative and/or his
assistants and/or Class Representative. Following the Sea Trial or
test
the Builder shall deliver to the Buyer an amended Sea Trial Report
or a
report of the test results whichever is applicable. The Buyer shall,
within three (3) Business Days after receipt of such amended Sea
Trial
Report notify the Seller of its acceptance or rejection of the Vessel.
If
the Buyer rejects the Vessel, the Buyer shall indicate in its notice
in
what respect the Vessel or any part thereof does not conform to this
Contract and/or the Specifications. The Buyer shall accept the Vessel
after repair of the Vessel and successful testing or sea trial as
above.
|
(c)
|
If
the Buyer fails to notify the Seller or the Builder in writing of
its
acceptance or rejection of the Vessel together with the reasons therefore
within the period as provided in the above Sub-paragraph (a), the
Buyer
shall be deemed to have accepted the Vessel.
|
(d)
|
Any
dispute arising between the parties hereto as the Vessel’s conformity or
non-conformity to requirements of this Contract and/or the Specifications
shall be resolved in accordance with the provisions of Article XIII
hereof.
|
5. |
Effect
of Acceptance
:
|
6. |
Disposition
of Remaining Consumable Stores
:
|
1. |
Time
and Place
:
|
2. |
When
and How Effected
:
|
3. |
Documents
to be Delivered to Buyer
:
|
(i)
|
The
Builder shall deliver to the Buyer at least twenty-one (21) days
prior to
the proposed delivery date of the Vessel the duly notarized and apostilled
Builder’s Certificate.
|
(ii)
|
Upon
delivery and acceptance of the Vessel, the Seller shall deliver to
the
Buyer the following documents, which shall accompany the aforementioned
Protocol of Delivery and Acceptance.
|
(a)
|
Protocol
of Trials of the Vessel made in accordance with the Sea Trial Report
pursuant to the Specifications.
|
(b)
|
Protocol
of Inventory of the equipment of the Vessel, including spare parts
and the
like, all as specified in the Specifications.
|
(c)
|
Protocol
of Stores of Consumable Nature made pursuant to Article VI
hereof.
|
(d)
|
Drawings
and Plans pertaining to the Vessel as stipulated in the
Specifications.
|
(e)
|
All
Certificates other than the Builder’s Certificate to be furnished pursuant
to this Contract and the Specifications.
|
It
is agreed that if, through no fault on the part of the Seller and
the
Builder, the classification certificate and/or other certificates
are not
available at the time of delivery of the Vessel, provisional certificates
shall be accepted by the Buyer, provided that the Builder shall furnish
the Buyer with the formal certificates as promptly as possible after
such
formal certificates have been
issued.
|
(f)
|
Declaration
of Warranty of the Seller and/or the Builder that the Vessel is delivered
to the Buyer free and clear of any liens, charges, claims, mortgages,
or
other encumbrances upon the Buyer’s title thereto, and in particular, that
the Vessel is absolutely free of all burdens in the nature of imposts,
taxes or charges imposed by any authority of the prefecture or country
of
the port of delivery, as well as of all liabilities of the Builder
to its
subcontractors, employees and crew, and of all liabilities arising
out of
the operation of the Vessel in the sea trial, or otherwise, prior
to
delivery and acceptance thereof.
|
(g)
|
Commercial
Invoice
|
(h)
|
Bill
of Sale duly notarized and apostilled in the form required by the
laws of
the country under the flag of which the Vessel is to be
registered.
|
(i)
|
A
certificate confirming that no registration of the Vessel has been
effected by the Builder or the Seller prior to delivery and acceptance
of
the Vessel by the Buyer.
|
(j)
|
Certificate
certifying the lightship weight of the
Vessel.
|
4. |
Title
and Risk
:
|
5. |
Removal
of Vessel
:
|
1. |
Clauses
of Delay
:
|
2. |
Notice
:
|
3. |
Right
to Rescind for Excessive Permissible Delay
:
|
4. |
Right
to Rescind for Excessive Delay
:
|
5. |
Definition
of Permissible Delay
:
|
1. |
Warranty
and Warranty Period
:
|
2. |
Notice
of Defects
:
|
3. |
Extent
of Seller’s and Builder’s Liability
:
|
(a)
|
The
Seller and the Builder shall in no event be liable for any special
or
consequential losses, expenses or damages including but not limited
to
loss of time, loss of profit or loss of earning (whether of the Vessel,
its master, officers or crew, or of the Buyer, its officers, agents
or
employees) or demurrage or towing or pilot charges or dockage incurred
by
the Buyer by reason of any defects specified in Paragraph 1 of this
Article.
|
(b)
|
The
Seller and the Builder shall in no event be liable for any damage
to the
Vessel, or any part of equipment thereof, caused or aggravated by
perils
of the sea, inland waters or navigation, or by normal wear and tear
or
depreciation, or by fire or other accident on board or ashore, or
by
improper maintenance, negligence or willful conduct on the part of
the
|
Buyer,
its employees or agents, or any other persons other than the Seller
and
the Builder, its employees or subcontractors engaged in work upon
the
Vessel.
|
|
(c)
|
The
Seller and the Builder shall in no event be liable for any defect
in or
damage to the Vessel, or any part or equipment thereof, caused or
aggravated by repairs, alterations, additions or renewals other than
those
made by the Builder. Promptly after making of any repairs to the
Vessel
during the Warranty Period by any party other than the Seller and
the
Builder, the Buyer shall give the Seller and the Builder prompt written
notice containing particulars as to the nature of such repairs,
accompanied by the report of an independent surveyor or a classification
surveyor.
|
4. |
Remedy
of Defects Covered by Warranty
:
|
(a)
|
The
Seller or the Builder shall, at its expense, remedy any defects covered
by
the Warranty by repairing or replacing the defective part or parts
at the
Shipyard, or at any other repair facility of the Builder in Japan,
at the
Builder’s option.
|
(b)
|
If
it is impracticable to bring the Vessel to Japan for remedy of defects
under the Warranty, the Buyer may cause necessary repairs or replacements
to be made elsewhere suitable for the purpose, provided, however,
that the
Builder may furnish, or cause to be furnished, replacement parts
or
materials at its own expense, if to do so would not unduly affect
the
operation of the Vessel. Prior to making of any such repairs other
than by
the Seller and the Builder, the Buyer shall give notice in writing
of the
nature of the proposed repairs and the scheduled time and place thereof
(except in an emergency, but in such event notice shall be given
as soon
as possible thereafter), and, if practicable, the Seller and/or the
Builder shall be given opportunity to verify the Buyer’s claim of defect
under the Warranty by sending a representative at its own expense.
If the
Seller and/or Builder fail to send a representative having been given
notice of the scheduled time and place of the repairs they will be
deemed
to have accepted them.
|
(c)
|
With
respect to any defect covered by the Warranty which is remedied elsewhere
than at the Shipyard or in other facility of the Builder in Japan,
the
Seller or Builder shall pay to the Buyer the Buyer’s cost thereof, not
exceeding the cost of providing the same remedy at the Shipyard (deducting
the cost of any replacement parts or materials actually furnished
by the
Seller and/or the Builder to the Buyer for making of such repairs),
such
payment to be made not later than sixty (60) days after submission
to the
Builder of repair invoices and other appropriate evidence to substantiate
the claim under the Warranty.
|
5. |
Freight
Charges
:
|
6. |
Conditions
of Warranty
:
|
(a)
|
The
Buyer shall exercise the care of a prudent shipowner in keeping the
Vessel
in good condition, working order and repairs, and shall use the Vessel,
its machinery and equipment only for the purpose intended and as
described
in this Contract during the Warranty Period.
|
(b)
|
The
Buyer shall follow the recommendations contained in operating and
maintenance manuals (in English language) provided by the Builder
prior to
delivery of the Vessel.
|
7. |
Warranty
to be Exclusive
:
|
8. |
Assignment
of Rights
:
|
9. |
Arbitration
:
|
1. |
Notice
:
|
2. |
Refund
to Buyer
:
|
3. |
Discharge
of Obligations
:
|
4. |
Refund
Guarantee
:
|
(a)
|
receipt
by the Buyer of all sums together with interest accrued thereon guaranteed
by the said Refund Guarantee; or
|
(b)
|
upon
acceptance by the Buyer of the delivery of the Vessel at the Shipyard
in
accordance with the terms of this
Contract,
|
1. |
Definition
of Default
:
|
(a)
|
If
any of the instalments due and payable before delivery of the Vessel
is
not paid to the Seller within five (5) Banking days (excluding Bank
Holidays in New York, London, Athens and Tokyo) after the Due Date
as
provided in Article II hereof; or
|
(b)
|
If
the instalment due and payable upon delivery of the Vessel is not
paid
concurrently with delivery of the Vessel as provided in Article
II
hereof;
or
|
(c)
|
If
the Buyer, when the Vessel is duly tendered for delivery by the Seller
in
accordance with the provisions of this Contract, fails to take delivery
of
the Vessel without specific and valid ground therefore under this
Contract.
|
2. |
Interest
and Charge
:
|
3. |
Effect
of Default
:
|
(a)
|
If
any default by the Buyer as provided hereinbefore occurs, the Expected
Delivery Date shall be automatically postponed for the period of
such
default by the Buyer.
|
(b)
|
If
any default by the Buyer continues for a period of fifteen (15) days,
the
Seller may, at its option, rescind this Contract by giving notice
of such
effect to the Buyer in writing.
|
Upon
dispatch by the Seller of such notice of rescission, this Contract
shall
be forthwith rescinded and terminated, and the Buyer’s Supplies, if any,
shall become the sole property of the
Seller.
|
In
the event of such rescission of this Contract, the Seller shall be
entitled to retain any instalment or instalments already paid by
the Buyer
to the Seller under this contract provided always that in the case
of the
sale of the Vessel the Seller shall take into account such instalments
in
accordance with the provisions of Paragraph 4 of this
Article.
|
4. |
Disposal
of Vessel
:
|
(a)
|
In
the event that this Contract is rescinded by the Seller under the
provisions of Paragraph 3 of this Article, the Seller may, at its
sole
discretion, either complete the Vessel and sell the same, or sell
the
Vessel in its incompleted state, free from any right or claim of
the
Buyer. Such sale of the Vessel by the Seller shall be by public auction
or
private contract if the sale by private contract is deemed in the
sole
judgment of the Seller to be more advisable and shall be made on
such
terms and conditions as the Seller shall deem fit without any liability
whatsoever upon the Seller for any loss or damage sustained by the
Buyer
as a result of such sale.
|
(b)
|
In
the event of sale of the Vessel in its completed state, the proceeds
of
sale received by the Seller shall be applied firstly to payment of
all
expenses attending such sale or otherwise incurred by the Seller
as a
result of the Buyer’s default and then to payment of the unpaid
instalments of the Contract Price and interest on such unpaid instalments
at the rate of ten percent (10%) per annum from the respective due
dates
thereof to the date of receipt of the proceeds.
|
(c)
|
In
the event of sale of the Vessel in its incompleted state, the proceeds
of
sale received by the Seller shall be applied firstly to all expenses
attending such sale or otherwise incurred by the Seller as a result
of the
Buyer’s default and then to payment of all costs and expenses of
construction of the Vessel incurred by the Seller less the instalments
already paid by the Buyer and compensation to the Seller for a reasonable
loss of profit due to rescission of this Contract.
|
(d)
|
In
either of the above events of sale, if the proceeds of sale exceeds
the
total amount against which such proceeds are to be applied as aforesaid,
the Seller shall pay the excess to the Buyer without interest, provided
that the amount of such payment to the Buyer shall in no event exceed
the
total amount of instalments already paid by the Buyer to the Seller
and
cost of the Buyer’s Supplies, if any.
|
(e)
|
If
the proceeds of sale are insufficient to pay such total amount, the
Buyer
shall promptly pay the deficiency to the Seller upon
demand.
|
1. |
Extent
of Insurance Coverage
:
|
2. |
Application
of Recovered Amount
:
|
(a) |
Partial
Loss
|
(b) |
Total
Loss
|
(i)
|
the
Builder shall proceed in accordance with the terms of this Contract,
in
which case the amount recovered under the said insurance policy shall
be
applied to the reconstruction of the Vessel’s damage, provided the parties
hereto shall have first agreed in writing as to such reasonable
postponement of the Expected Delivery Date and adjustment of other
terms
of this
|
(ii)
|
the
Seller shall refund immediately to the Buyer the amount of all instalments
paid to the Seller under this contract together with interest at
the rate
of five percent (5%) per annum, provided however that in the case
of such
total loss being due to causes described in Article VIII, Paragraph
1 no
interest shall be payable, whereupon this contract shall be rescinded
and
all rights, duties, liabilities and obligations of each of the parties
to
the other shall terminate
forthwith.
|
3. |
Termination
of Seller’s and Builder’s Obligation to Insure
:
|
1. |
Disputes
:
|
2. |
Arbitration
:
|
3. |
Alteration
of Expected Delivery Date
:
|
1. |
Taxes
and Duties Imposed in Japan
:
|
2. |
Taxes
and Duties Imposed outside Japan
:
|
1. |
Patents,
Trademarks and Copyrights
:
|
2. |
Specifications.
Plans and Drawings
:
|
1. |
Responsibility
of Buyer
:
|
(a)
|
The
Buyer shall, at its own risk, cost and expense, supply and deliver
to the
Builder all items of equipment and supplies specified in the
Specifications as being furnished by the Buyer (herein called the
“Buyer’s
Supplies”) at warehouses or other storages of the Shipyard or other places
designated by the Builder in the proper condition ready for installation
in or on the Vessel in accordance with the time schedule designated
by the
Builder.
|
(b)
|
In
order to facilitate installation by the Builder of the Buyer’s Supplies in
or on the Vessel, the Buyer shall furnish the Builder with necessary
specifications, plans, drawings, instruction books, manuals, test
reports
and certificates required by the rules and regulations. The Buyer,
if so
requested by the Builder, shall, without any charge to the Builder,
cause
the representative of the manufacturers of the Buyer’s Supplies to assist
the Builder in installation thereof in or on the Vessel and/or to
carry
out installation thereof by themselves and/or to make necessary
adjustments thereof at the Shipyard or other places designated by
the
Builder.
|
(c)
|
Any
and all of the Buyer’s Supplies shall be subject to the Seller’s and/or
the Builder’s reasonable right of rejection, as and if they are found to
be unsuitable or in improper condition for installation. However,
if so
requested by the Buyer, the Seller may cause the Builder to repair
or
adjust the Buyer’s Supplies without prejudice to the Seller’s and the
Builder’s other rights hereunder and without being responsible for any
consequences therefrom. In such case, the Buyer shall reimburse the
Seller
and/or the Builder for all costs and expenses incurred by the Seller
and/or the Builder in such repair or adjustment and the Expected
Delivery
Date shall be automatically extended for a period of time necessary
for
such repair or replacement.
|
(d)
|
Should
the Buyer fail to deliver any of the Buyer’s Supplies within the time
designated, and as a result of this delay the Builder cannot deliver
the
vessel on the Expected Delivery Date, the Expected Delivery Date
shall be
postponed by the period of the actual delay caused by the delay in
delivery of the Buyer’s Supplies.
|
If
delay in delivery of any of the Buyer’s Supplies exceeds thirty (30) days,
then, the Seller and/or the Builder shall be entitled to proceed
with
construction of the Vessel without installation thereof in or on
the
Vessel and the Buyer shall accept and take delivery of the Vessel
so
constructed, unless otherwise mutually agreed upon between the parties
hereto.
|
2. |
Responsibility
of Seller and/or Builder
:
|
3. |
Running
Spares, Stores, Provisions and Other Supplies
:
|
To
the Buyer:
|
ENIAPROHI
SHIPPING CORPORATION
c/o
SAFETY MANAGEMENT OVERSEAS S.A.
32
AVENUE KARAMANLI
P.O.BOX
70837
GR-16605
VOULA
Phone:
+30
210 895 7070
Fax:
+30
210 895 6900
|
To
the Seller:
|
ITOCHU
Corporation
5-1,
Kita-Aoyama 2-Chome, Minato-ku,
Tokyo
107-8077, Japan
Attention:
Marine
Group No.1 of Marine Department
TOKBR
Section
Phone:
81-3-3497-2963
Fax
:
81-3-3497-7111
|
1.
|
This
Contract shall become effective on the date of execution hereof.
Notwithstanding the foregoing, in the event that the Construction
Permit
for the Vessel is not obtained from the Japanese Government prior
to
keel-laying of the Vessel (i.e. the first structural assembly of
the
Vessel has been placed in the building dock or on the building berth),
then, this Contract shall automatically become null and void, unless
otherwise mutually agreed upon in writing between the parties hereto
and
the parties hereto shall be immediately and completely discharged
from all
of their obligations to each other under this Contract as though
this
Contract had never been entered into at all. In such event, the Seller
shall refund to the Buyer full amount of the First Instalment as
defined
in Article II of this Contract together with interest at the rate
of six
percent (6%) per annum from the date of receipt of such amounts by
the
Seller until the date of refund thereof within thirty (30) days after
the
date on which this Contract shall have become null and
void.
|
(a)
|
the
cessation of the carrying on of business or the filing of a petition
or
the making of an order or the passing of an effective resolution
for the
winding-up of or the appointment of a receiver of the undertaking
or
property of, or the insolvency of, the Seller or the Builder unless
(i)
the Builder or the Seller (whichever is relevant) provide to the
Buyer
within forty five (45) days of written notice from the Buyer evidence
that
it remains able to complete the Vessel in accordance with the terms
of
this Contract and (ii) such evidence is accepted in the fair judgement
of
the Buyer, or
|
(b)
|
the
placing of the Seller or the Builder under court protection or analogous
proceedings or corporate reorganization unless (i) the Builder or
the
Seller (whichever is relevant) provide to the Buyer within one hundred
and
twenty (120) days of written notice from the Buyer evidence that
it
remains able to complete the Vessel in accordance with the terms
of this
Contract and (ii) such evidence is accepted in the fair judgement
of the
Buyer.
|
1. |
Laws
and Regulations Applicable
:
|
2. |
Discrepancies
:
|
3. |
Entire
Agreement
:
|
Buyer:
|
Seller:
|
|
/s/George
Papadopoulos
|
/s/
Y. Nishimuro
|
|
ENIAPROHI
SHIPPING CORPORATION
|
ITOCHU
CORPORATION
|
|
George
Papadopoulos
|
Y.
Nishimuro
|
|
By:
|
By:
|
|
Title:
Attorney-in-fact
|
Title:
Attorney-in-fact
|
|
Witness:
|
Witness:
|
|
/s/
L.N. Barbaris
|
/s/
H. Fujimoto
|
|
By:
|
By:
|
|
Name:
L.N. Barbaris
|
Name:
H. Fujimoto
|
|
Title:
|
Title:
|
The
Builder
|
The
Buyer
|
|
Authorised
Representative
|
Authorised
Representative
|
|
For
and on behalf of
The
Classification Society
Dated
|
Dated: _______________________________
|
By:
|
Title:
|
PAGE
|
|||
PREAMBLE
|
P-1
|
||
ARTICLE
I – SPECIFICATIONS AND CLASS OF VESSEL
|
|||
1.
|
Specifications
|
P-2
|
|
2.
|
Principal
Particulars
|
P-2
|
|
3.
|
Class
and Rules
|
P-3
|
|
4.
|
Places
of Assembly and Construction
|
P-4
|
|
5.
|
Subcontracting
|
P-4
|
|
6.
|
Registration
of Vessel
|
P-4
|
|
7.
|
Obligations
of the Builder
|
P-4
|
|
ARTICLE
II – CONTRACT PRICE AND TERMS OF PAYMENT
|
|||
1.
|
Contract
Price
|
P-5
|
|
2.
|
Adjustment
of Contract Price
|
P-5
|
|
3.
|
Currency
|
P-5
|
|
4.
|
Due
Date and Due Amount of Payment
|
P-5
|
|
5.
|
Method
of Payment
|
P-6
|
|
6.
|
Notice
of Payment
|
P-7
|
|
7.
|
Performance
Guarantee
|
P-7
|
|
8.
|
Prepayment
|
P-8
|
|
ARTICLE
III – ADJUSTMENT OF CONTRACT PRICE
|
|||
1.
|
Delayed
Delivery
|
P-9
|
|
2.
|
Insufficient
Speed
|
P-10
|
|
3.
|
Excessive
Fuel Consumption
|
P-10
|
|
4.
|
Deficiency
in Deadweight
|
P-10
|
|
5.
|
Duty
to Mitigate
|
P-11
|
|
6.
|
Expedited
Delivery
|
P-11
|
|
ARTICLE
IV – MODIFICATIONS AND CHANGES
|
|||
1.
|
Modifications
to Specifications
|
P-12
|
|
2.
|
Changes
in Class, etc
|
P-12
|
|
3.
|
Substitution
of Materials
|
P-13
|
EXHIBIT “A” – Stage Certificate |
EXHIBIT “B” – Performance Guarantee |
EXHIBIT “C” – Refund Guarantee |
1.
|
Specifications
:
|
2.
|
Principal
Particulars:
|
(a)
|
Hull:
|
Length
overall
|
approx.
229.00 m
|
|
Length
between perpendiculars
|
219.90
m
|
|
Breadth,
moulded
|
36.50
m
|
|
Depth,
moulded
|
19.90
m
|
|
Designed
draught, moulded
|
12.40
m
|
|
Scantling
draught, moulded
|
14.10
m
|
(b)
|
Propelling
Machinery:
|
Type
|
DU
WARTSILA 6RTA58T
|
|
No.
of Set
|
One
(1)
|
|
Normal
Output
|
8,550
KW at about 89.3 RPM
|
|
Maximum
Continuous Output
|
10,300 KW at about 95.0 RPM
|
(c)
|
Deadweight
:
|
(d)
|
Speed:
|
(e)
|
Fuel
Consumption:
|
3.
|
Class
and Rules:
|
4.
|
Places
of Assembly and Construction :
|
5.
|
Subcontracting:
|
6.
|
Registration
of Vessel:
|
7.
|
Obligations
of the Builder:
|
1.
|
Contract
Price :
|
2.
|
Adjustment
of Contract Price :
|
3.
|
Currency
:
|
4.
|
Due
Date and Due Amount of Payment
|
(a)
|
First
Instalment:
|
(b)
|
Second
Instalment
|
(c)
|
Third
Instalment:
|
(d)
|
Fourth
Instalment:
|
(e)
|
Fifth
Instalment:
|
5.
|
Method
of Payment:
|
(a)
|
First
Instalment:
|
(b)
|
Second
Instalment:
|
(c)
|
Third
Instalment:
|
(d)
|
Fourth
Instalment
|
(e)
|
Fifth
Instalment:
|
6.
|
Notice
of Payment:
|
7.
|
Performance
Guarantee:
|
8.
|
Prepayment:
|
1.
|
Delayed
Delivery:
|
(a)
|
No
adjustment shall be made and the Contract Price shall remain unchanged
for
the first thirty (30) days of delay in delivery of the Vessel beyond
the
Expected Delivery Date (as defined in Article VII hereof) as postponed
and/or extended under the provisions of this Contract (ending as
of twelve
o’clock midnight of the thirtieth (30th) day of
delay).
|
(b)
|
If
delivery of the Vessel is delayed more than thirty (30) days after
the
Expected Delivery Date as postponed and/or extended under the provisions
of this Contract, the Contract Price shall be reduced by deducting
therefrom the amount of One Million One Hundred Eighty Three Thousand
Japanese Yen (JPY1,183,000) for each day of delay over the aforesaid
grace
of thirty (30) days. However, the maximum reduction in the Contract
Price
shall in no event be more than the amount in the case of a delay
of one
hundred eighty (180) days after the aforesaid grace of thirty (30)
days.
|
(c)
|
If
delay in delivery of the Vessel continues for a period of one hundred
eighty (180) days from the thirty-first (31st) day after the Expected
Delivery Date as postponed and/or extended under the provisions of
this
Contract, then, the Buyer shall have the option either to accept
the
Vessel at a maximum reduction in the Contract Price as above provided
or
to rescind this Contract in accordance with the provisions of Article
X
hereof as alternative to receiving the aforesaid liquidated damages.
At
any time after the expiry of the aforementioned one hundred eighty
(180)
day period of delay in delivery the Seller may, if the Buyer has
not
served notice of rescission, propose a new delivery date and demand
in
writing that the Buyer shall make an election, in which case the
Buyer
shall, within fifteen (15) days after such proposal and demand is
received
by the Buyer, notify the Seller of its intention either to rescind
this
Contract or to consent to delivery of the Vessel at a future date
to be
mutually agreed failing which it will be deemed that it has elected
that
the delivery of the Vessel takes place on the proposed new delivery
date;
it being understood and agreed upon by the parties hereto that (i)
if the
Buyer does not elect to rescind the Contract it shall be without
prejudice
to its right to accrued liquidated damages; and (ii) if the Vessel
is not
delivered by such future date (agreed or proposed), the Buyer shall
have
the same right of rescission to take effect immediately after the
said
further date upon the same terms as hereinabove
provided.
|
(d)
|
For
the purpose of this Article, the delivery of the Vessel shall be
deemed to
be delayed when and if the Vessel, after taking into full account
all
postponements of the Expected Delivery Date by reason of permissible
delays defined in Article VIII hereof and/or extension of the Expected
Delivery Date by other reasons under this Contract, is not delivered
by
the Expected Delivery Date so postponed or
extended.
|
2.
|
Insufficient
Speed:
|
(a)
|
The
Contract Price shall not be affected or changed by reason of the
trial
speed, as determined in accordance with the Specifications, being
less
than the Guaranteed Speed, if such deficiency is not more than
three-tenths (3/10) of a knot.
|
(b)
|
However,
if such deficiency is-more than three-tenths (3/10) of a knot, then,
the
Contract Price shall be reduced by deducting therefrom the amount
of Seven
Million One Hundred Thousand Japanese Yen (JPY7,100,000) per one-tenth
(1/10) of a knot or deficiency over the aforesaid grace of three-tenths
(3/10) of a knot (fractions of one-tenth (1/10) of a knot to be prorated).
However, the maximum reduction in the Contract Price shall in no
event be
more than the amount in the case of a deficiency of seven-tenths
(7/10) of
a knot below the Guaranteed Speed.
|
(c)
|
If
deficiency in the trial speed of the Vessel (as so determined) is
more
than seven-tenths (7/10) of a knot below the Guaranteed Speed, then,
the
Buyer shall have the option either to accept the Vessel at a maximum
reduction in the Contract Price as above provided or to reject the
Vessel
and to rescind this Contract in accordance with provisions of
Article X hereof as alternative to receiving the aforesaid liquidated
damages.
|
3.
|
Excessive
Fuel Consumption:
|
(a)
|
The
Contract Price shall not be affected or changed, by reason of the
fuel
consumption of the main engine, as determined in accordance with
the
Specifications, being more than the Guaranteed Fuel Consumption,
if such
excess is not more than three percent (3%) over the Guaranteed Fuel
Consumption.
|
(b)
|
However,
if such excess is more than three percent (3%), then, the Contract
Price
shall be reduced by deducting therefrom the amount of Seven Million
One
Hundred Thousand Japanese Yen (JPY7,100,000) for each one percent
(1%)
increase in fuel consumption above the aforesaid grace of three percent
(3%) (fractions of one percent (1%) to be prorated). However, the
maximum
reduction in the Contract Price shall in no event be more than the
amount
in the case of an excess of eight percent (8%) over the aforesaid
Guaranteed Fuel Consumption.
|
(c)
|
If
the fuel consumption of the main engine exceeds the Guaranteed Fuel
Consumption by more than eight percent (8%), then, the Buyer shall
have
the option either to accept the Vessel at a maximum reduction in
the
Contract Price as above provided or to reject the Vessel and to rescind
this Contract in accordance with provisions of Article X hereof as
alternative to receiving the aforesaid liquidated
damages.
|
4.
|
Deficiency
in Deadweight:
|
(a)
|
The
Contract Price shall not be affected or changed by reason of the
deadweight of the Vessel, as determined in accordance with the
Specifications, being less
|
|
than
the Guaranteed Deadweight, if such deficiency is not more than
800 metric
tons of the Guaranteed Deadweight.
|
(b)
|
However,
if such deficiency is more than 800 metric tons, the Contract Price
shall
be reduced by deducting therefrom the amount of Fifty Five Thousand
Two
Hundred Japanese Yen (JPY55,200) for each full metric ton of such
deficiency over the aforesaid grace of 800 metric tons (in this case
disregarding fractions of one (1) metric
ton).
|
(c)
|
In
the event that such deficiency in the Vessel’s deadweight is more than
1,800 metric tons the Buyer shall have the option either to accept
the
Vessel at a maximum reduction in the contract Price as above provided
or
to reject the Vessel and to rescind this Contract in accordance with
provisions of Article X hereof as alternative to receiving the aforesaid
liquidated damages.
|
5.
|
Duty
to Mitigate :
|
6.
|
Expedited
Delivery :
|
(a)
|
If
the Buyer requests in writing that the delivery of the Vessel be
made
earlier than the Expected Delivery Date and if the Vessel is delivered,
in
response to such request of the Buyer, then, in such event, the Contract
Price shall be increased by adding thereto the amount of One Million
One
Hundred Eighty Three Thousand Japanese Yen (JPY1,183,000) for each
day
that such earlier delivery is effected in advance of the Expected
Delivery
Date or from an earlier delivery date as declared in writing by the
Seller
to the Buyer if such earlier delivery date is already declared before
being so requested by the Buyer; it being understood that acceptance
by
the Seller of the Buyer’s request for earlier delivery shall, in no way,
be construed as change of the Expected Delivery
Date.
|
(b)
|
Should
the Builder deliver the Vessel earlier than the Expected Delivery
Date
without request by the Buyer, the Buyer shall accept such earlier
delivery
of the Vessel, always provided that the Seller or the Builder has
given
the Buyer three (3) months notice in writing or by fax or telex of
the
proposed earlier delivery date.
|
1.
|
Modifications
to Specifications :
|
(a)
|
Upon
the Buyer’s request in writing, the Specifications may be modified and /or
changed provided that such modifications or changes or an accumulation
of
such modifications or changes will in the Builder’s reasonable judgment
neither adversely affect the Builder’s design of the Vessel nor adversely
affect the Builder’s construction schedule of the Vessel or program in
relation to the Builder’s other binding commitments, provided always that
the Buyer shall first agree, before such modifications or changes
are
carried out, to adjustments reasonably required by the Seller and/or
the
Builder to the Contract Price, the Expected Delivery Date, the Guaranteed
Speed, the Guaranteed Fuel Consumption, the Guaranteed Deadweight
and/or
other terms and conditions of this Contract and the Specifications, if
any, caused by such modifications or changes. Such modifications
or
changes and adjustment shall be confirmed by written agreement between
the
parties hereto, or by exchange of fax messages and thereafter effected
by
the Builder. The Builder will exert its best efforts to accommodate
such
request of the Buyer so that the said changes and modifications shall
be
made at the Builder’s lowest possible cost and within the shortest period
of time as is reasonably possible.
|
(b)
|
Without
impairing the intent of the Specifications, the Builder may make
minor
modifications or changes to the Specifications if found necessary
for the
introduction of improved design, construction methods or otherwise,
provided that there shall be no change in the Contract Price as a
result
of such changes unless otherwise agreed upon between the parties
hereto
and that the Seller shall first obtain the Buyer’s approval in writing
which shall not be unreasonably
withheld.
|
2.
|
Changes
in Class, etc.:
|
(a)
|
If,
after the date of this Contract, any requirements as to class, to
which
the construction of the Vessel is required to conform, are altered
or
changed by the Classification Society, and the classification certificate
cannot be obtained without conformity with such alterations or changes,
then, any Party (including the Builder) who becomes aware of the
change
shall forthwith transmit such information in full to the other in
writing
and then the Builder shall promptly incorporate such alterations
or
changes into the construction of the Vessel, provided that the Buyer
shall
first agree to adjustments reasonably required by the Seller and/or
the
Builder in the Contract Price, the Expected Delivery Date, the Guaranteed
Speed, the Guaranteed Fuel Consumption, the Guaranteed Deadweight
and
other terms and conditions of this Contract and the Specifications,
if
any, caused by the application of such alterations or
changes.
|
(b)
|
If,
after the date of this Contract, any requirements under the rules
and
regulations other than those of the Classification Society, to which
the
construction of the Vessel is required in the Specifications to conform,
are altered or changed by the regulatory bodies authorized to make
such
alterations or changes, and the certificates of such regulatory bodies
cannot be obtained without conformity with such alterations or changes,
then any Party (including the Builder) who becomes aware of the change
shall forthwith transmit such information in full to the other in
writing
and then the Builder shall promptly incorporate such alterations
or
changes into the construction of the Vessel, provided that the Buyer
shall
first agree to the adjustment reasonably required by the Seller and/or
the
Builder in the Contract Price, the Expected Delivery Date, the Guaranteed
Speed, the Guaranteed Fuel Consumption, the Guaranteed Deadweight
and
other terms and conditions of this Contract and the Specifications
if any,
caused by the application of such alterations or
changes.
|
(c)
|
If,
after the date of this Contract, any requirements as to class, or
under
the other rules and regulations which are irrelevant to or unnecessary
in
obtaining the classification certificates or the certificates of
such
other regulatory bodies are altered or changed by the Classification
Society or such other regulatory bodies, and the Buyer desires to
incorporate such alterations or changes into the construction of
the
Vessel, then, the Buyer shall give a written notice of such intention
to
the Seller and the Builder. The Builder will in the Builder’s reasonable
judgement accept such alterations or changes, if those alterations
or
changes will neither adversely affect the Builder’s design of the Vessel
nor adversely affect the Builder’s construction schedule of the Vessel
and/or program in relation to the Builder’s other binding commitments,
provided always that the Buyer shall first agree to adjustments reasonably
required by the Seller and/or the Builder in the Contract Price,
the
Expected Delivery Date, the Guaranteed Speed, the Guaranteed Fuel
Consumption, the Guaranteed Deadweight and other terms and conditions
of
this Contract and the Specifications, if any, caused by application
of
such alterations or changes.
|
3.
|
Substitution
of Materials :
|
1.
|
Appointment
of Buyer’s Representative :
|
2.
|
Approval
of Drawings :
|
(a)
|
The
Builder shall submit to the Head Office of the Buyer at its address
as set
out in Article XVIII for its approval three (3) copies each of the
drawings listed in the Specifications in hard copy. The Buyer shall,
as
soon as possible but within twenty one (21) days after dispatch thereof
by
the Builder at the latest, return to the Builder one (1) copy of
such
drawings with its approval or comments written thereon. Any alteration
to
the specifications resulting from such comments shall be dealt with
in
accordance with Article IV hereof. A list of the Plans and Drawings
to be
so submitted to the Buyer and the order of submission thereof shall
be
mutually agreed upon between the Builder and the
Buyer.
|
(b)
|
In
the event that the Buyer shall fail to return the drawings to the
Builder
within the time limit hereinabove provided, the said drawings shall
be
deemed to have been approved without any
comments.
|
3.
|
Inspection
by Buyer :
|
4.
|
Facilities
:
|
5.
|
Liability
of Seller and/or Builder:
|
6.
|
Responsibility
of Buyer :
|
(a)
|
The
Buyer undertakes and assures that the Representative shall attend
tests
and inspections in the manner provided in the Inspection Standards
and
also in such a way as will neither increase building costs nor cause
delay
or disturbance in the construction and delivery of the
Vessel.
|
(b)
|
In
the event that the Seller and/or the Builder considers any act or
acts of
the Representative to be an abuse of his or the Buyer’s rights under the
terms of this Contract, the Seller and/or the Builder may request
the
Buyer to replace such Representative by written notice, whereupon
the
Buyer shall investigate the matter and if such Seller’s and/or Builder’s
request is found justified, the Buyer shall effect such
replacement.
|
(c)
|
The
Buyer may not entrust the approval of plans and drawings or attendance
to
the inspections, tests and trials to any firm(s) or person(s) outside
its
organization unless prior written consent of the Seller and/or the
Builder
are given.
|
1.
|
Notice
:
|
2.
|
Weather
Condition :
|
3.
|
How
Conducted :
|
(a)
|
All
expenses in connection with the sea trial of the Vessel shall be
for the
account of the Builder who during the sea trial shall provide necessary
crew for safe navigation. The sea trial shall be conducted by the
Builder
in Japanese waters in the manner prescribed in the
Specifications.
|
(b)
|
Notwithstanding
the foregoing, fuel oil, lubricating oils and greases necessary for
the
sea trial of the Vessel shall be supplied by the Buyer at the Shipyard
at
the time designated by the Builder prior to the sea trial, and the
Seller
shall pay to the Buyer the cost of the quantities thereof consumed
during
the sea trial at the original purchase price. In measuring the consumed
quantity, lubricating oils and greases remaining in the main engine,
other
machinery, their sumps and pipes,
|
|
stern
tube and the like, shall be excluded. Payment therefore shall be
effected
as provided in Paragraph 2 of Article II hereof. The specifications
of
fuel oil, lubricating oils and greases shall be in accordance with
the
Specifications and also the instruction of the
Builder.
|
4.
|
Method
of Acceptance or Rejection
|
(a)
|
Upon
completion of the sea trial, the Builder shall give the Buyer’s
Representative a sea trial report containing the results of all tests
performed during such trial as per the Specification (“the Sea Trial
Reports”). Thereafter the Buyer shall, within three (3) days after receipt
of such report from the Builder, notify the Seller and the Builder
by
cable confirmed in writing of its acceptance or rejection of the
Vessel.
|
(b)
|
If
the Buyer rejects the Vessel, the Buyer shall indicate in its notice
in
what respect the Vessel or any part thereof does not conform to this
Contract and/or the Specifications. If the Seller and the Builder
are in
agreement with the Buyer’s contention as to such non-conformity, the
Builder shall make such alterations or corrections as may be necessary
to
rectify such non-conformity and shall arrange a further sea trial
or test
whichever is appropriate to demonstrate that the Vessel conforms
to the
Specifications to be attended by the Buyer’s Representative and/or his
assistants and/or Class Representative. Following the Sea Trial or
test
the Builder shall deliver to the Buyer an amended Sea Trial Report
or a
report of the test results whichever is applicable. The Buyer shall,
within three (3) Business Days after receipt of such amended Sea
Trial
Report notify the Seller of its acceptance or rejection of the Vessel.
If
the Buyer rejects the Vessel, the Buyer shall indicate in its notice
in
what respect the Vessel or any part thereof does not conform to this
Contract and/or the Specifications. The Buyer shall accept the Vessel
after repair of the Vessel and successful testing or sea trial as
above.
|
(c)
|
If
the Buyer fails to notify the Seller or the Builder in writing of
its
acceptance or rejection of the Vessel together with the reasons therefore
within the period as provided in the above Sub-paragraph (a), the
Buyer shall be deemed to have accepted the
Vessel.
|
(d)
|
Any
dispute arising between the parties hereto as the Vessel’s conformity or
non-conformity to requirements of this Contract and/or the Specifications
shall be resolved in accordance with the provisions of Article XIII
hereof.
|
5.
|
Effect
of Acceptance
|
6.
|
Disposition
of Remaining Consumable Stores :
|
1.
|
Time
and Place :
|
2.
|
When
and How Effected :
|
3.
|
Documents
to be Delivered to Buyer :
|
(i)
|
The
Builder shall deliver to the Buyer at least twenty-one (21) days
prior to
the proposed delivery date of the Vessel the duly notarized and apostilled
Builder’s Certificate.
|
(ii)
|
Upon
delivery and acceptance of the Vessel, the Seller shall deliver to
the
Buyer the following documents, which shall accompany the aforementioned
Protocol of Delivery and
Acceptance.
|
(a)
|
Protocol
of Trials of the Vessel made in accordance with the Sea Trial Report
pursuant to the Specifications.
|
(b)
|
Protocol
of Inventory of the equipment of the Vessel, including spare parts
and the
like, all as specified in the
Specifications.
|
(c)
|
Protocol
of Stores of Consumable Nature made pursuant to Article VI
hereof.
|
(d)
|
Drawings
and Plans pertaining to the Vessel as stipulated in the
Specifications.
|
(e)
|
All
Certificates other than the Builder’s Certificate to be furnished pursuant
to this Contract and the
Specifications.
|
(f)
|
Declaration
of Warranty of the Seller and/or the Builder that the Vessel is delivered
to the Buyer free and clear of any liens, charges, claims, mortgages,
or
other encumbrances upon the Buyer’s title thereto, and in particular, that
the Vessel is absolutely free of all burdens in the nature of imposts,
taxes or charges imposed by any authority of the prefecture or country
of
the port of delivery, as
|
|
well
as of all liabilities of the Builder to its subcontractors, employees
and
crew, and of all liabilities arising out of the operation of the
Vessel in
the sea trial, or otherwise, prior to delivery and acceptance
thereof.
|
(g)
|
Commercial
Invoice
|
(h)
|
Bill
of Sale duly notarized and apostilled in the form required by the
laws of
the country under the flag of which the Vessel is to be
registered.
|
(i)
|
A
certificate confirming that no registration of the Vessel has been
effected by the Builder or the Seller prior to delivery and acceptance
of
the Vessel by the Buyer.
|
(j)
|
Certificate
certifying the lightship weight of the
Vessel.
|
4.
|
Title
and Risk
|
5.
|
Removal
of Vessel :
|
1.
|
Clauses
of Delay :
|
2.
|
Notice:
|
3.
|
Right
to Rescind for Excessive Permissible
Delay:
|
4.
|
Right
to Rescind for Excessive Delay:
|
5.
|
Definition
of Permissible Delay:
|
1.
|
Warranty
and Warranty Period :
|
2.
|
Notice
of Defects :
|
3.
|
Extent
of Seller’s and Builder’s Liability
:
|
(a)
|
The
Seller and the Builder shall in no event be liable for any special
or
consequential losses, expenses or damages including but not limited
to
loss of time, loss of profit or loss of earning (whether of the Vessel,
its master, officers or crew, or of the Buyer, its officers, agents
or
employees) or demurrage or towing or pilot charges or dockage incurred
by
the Buyer by reason of any defects specified in Paragraph 1 of this
Article.
|
(b)
|
The
Seller and the Builder shall in no event be liable for any damage
to the
Vessel, or any part of equipment thereof, caused or aggravated by
perils
of the sea, inland waters or navigation, or by normal wear and tear
or
depreciation, or by fire or other accident on board or ashore, or
by
improper maintenance, negligence or willful conduct on the part of
the
Buyer, its employees or agents, or
|
(c)
|
The
Seller and the Builder shall in no event be liable for any defect
in or
damage to the Vessel, or any part or equipment thereof, caused or
aggravated by repairs, alterations, additions or renewals other than
those
made by the Builder. Promptly after making of any repairs to the
Vessel
during the Warranty Period by any party other than the Seller and
the
Builder, the Buyer shall give the Seller and the Builder prompt written
notice containing particulars as to the nature of such repairs,
accompanied by the report of an independent surveyor or a classification
surveyor.
|
4.
|
Remedy
of Defects Covered by Warranty
|
(a)
|
The
Seller or the Builder shall, at its expense, remedy any defects covered
by
the Warranty by repairing or replacing the defective part or parts
at the
Shipyard, or at any other repair facility of the Builder in Japan,
at the
Builder’s option.
|
(b)
|
If
it is impracticable to bring the Vessel to Japan for remedy of defects
under the Warranty, the Buyer may cause necessary repairs or replacements
to be made elsewhere suitable for the purpose, provided, however,
that the
Builder may furnish, or cause to be furnished, replacement parts
or
materials at its own expense, if to do so would not unduly affect
the
operation of the Vessel. Prior to making of any such repairs other than by
the Seller and the Builder, the Buyer shall give notice in writing
of the
nature of the proposed repairs and the scheduled time and place thereof
(except in an emergency, but in such event notice shall be given
as soon
as possible thereafter), and, if practicable, the Seller and/or the
Builder shall be given opportunity to verify the Buyer’s claim of defect
under the Warranty by sending a representative at its own expense.
If the
Seller and/or Builder fail to send a representative having been given
notice of the scheduled time and place of the repairs they will be
deemed
to have accepted them.
|
(c)
|
With
respect to any defect covered by the Warranty which is remedied elsewhere
than at the Shipyard or in other facility of the Builder in Japan,
the
Seller or Builder shall pay to the Buyer the Buyer’s cost thereof, not
exceeding the cost of providing the same remedy at the Shipyard (deducting
the cost of any replacement parts or materials actually furnished
by the
Seller and/or the Builder to the Buyer for making of such repairs),
such
payment to be made not later than sixty (60) days after submission
to the
Builder of repair invoices and other appropriate evidence to substantiate
the claim under the Warranty.
|
5.
|
Freight
Charges :
|
6.
|
Conditions
of Warranty :
|
(a)
|
The
Buyer shall exercise the care of a prudent shipowner in keeping the
Vessel
in good condition, working order and repairs, and shall use the Vessel,
its machinery and equipment only for the purpose intended and as
described
in this Contract during the Warranty
Period.
|
(b)
|
The
Buyer shall follow the recommendations contained in operating and
maintenance manuals (in English language) provided by the Builder
prior to
delivery of the Vessel.
|
7.
|
Warranty
to be Exclusive :
|
8.
|
Assignment
of Rights :
|
9.
|
Arbitration
:
|
1.
|
Notice
:
|
2.
|
Refund
to Buyer :
|
3.
|
Discharge
of Obligations :
|
4.
|
Refund
Guarantee
|
(a)
|
receipt
by the Buyer of all sums together with interest accrued thereon guaranteed
by the said Refund Guarantee; or
|
(b)
|
upon
acceptance by the Buyer of the delivery of the Vessel at the Shipyard
in
accordance with the terms of this
Contract,
|
1.
|
Definition
of Default :
|
(a)
|
If
any of the instalments due and payable before delivery of the Vessel
is
not paid to the Seller within five (5) Banking days (excluding Bank
Holidays in New York, London, Athens and Tokyo) after the Due Date
as
provided in Article II hereof; or
|
(b)
|
If
the instalment due and payable upon delivery of the Vessel is not
paid
concurrently with delivery of the Vessel as provided in Article II
hereof;
or
|
(c)
|
If
the Buyer, when the Vessel is duly tendered for delivery by the Seller
in
accordance with the provisions of this Contract, fails to take delivery
of
the Vessel without specific and valid ground therefore under this
Contract.
|
2.
|
Interest
and Charge :
|
3.
|
Effect
of Default :
|
(a)
|
If
any default by the Buyer as provided hereinbefore occurs, the Expected
Delivery Date shall be automatically postponed for the period of
such
default by the Buyer.
|
(b)
|
If
any default by the Buyer continues for a period of fifteen (15) days,
the
Seller may, at its option, rescind this Contract by giving notice
of such
effect to the Buyer in writing.
|
4.
|
Disposal
of Vessel :
|
(a)
|
In
the event that this Contract is rescinded by the Seller under the
provisions of Paragraph 3 of this Article, the Seller may, at its
sole
discretion, either complete the Vessel and sell the same, or sell
the
Vessel in its incompleted state, free from any right or claim of
the
Buyer. Such sale of the Vessel by the Seller shall be by public auction
or
private contract if the sale by private contract is deemed in the
sole
judgment of the Seller to be more advisable and shall be made on
such
terms and conditions as the Seller shall deem fit without any liability
whatsoever upon the Seller for any loss or damage sustained by the
Buyer
as a result of such sale.
|
(b)
|
In
the event of sale of the Vessel in its completed state, the proceeds
of
sale received by the Seller shall be applied firstly to payment of
all
expenses attending such sale or otherwise incurred by the Seller
as a
result of the Buyer’s default and then to payment of the unpaid
instalments of the Contract Price and interest on such unpaid instalments
at the rate of ten percent (10%) per annum from the respective due
dates
thereof to the date of receipt of the
proceeds.
|
(c)
|
In
the event of sale of the Vessel in its incompleted state, the proceeds
of
sale received by the Seller shall be applied firstly to all expenses
attending such sale or otherwise incurred by the Seller as a result
of the
Buyer’s default and then to payment of all costs and expenses of
construction of the Vessel incurred by the Seller less the instalments
already paid by the Buyer and compensation to the Seller for a reasonable
loss of profit due to rescission of this
Contract.
|
(d)
|
In
either of the above events of sale, if the proceeds of sale exceeds
the
total amount against which such proceeds are to be applied as aforesaid,
the Seller shall pay the excess to the Buyer without interest, provided
that the amount of such payment to the Buyer shall in no event exceed
the
total amount of instalments already paid by the Buyer to the Seller
and
cost of the Buyer’s Supplies, if
any.
|
(e)
|
If
the proceeds of sale are insufficient to pay such total amount, the
Buyer
shall promptly pay the deficiency to the Seller upon
demand.
|
1.
|
Extent
of Insurance Coverage :
|
2.
|
Application
of Recovered Amount :
|
(a)
|
Partial
Loss
|
(b)
|
Total
Loss
|
(i)
|
the
Builder shall proceed in accordance with the terms of this Contract,
in
which case the amount recovered under the said insurance policy shall
be
applied to the reconstruction of the Vessel’s damage, provided the parties
hereto shall have first agreed in writing as to such reasonable
postponement of the Expected Delivery Date and adjustment of other
terms
of this Contract including the Contract Price as may be necessary
for the
completion of such reconstruction;
or
|
(ii)
|
the
Seller shall refund immediately to the Buyer the amount of all instalments
paid to the Seller under this contract together with interest at
the rate
of five percent (5%) per annum, provided however that in the case
of such
total loss
|
|
being
due to causes described in Article VIII, Paragraph 1 no interest
shall be
payable, whereupon this contract shall be rescinded and all rights,
duties, liabilities and obligations of each of the parties to the
other
shall terminate forthwith.
|
3.
|
Termination
of Seller’s and Builder’s Obligation to Insure
:
|
1.
|
Disputes
:
|
2.
|
Arbitration
:
|
3.
|
Alteration
of Expected Delivery Date :
|
1.
|
Taxes
and Duties Imposed in Japan :
|
2.
|
Taxes
and Duties Imposed outside Japan
:
|
1.
|
Patents,
Trademarks and Copyrights :
|
2.
|
Specifications,
Plans and Drawings :
|
1.
|
Responsibility
of Buyer :
|
(a)
|
The
Buyer shall, at its own risk, cost and expense, supply and deliver
to the
Builder all items of equipment and supplies specified in the
Specifications as being furnished by the Buyer (herein called the
“Buyer’s
Supplies”) at warehouses or other storages of the Shipyard or other places
designated by the Builder in the proper condition ready for installation
in or on the Vessel in accordance with the time schedule designated
by the
Builder.
|
(b)
|
In
order to facilitate installation by the Builder of the Buyer’s Supplies in
or on the Vessel, the Buyer shall furnish the Builder with necessary
specifications, plans, drawings, instruction books, manuals, test
reports
and certificates required by the rules and regulations. The Buyer,
if so
requested by the Builder, shall, without any charge to the Builder,
cause
the representative of the manufacturers of the Buyer’s Supplies to assist
the Builder in installation thereof in or on the Vessel and/or to
carry
out installation thereof by themselves and/or to make necessary
adjustments thereof at the Shipyard or other places designated by
the
Builder.
|
(c)
|
Any
and all of the Buyer’s Supplies shall be subject to the Seller’s and/or
the Builder’s reasonable right of rejection, as and if they are found to
be unsuitable or in improper condition for installation. However,
if so
requested by the Buyer, the Seller may cause the Builder to repair
or
adjust the Buyer’s Supplies without prejudice to the Seller’s and the
Builder’s other rights hereunder and without being responsible for any
consequences therefrom. In such case, the Buyer shall reimburse the
Seller
and/or the Builder for all costs and expenses incurred by the Seller
and/or the Builder in such repair or adjustment and the Expected
Delivery
Date shall be automatically extended for a period of time necessary
for
such repair or replacement.
|
(d)
|
Should
the Buyer fail to deliver any of the Buyer’s Supplies within the time
designated, and as a result of this delay the Builder cannot deliver
the
vessel on the Expected Delivery Date, the Expected Delivery Date
shall be
postponed by the period of the actual delay caused by the delay in
delivery of the Buyer’s Supplies.
|
2.
|
Responsibility
of Seller and/or Builder :
|
3.
|
Running
Spares. Stores. Provisions and Other Supplies
:
|
To the Buyer : |
ENIADEFHI
SHIPPING CORPORATION
|
Phone : |
+30
210 895 7070
|
Fax : |
+30
210 895 6900
|
To the Seller : |
ITOCHU
Corporation
|
Attention : |
Marine
Group No.1 of Marine Department
|
Phone : |
81-3-3497-2963
|
Fax : |
81-3-3497-7111
|
1.
|
This
Contract shall become effective on the date of execution hereof.
Notwithstanding the foregoing, in the event that the Construction
Permit
for the Vessel is not obtained from the Japanese Government prior
to
keel-laying of the Vessel (i.e. the first structural assembly of
the
Vessel has been placed in the building dock or on the building berth),
then, this Contract shall automatically become null and void, unless
otherwise mutually agreed upon in writing between the parties hereto
and
the parties hereto shall be immediately and completely discharged
from all
of their obligations to each other under this Contract as though
this
Contract had never been entered into at all. In such event, the Seller
shall refund to the Buyer full amount of the First Instalment as
defined
in Article II of this Contract together with interest at the rate
of six
percent (6%) per annum from the date of receipt of such amounts by
the
Seller until the date of refund thereof within thirty (30) days after
the
date on which this Contract shall have become null and
void.
|
(a)
|
the
cessation of the carrying on of business or the filing of a petition
or
the making of an order or the passing of an effective resolution
for the
winding-up of or the appointment of a receiver of the undertaking
or
property of, or the insolvency of, the Seller or the Builder unless
(i)
the Builder or the Seller (whichever is relevant) provide to the
Buyer
within forty five (45) days of written notice from the Buyer evidence
that
it remains able to complete the Vessel in accordance with the terms
of
this Contract and (ii) such evidence is accepted in the fair judgement
of
the Buyer, or
|
(b)
|
the
placing of the Seller or the Builder under court protection or analogous
proceedings or corporate reorganization unless (i) the Builder or
the
Seller (whichever is relevant) provide to the Buyer within one hundred
and
twenty (120) days of written notice from the Buyer evidence that
it
remains able to complete the Vessel in accordance with the terms
of this
Contract and (ii) such evidence is accepted in the fair judgement
of the
Buyer.
|
1.
|
Laws
and Regulations Applicable :
|
2.
|
Discrepancies
:
|
3.
|
Entire
Agreement :
|
The
Builder
|
The
Buyer
|
||
|
|
||
Authorised
Representative
|
Authorised
Representative
|
INDEX
|
PAGE
|
||
PREAMBLE
|
5
|
||
ARTICLE
I - DESCRIPTION AND CLASS
|
5 | ||
1.
|
Description:
|
5
|
|
2.
|
Class
and Rules:
|
6
|
|
3.
|
Principal
Particulars of the VESSEL:
|
7
|
|
4.
|
Subcontracting
Construction outside Builder’s Premise:
|
8
|
|
5.
|
Registration:
|
8
|
|
ARTICLE
II - CONTRACT PRICE AND TERMS OF PAYMENT
|
10
|
||
1.
|
Contract
Price:
|
10
|
|
2.
|
Adjustment
of Contract Price:
|
10
|
|
3.
|
Currency:
|
10
|
|
4.
|
Terms
of Payment:
|
10
|
|
5.
|
Method
of Payment:
|
12
|
|
6.
|
Prepayment.
|
13
|
|
7.
|
Refunds:
|
13
|
|
8.
|
Security
for Payment of Instalments before Delivery:
|
14
|
|
ARTICLE
III - ADJUSTMENT OF CONTRACT PRICE
|
15
|
||
1.
|
Delivery:
|
15
|
|
2.
|
Speed:
|
16
|
|
3.
|
Fuel
Consumption:
|
17
|
|
4.
|
Deadweight:
|
17
|
|
5.
|
Effect
of Rescission:
|
18
|
|
6.
|
Method
of Settlement:
|
18
|
|
ARTICLE
IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING
CONSTRUCTION
|
19
|
||
1.
|
Approval
of Plans and Drawings:
|
19
|
|
2.
|
Appointment
of the BUYER’s REPRESENTATIVE:
|
20
|
|
3.
|
Inspection
by REPRESENTATIVE:
|
20
|
|
4.
|
Facilities:
|
21
|
|
5.
|
Liability
of the BUILDER:
|
22
|
|
6.
|
Responsibility
of the BUYER:
|
22
|
|
7.
|
Salaries
and Expenses:
|
23
|
|
ARTICLE
V - MODIFICATION
|
24
|
||
1.
|
Modification
of Specifications:
|
24
|
|
2.
|
Change
in Class, etc.:
|
24
|
|
3.
|
Substitution
of Materials:
|
25
|
|
ARTICLE
VI - TRIALS AND ACCEPTANCE
|
26
|
||
1.
|
Notice:
|
26
|
|
2.
|
Weather
Condition:
|
26
|
|
3.
|
How
Conducted:
|
27
|
|
4.
|
Method
of Acceptance or Rejection:
|
27
|
|
5.
|
Effect
of Acceptance:
|
28
|
6.
|
Disposition
of Surplus Consumable Stores:
|
28
|
|
ARTICLE
VII - DELIVERY
|
29
|
||
1.
|
Time
and Place:
|
29
|
|
2.
|
Notice:
|
29
|
|
3.
|
When
and How Effected:
|
29
|
|
4.
|
Documents
to be Delivered to the BUYER:
|
29
|
|
5.
|
Tender
of the VESSEL:
|
31
|
|
6.
|
Title
and Risk:
|
31
|
|
7.
|
Removal
of the VESSEL:
|
31
|
|
ARTICLE
VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE
MAJEURE)
|
32
|
||
1.
|
Causes
of Delay:
|
32
|
|
2.
|
Notice
of Delays:
|
32
|
|
3.
|
Definition
of Permissible Delays:
|
33
|
|
4.
|
Definition
of Non-Permissible Delays:
|
33
|
|
5.
|
Right
to Rescind for Excessive Delay:
|
33
|
|
ARTICLE
IX - WARRANTY OF QUALITY
|
34
|
||
1.
|
Guarantee
of Material, Workmanship:
|
34
|
|
2.
|
Notice
of Defects:
|
34
|
|
3.
|
Remedy
of Defects:
|
34
|
|
4.
|
Extent
of BUILDER’s Liability:.
|
37
|
|
ARTICLE
X - RESCISSION OF THE CONTRACT
|
39
|
||
1.
|
Notice:
|
39
|
|
2.
|
Refund
by the BUILDER:
|
39
|
|
3.
|
Discharge
of Obligations:
|
39
|
|
4.
|
Refundment
Guarantee:
|
40
|
|
ARTICLE
XI - BUYER’S DEFAULT
|
41
|
||
1.
|
Definition
of Default:
|
41
|
|
2.
|
Interest
and Charge:
|
41
|
|
3.
|
Effect
of Default:
|
42
|
|
4.
|
Sale
of the VESSEL:
|
42
|
|
ARTICLE
XII - INSURANCE
|
44
|
||
1.
|
Extent
of Insurance Coverage:
|
44
|
|
2.
|
Application
of Recovered Amount:
|
44
|
|
3.
|
Termination
of the BUILDER’s obligation to insure:
|
45
|
|
4.
|
Insurance
Confirmation:
|
45
|
|
ARTICLE
XIII - DISPUTES AND ARBITRATION
|
46
|
||
1.
|
Proceedings:
|
46
|
|
2.
|
Notice
of Award:
|
47
|
|
3.
|
Expenses:
|
47
|
|
4.
|
Entry
in Court:
|
47
|
|
5.
|
Alteration
of Delivery Time:
|
47
|
|
ARTICLE
XIV - RIGHTS OF ASSIGNMENT
|
48
|
||
1.
|
Assignment:
|
48
|
|
2.
|
Assignment
of Guarantee Claims:
|
48
|
|
ARTICLE
XV - TAXES AND DUTIES
|
49
|
Taxes
and Duties in the People’s Republic of China:
|
49
|
||
ARTICLE
XVI - PATENTS, TRADEMARKS, COPYRIGHTS, ETC
.
|
50
|
||
1.
|
Patents,
Trademarks and Copyrights:
|
50
|
|
2.
|
General
Plans, Specifications and Working Drawings:
|
50
|
|
ARTICLE
XVII - BUYER’s SUPPLIES
|
51
|
||
1.
|
Responsibility
of the BUYER:
|
51
|
|
2.
|
Responsibility
of the BUILDER:
|
52
|
|
3.
|
Joint
Responsibility of the Parties hereto:
|
52
|
|
ARTICLE
XVIII - NOTICE AND CORRESPONDENCE
|
53
|
||
1.
|
Address:
|
53
|
|
2.
|
Language:
|
53
|
|
ARTICLE
XIX - EFFECTIVE DATE OF CONTRACT
|
54
|
||
ARTICLE
XX - INTERPRETATION
|
55
|
||
1.
|
Laws
Applicable:
|
55
|
|
2.
|
Discrepancies:
|
55
|
|
3.
|
Entire
Agreement:
|
55
|
|
ARTICLE
XXI - CONFIDENTIALITY
|
56
|
||
EXHIBIT
A
|
58
|
||
EXHIBIT
B
|
60
|
||
EXHIBIT
C
|
63
|
1. |
Description:
|
(1)
|
Specification
for 176,000 DWT Bulk Carrier (Drawing No. SC4481-010-02SM(0000101B))
(For
avoidance of any doubt, this VESSEL technically does not comply
with IMO
Performance Standard for Protective Coatings for dedicated seawater
ballast tanks.)
|
(2)
|
General
Arrangement (Drawing No. 0000001)
|
(3)
|
Midship
Section (Drawing No. 0000002)
|
(4)
|
Makers
List for Equipment (Drawing No.
SC4481-010-05MX)
|
(5)
|
Memo
(Ref. No.:
SC4481-010-02SM(0000101B)-M1)
|
2. |
Class
and Rules:
|
3. |
Principal
Particulars of the
VESSEL:
|
(a)
|
Hull:
|
Length
overall
|
abt.
|
291.80
m
|
|
Length
between perpendiculars
|
282.20
m
|
||
Breadth
moulded
|
45.00
m
|
||
Depth
moulded
|
24.75
m
|
||
Designed
draught moulded
|
16.50
m
|
||
Scantling
draught moulded
|
18.25
m
|
||
Deadweight
at scantling draft
(summer
load line) in sea water of
1.025
specific gravity
|
176,000
mt
|
(b)
|
Propelling
Machinery and Guaranteed Speed:
|
(c)
|
Guaranteed
Deadweight:
|
(d)
|
Guaranteed
Fuel Oil Consumption:
|
4. |
Subcontracting
Construction outside Builder’s
Premise:
|
5. |
Registration:
|
1. |
Contract
Price:
|
2. |
Adjustment
of Contract Price:
|
3. |
Currency:
|
4. |
Terms
of Payment:
|
(a) |
1st
Instalment:
|
(b)
|
2nd
Instalment
|
(c)
|
3rd
Instalment:
|
(d)
|
4th
Instalment:
|
(e)
|
5th
Instalment:
|
5. |
Method
of Payment:
|
(a)
|
1st
Instalment:
|
(b)
|
2nd
Instalment:
|
(c)
|
3rd
Instalment:
|
(d)
|
4th
Instalment:
|
(e)
|
5th
Instalment:
|
6. |
Prepayment:
|
7. |
Refunds:
|
8. |
Security
for Payment of Instalments before
Delivery:
|
1. |
Delivery:
|
(a)
|
No
adjustment shall be made and the Contract Price shall remain unchanged
for
the first thirty (30) days of delay in delivery of the VESSEL beyond
the
Delivery Date as defined in Article VII hereof (ending as of twelve
o’clock midnight China Standard Time of the thirtieth (30th) day
of
delay).
|
(b)
|
If
the delivery of the VESSEL is delayed more than thirty (30) days
after the
Delivery Date, then, in such event, beginning at twelve o’clock midnight
of the thirtieth (30th) day after the Delivery Date, the Contract
Price
shall be reduced by deducting therefrom the sum of United States
Dollar
fifteen thousand only (US$15,000.-) per day from the thirtieth
(30th) day
till the date of actual delivery as set forth in Article VII
hereof.
|
(c)
|
But
if the delay in delivery of the VESSEL should continue for a period
of one
hundred eighty (180) days from the thirty-first (31st) day after
the
Delivery Date, then, in such event, and after such period has expired,
the
BUYER may at its option rescind or cancel this Contract in accordance
with
the provisions of Article X hereof. The BUILDER may, at any time
after the
expiration of the aforementioned one hundred eighty (180) days
of delay in
delivery, if the BUYER has not served notice of rescission as provided
in
Article X hereof, demand in writing that the BUYER shall make an
election,
in which case the BUYER shall, within fifteen (15) days after such
demand
is received by the BUYER, notify the BUILDER of its intention either
to
rescind/cancel this Contract or to consent to the acceptance of
the VESSEL
at agreed reduction price and at agreed future date (the “Newly Planned
Delivery Date”); it being understood by the parties hereto that, if the
VESSEL is not delivered by such Newly Planned Delivery Date, the
BUYER
shall have the same right of rescission or cancellation upon the
same
terms and conditions as hereinabove
provided.
|
(d)
|
For
the purpose of this Article, the delivery of the VESSEL shall be
deemed to
be delayed when and if the VESSEL, after taking into full account
all
postponements of the Delivery Date by reason of Permissible Delays
as
defined in Article VIII, is not delivered by the date upon which
delivery
is required under the terms of this
Contract.
|
(f)
|
In
the event that the BUILDER is unable to deliver the Vessel on the
Newly
Planned Delivery Date as declared, the VESSEL can, nevertheless,
be
delivered by the BUILDER at a date after such declared Newly Planned
Date.
|
2. |
Sp
eed:
|
(a)
|
The
Contract Price shall not be affected or changed by reason of the
actual
speed, as determined by trial run, being less than three-tenths
(3/10) of
one (1) knot below the Guaranteed Speed of the VESSEL specified
and
required under Paragraph 3(b) of Article I of this Contract (hereinafter
called the Guaranteed Speed”).
|
(b)
|
However,
commencing with and including such deficiency of three-tenths (3/10)
of
one (1) knot in actual speed below the Guaranteed Speed of the
VESSEL, the
Contract Price shall be reduced as follows (but disregarding fractions
of
one-tenth (1/10) of a knot):
|
(c)
|
If
the deficiency in actual speed of the VESSEL upon trial run is
more than
nine-tenths (9/10) of a knot below the Guaranteed Speed of the
VESSEL,
then the BUYER may, at its option, reject the VESSEL and rescind
this
Contract in accordance with the provisions of Article X
|
3. |
Fuel
Consumption:
|
(a)
|
The
Contract Price shall not be affected or changed by reason of the
fuel
consumption of the Main Engine, as determined by shop trial as
per the
Specifications, being more than the Guaranteed Fuel Consumption
of the
Main Engine of 169
grams/
(
Akilowatt
x hour
)
at
MCR specified and required under Paragraph 3(d) of Article I of
this
Contract, if such excess is not more than five percent (5%) over
the
Guaranteed Fuel Consumption.
|
(b)
|
However,
commencing with and including an excess of five percent (5%) in
the actual
fuel consumption over the Guaranteed Fuel Consumption of the Main
Engine,
the Contract Price shall be reduced by the sum of United States
Dollars
(US$100,000.-) for each full one percent (1%) increase in fuel
consumption
above said five percent (5%) (fractions of one percent (1%) to
be
prorated), up to a maximum of eight percent (8%) over the Guaranteed
Fuel
Consumption of the Main Engine.
|
(c)
|
If
such actual fuel consumption exceeds eight percent (8%) of the
Guaranteed
Fuel Consumption of the Main Engine, the BUYER may, at its option,
reject
the VESSEL and rescind this Contract in accordance with the provisions
of
Article X hereof, or may accept the VESSEL at a reduction in the
Contract
Price as above specified for eight percent (8%) only, that is,
at a total
reduction of United States Dollars three hundred thousand
(US$300,000.-).
|
4. |
Deadweight:
|
(a)
|
The
Contract Price shall not be affected or changed by reason of the
actual
deadweight tonnage determined as provided for in the Specifications
being
below the deadweight tonnage specified and required under Paragraph
3(c)
of Article I of this Contract (hereinafter called the “Guaranteed
Deadweight”), if such deficiency in the actual deadweight tonnage is not
more than one thousand (1,000) metric
tons.
|
(b)
|
In
the event that the actual deadweight of the VESSEL as determined
in
accordance with the Specifications is less than the guaranteed
deadweight
of the VESSEL, the Contract Price shall be reduced by the sum of
United
States Dollars one thousand (US$1,000.-) for each full metric ton
of such
deficiency being more than one thousand (1,000) metric tons, up
to a
maximum reduction of United States Dollars one million five hundred
(U.S.$1,500,000.-) but disregarding fractions of one (1) metric
ton.
|
(c)
|
In
the event of such deficiency in the actual deadweight of the VESSEL
|
5. |
Effect
of Rescission:
|
6. |
Method
of Settlement:
|
1. |
Approval
of Plans and Drawings:
|
(a)
|
The
BUILDER shall submit to the BUYER four (4) copies each of the plans
and
drawings to be submitted thereto for its approval at its address
as set
forth in Article XVIII hereof.
|
(b)
|
When
and if the REPRESENTATIVE (as defined hereinafter) shall have been
sent by
the BUYER to the SHIPYARD in accordance with Paragraph 2 of this
Article,
the BUILDER may, however at the BUYER’s express written consent only,
submit the remainder, if any, of the plans and drawings in the
agreed
list, to the REPRESENTATIVE for his approval. The REPRESENTATIVE
shall,
within two (2) weeks after receipt thereof, return to the BUILDER
one (1)
copy of such plans and drawings with his approval or qualified
approval
with comments written thereon, if
any.
|
(e)
|
All
documents, drawings, calculations, instruction manuals, etc. which
are
submitted to the BUYER, shall be in English
only.
|
2. |
Appointment
of the BUYER’s
REPRESENTATIVE:
|
3. |
Inspection
by
REPRESENTATIVE:
|
4. |
Facilities:
|
5. |
Liability
of the BUILDER:
|
6. |
Responsibility
of the BUYER:
|
7. |
Salaries
and
Expenses:
|
1. |
Modification
of Specifications:
|
2. |
Change
in Class, etc.:
|
(i)
|
As
to any reasonable increase or decrease in the Contract Price of
the VESSEL
that is occasioned by the cost for such compliance according to
and in
compliance with Paragraph 1 of this Article V;
and/or
|
(ii)
|
As
to any extension in the time for delivery of the VESSEL that is
necessary
due to such compliance; and/or
|
(iii)
|
As
to any decrease in the Guaranteed Deadweight and the Guaranteed
Speed of
the VESSEL, if such compliance results in reduced deadweight, cargo
capacity and speed; and/or
|
(iv)
|
As
to any other alterations in the terms of this Contract, if such
compliance
makes such alterations of the terms
necessary.
|
3. |
Substitution
of Materials:
|
1. |
Notice:
|
2. |
Weather
Condition:
|
3. |
How
Conducted:
|
4. |
Method
of Acceptance or Re
jection:
|
(a)
|
Upon
completion of the trial run, the BUILDER shall give the BUYER a
notice of
completion of the trial run together with written reports recording
off
all the trials, as and if the BUILDER considers that the results
of the
trial run indicate conformity of the VESSEL to this Contract and
the
Specifications. The BUYER shall, within five (5) banking days after
receipt of such notice from the BUILDER notify the BUILDER by telefax
of
its acceptance or of its rejection of the Trial Run results, together
with
the reasons therefor.
|
(b)
|
However,
should the result of the Trial Run indicate that the VESSEL or
any part
thereof including its equipment does not conform to the requirements
of
this Contract, the BUILDER shall investigate together with the
REPRESENTATIVE the cause of such non-conformance and determine
the proper
steps to be taken to remedy the same and make whatever corrections
and
alterations and/or re-Trial Run or Trial Runs as may be necessary
without
extra cost to the BUYER, and upon notification by the BUILDER of
the
completion of such alterations or corrections and/or re-Trial or
re-Trials
the BUYER shall, within five (5) business days, notify the BUILDER
by
telefax (confirmed in writing) of its acceptance of the VESSEL
or of the
rejection of the Trial Run results, together with the reason therefore,
taking into account the alterations and corrections and/or retrial
or
retrials by the BUILDER.
|
(c)
|
In
the event that the BUYER fails to notify the BUILDER by facsimile
of the
acceptance, or the rejection of the trial run together with the
reason
|
(d)
|
Any
dispute arising between the parties hereto as to whether the VESSEL
and
its equipment and machinery comply with this Contract and/or
Specifications, or as to the result of any trial run of the VESSEL,
or
relating to the BUYER’s rejection to take delivery of the VESSEL, shall be
resolved in accordance with Article
XIII.
|
(e)
|
Nothing
herein shall preclude the BUYER from accepting the VESSEL with
its
qualifications and/or remarks following the Trial Run and/or further
tests
or trials as aforesaid and the BUILDER shall be obliged to comply
with
and/or remove such qualifications and/or remarks (if such qualifications
and/or remarks are reasonably acceptable to the BUILDER) at the
time
before effecting delivery of the VESSEL to the BUYER under this
Contract.
|
5. |
Effect
of Acceptance:
|
6. |
Disposition
of Surplus Consumable
Stores:
|
1. |
Time
and Place:
|
2. |
Notice:
|
3. |
When
and How Effected:
|
4. |
Documents
to be Delivered to the
BUYER:
|
(a)
|
PROTOCOL
OF TRIALS OF THE VESSEL made pursuant to the
|
(b)
|
PROTOCOL
OF INVENTORY of the equipment of the VESSEL, including spare parts
and the
like, all as specified in the
Specifications.
|
(c)
|
PROTOCOL
OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6 of
Article VI
hereof, including the original purchase price
thereof.
|
(d)
|
ALL
CERTIFICATES including three (3) originals of the BUILDER’s CERTIFICATE
(duly attested by notary public if necessary) required to be furnished
upon delivery of the VESSEL pursuant to this Contract and the
Specifications. All other certificates, except for BUILDER’s CERTIFICATE,
shall be delivered in one (1) original to the VESSEL and two (2)
copies to
the BUYER. It is agreed that if, through no fault on the part of
the
BUILDER, the classification certificate and/or other certificates
are not
available at the time of delivery of the VESSEL, provisional certificates
shall be accepted by the BUYER, provided that the BUILDER shall
furnish
the BUYER with the formal certificates within three (3) months
after
delivery of the VESSEL however in any event before the expiry of
such
provisional certificates, unless otherwise mutually
agreed.
|
(e)
|
DECLARATION
OF WARRANTY of the BUILDER that the VESSEL is delivered to the
BUYER free
and clear of any liens, charges, claims, mortgages, or other encumbrances
upon the BUYER’s title thereto, and in particular, that the VESSEL is
absolutely free of all burdens in the nature of imposts, taxes
or charges
imposed by the Chinese governmental authorities, as well as of
all
liabilities of the BUILDER to its subcontractors, employees and
crew,
and/or of all liabilities arising from the operation of the VESSEL
in
Trial Runs, or otherwise, prior to
delivery.
|
(f)
|
FINISHED
DRAWINGS AND PLANS pertaining to the VESSEL as stipulated in the
Specifications.
|
(g)
|
COMMERCIAL
INVOICE in triplicate, with main particulars of the
VESSEL.
|
(h)
|
BILL
OF SALE in three (3) originals, duly notarized and legally
attested.
|
(i)
|
PROTOCOL
OF DEADWEIGHT DETERMINATION and inclining
experiments.
|
(j)
|
NON-REGISTRATION-CERTIFICATE,
as a copy, issued by the competent local authority, stating that
the
VESSEL is not registered at the time of Delivery; the original
instrument
shall be delivered within thirty (30) business days after delivery
of such
copy; and
|
(k)
|
Any
other reasonable document required by flag authority for the
|
5. |
Tender
of the VESSEL:
|
6. |
Title
and Risk:
|
7. |
Removal
of the VESSEL:
|
1. |
Causes
of Delay:
|
2. |
Notice
of Delays:
|
3. |
Definition
of Permissible Delays:
|
4. |
Definition
of Non-Permissible
Delays:
|
5. |
Right
to Rescind for Excessive
Delay:
|
1. |
Guarantee
of Material,
Workmanship:
|
2. |
Notice
of Defects:
|
3. |
Remedy
of Defects:
|
(a)
|
The
BUILDER shall remedy, at its expense, any defect against which
the VESSEL
or any part of equipment thereof is guaranteed under this Article
IX by
repairing or replacing the defective parts in the BUILDER’s SHIPYARD. Such
repairs or replacing defective parts will be made by the BUILDER
free of
charge.
|
(b)
|
Such
repairs or replacement will be made at the BUILDER’s SHIPYARD unless the
VESSEL cannot be conveniently brought
there.
|
(aa)
|
upon
the BUILDER’s acceptance of the defects as justifying remedy under this
Article, which shall not be unreasonably withheld;
or
|
(bb)
|
if
the BUILDER neither accepts nor rejects the defects, nor requests
arbitration within fifteen (15) days after its receipt of the BUYER’s
notice of defects; or
|
(cc)
|
upon
determination in an arbitration process in accordance with Article
XIII
that the defect(s) in question fall within the provisions of this
Article
IX.
|
(c)
|
In
the event it is necessary to forward the replacement for the defective
|
(d)
|
If
all the defects for which the BUILDER is responsible under this
Article
are discovered and notified before the expiration of the guarantee
period,
then these defects shall be agreed in writing between the Parties
hereto
as being guarantee items by the end of guarantee period and shall
be
repaired or replaced in the manner provided hereinabove in principle
within four (4) months after such expiration of the guarantee period
or at
a later date to be mutually agreed
upon.
|
(e)
|
The
VESSEL shall, at the sole discretion of the BUYER, drydock for
guarantee
termination survey in China on or before the expiry date of the
12-months
guarantee period. However, the BUILDER hereby agrees that should
the
VESSEL not be able to return to China within the stipulated time
allowed
for the 12-months drydocking, then, either the BUILDER
|
(f)
|
In
any case, the VESSEL shall be taken at the BUYER’s cost and responsibility
to the place elected, ready in all respects for such repairs or
replacements.
|
4. |
Extent
of BUILDER’s
Liability:
|
1. |
Notice:
|
2. |
Refund
by the BUILDER:
|
3. |
Discharge
of Obligations:
|
4. |
Refundment
Guarantee:
|
1. |
Definition
of Default:
|
(a)
|
If
the BUYER fails to pay any of the first, second, third and fourth
instalments to the BUILDER after such instalment becomes due and
payable
under the provision of Article II hereof;
or
|
(b)
|
If
the BUYER fails to pay the fifth Instalment to the BUILDER concurrently
with the delivery of the VESSEL by the BUILDER to the BUYER as
provided in
Article II hereof; or
|
(c)
|
If
the BUYER fails to take delivery of the VESSEL, when the VESSEL
is duly
tendered for delivery by the BUILDER under the provisions of Article
VII
hereof.
|
2. |
Interest
and Charge:
|
3. |
Effect
of Default:
|
(a)
|
If
any default by the BUYER occurs as provided hereinbefore, the Delivery
Date shall be automatically postponed for a period of continuance
of such
default by the BUYER.
|
(b)
|
If
any such default by the BUYER continues for a period of twenty-five
(25)
business days, the BUILDER may, at its option, rescind this Contract
by
giving notice of such effect to the BUYER by facsimile confirmed
in
writing. Upon receipt by the BUYER of such notice of rescission,
this
Contract shall forthwith become null and void, and any lien, interest
or
property right that the BUYER may have in and to the VESSEL or
to any part
or equipment thereof and to any material or part acquired for construction
of the VESSEL but not yet utilized for such purpose, shall forthwith
cease, and the VESSEL and all parts and equipment thereof shall
become the
sole property of the BUILDER.
|
4. |
Sale
of the VESSEL:
|
(a)
|
In
the event of rescission of this Contract as above provided, the
BUILDER
shall have full right and power either to complete or not to complete
the
VESSEL as it deems fit, and to sell the VESSEL at a public sale
on such
terms and conditions as the BUILDER thinks fit without being answerable
for any loss or damage.
|
(b)
|
In
the event of the sale of the VESSEL in its completed state, the
proceeds
of the sale received by the BUILDER shall be applied firstly to
payment of
all expenses attending such sale and otherwise incurred by the
BUILDER as
a result of the BUYER’s default, and then to payment of all unpaid
instalments of the Contract Price and interest on such instalments
at the
rate of eight percent (8%) per annum from the respective due dates
thereof
to the date of application.
|
(c)
|
In
the event of sale of the VESSEL in its incomplete state, the proceeds
of
sale received by the BUILDER shall be applied firstly to all expenses
attending such sale and otherwise incurred by the BUILDER as a
result of
the BUYER’s default, and then to payment of all costs of construction of
the VESSEL less the instalments so retained by the
BUILDER.
|
(d)
|
In
either of the above events of sale, if the proceeds of sale exceeds
the
|
(e)
|
If
the proceeds of sale are insufficient to pay such total amounts
payable as
aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER
upon
request.
|
1. |
Extent
of Insurance Coverage:
|
2. |
Application
of Recovered Amount:
|
(a)
|
Partial
Loss:
|
(b)
|
Total
Loss:
|
(i)
|
Proceed
in accordance with the terms of this Contract, in which case the
amount
recovered under said insurance policy shall be applied to the
reconstruction of the VESSEL’s damage, provided the parties hereto shall
have first agreed in writing as to such reasonable postponement
of the
Delivery Date and adjustment of other terms of this Contract including
the
Contract Price as may be necessary for the completion of such
reconstruction; or
|
(ii)
|
Refund
immediately to the BUYER the amount of all instalments paid to
the BUILDER
under this Contract with the interest at the rate of eight percent
(8%)
per annum, whereupon this Contract shall be deemed to be rescinded
and all
rights, duties, liabilities and obligations of each of the parties
to the
other shall terminate forthwith.
|
3. |
Termination
of the BUILDER’s obligation to
insure:
|
4. |
Insurance
Confirmation:
|
1. |
Proceedings:
|
(a)
|
Decision
by the Classification Society:
|
(b)
|
Proceedings
of Arbitration:
|
2. |
Notice
of Award:
|
3. |
Expenses:
|
4. |
Entry
in Court:
|
5. |
Alteration
of Delivery
Time:
|
1. |
Assignment:
|
2. |
Assignment
of Guarantee Claims:
|
1. |
Patents,
Trademarks and
Copyrights:
|
2. |
General
Plans, Specifications and Working
Drawings:
|
1. |
Responsibility
of the BUYER:
|
(a)
|
The
BUYER shall, at its own risk, cost and expense, supply and deliver
to the
SHIPYARD all of the items to be furnished by the BUYER as specified
in the
Specifications (herein called throughout this Contract the “BUYER’s
Supplies”) at the warehouse or other storage of the SHIPYARD in the proper
condition ready for installation in or on the VESSEL, in accordance
with
the time schedule designated by the
BUILDER.
|
(b)
|
In
order to facilitate installation by the BUILDER of the BUYER’s Supplies in
or on the VESSEL, the BUYER shall furnish the BUILDER with necessary
specifications, plans, drawings, instruction books, manuals, test
reports
and certificates required by the rules and regulations. The BUYER,
if so
requested by the BUILDER in writing, shall, without any charge
to the
BUILDER, cause the representatives of the manufacturers of the
BUYER’s
Supplies to assist the BUILDER in installation thereof in or on
the VESSEL
and/or to carry out installation thereof by themselves or to make
necessary adjustments thereof at the
SHIPYARD.
|
(c)
|
Any
and all of the BUYER’s Supplies shall be subject to the BUILDER’s
reasonable right of rejection, as and if they are found to be unsuitable
or in improper condition for installation. However, if so requested
by the
BUYER, the BUILDER shall repair or adjust the BUYER’s Supplies without
prejudice to the BUILDER’s other rights hereunder and without being
responsible for any consequences therefrom. In such case, the BUYER
shall
reimburse the BUILDER for all costs and expenses incurred by the
BUILDER
in such repair or adjustment and the Delivery Date shall be postponed
for
a period of time necessary for such repair or replacement, if the
BUILDER
requests.
|
(d)
|
Should
the BUYER fail to deliver any of the BUYER’s Supplies within the time
designated by the BUILDER, the Delivery Date shall be automatically
extended for a period of such delay in delivery, provided that
such delay
in delivery shall affect delivery of the VESSEL. In such event,
the BUYER
shall be responsible and pay to the BUILDER for all losses and
damages
incurred by the BUILDER by reason of such delay in delivery of
the BUYER’s
Supplies and such payment shall be made upon delivery of the
VESSEL.
|
2. |
Responsibility
of the BUILDER:
|
3. |
Joint
Responsibility of the Parties
hereto:
|
1. |
Address:G53
|
To
the BUYER:
|
EPTAPROHI
SHIPPING CORPORATION.
|
C/O:
SAFETY
MANAGEMENT OVERSEAS S.A.
|
|
32
Karamanli Avenue
|
|
166
73 Voula
|
|
Athens,
Greece
|
|
Telefax
No.:
|
+30-210-859
6900
|
To
the BUILDER:
|
Jiangsu
Rongsheng Heavy
|
Industries
Group Co., Ltd.
|
|
No.
882, Hong Qiao Road,
|
|
SHANGHAI,
200030
|
|
The
People’s Republic of China
|
|
Telefax
No. :
|
+86-21-64484727
|
2. |
Language:
|
1. |
Laws
Applicable:
|
2. |
Discrepancies:
|
3. |
Entire
Agreement:
|
BUYER:
|
BUILDER:
|
|
EPTAPROHI
SHIPPING
|
Jiangsu
Rongsheng
|
|
CORPORATION
|
Heavy
Industries Group Co., Ltd.
|
|
/s/
Ioannis Fotinos
|
/s/
Chen Qiang
|
|
Attorney-in-Fact:
IOANNIS FOTINOS
|
Attorney-in-Fact:
Chen Qiang
|
BANK
REF NO: [...]
|
|
ISSUING
DATE: [...]
|
1.
|
This
Letter of Guarantee shall come into force when you have effected
the
payment of this instalment as per the
Contract.
|
2.
|
The
maximum amount that the Bank, the undersigned, in any eventuality
may be
obliged to pay to your shall be the sum of United States Dollars
Sixteen
Million Two Hundred Thousand only (US$16,200,000.00) together with
interest calculated at the rate stipulated in said Contract for
the terms
from the date of the payment of the said instalment to the date
of
remittance of such refund.
|
3.
|
This
Letter of Guarantee shall become null and void upon receipt by
your
company of the amount guaranteed hereby together with interest
thereon or
upon the acceptance by your company of the delivery of the Vessel
|
4.
|
This
Letter of Guarantee shall benefit and ensure to the assignee and
successor
of this Contract.
|
5.
|
This
Letter of Guarantee shall be governed by and construed in accordance
with
the laws of the England. In the event that dispute should arise
between
yourself and your assignee and us, such dispute shall be settled
by
arbitration in London in accordance with the laws of
England.
|
Yours
faithfully,
|
||
For
|
(1)
|
In
consideration of your entering into a Ship Sale Contract
dated______________ (“the Shipbuilding Contract”) with SAFETY MANAGEMENT
OVERSEAS S.A. as the buyer (“the BUYER”) for the construction of one (1)
176,000 Metric Tons Deadweight Bulk Carrier bearing Hull No. H1074
(the
“VESSEL”), we, ______________, hereby IRREVOCABLY, ABSOLUTELY and
UNCONDITIONALLY guarantee, as the primary obligor and not merely
as the
surety, the due and punctual payment by the BUYER of the 2nd installment
of the Contract Price amounting to a sum of United States Dollars
Sixteen
Million Two Hundred Thousand (US$16,200,000.00) as specified in
(2)
below.
|
(2)
|
The
Installments guaranteed hereunder, pursuant to the terms of the
Shipbuilding Contract, comprise the 2nd installment in the amount
of
United States Dollars Sixteen Million Two Hundred Thousand
(US$16,200,000.00) payable by the BUYER within five (5) New York
banking
days after cutting of the first steel plate in your BUILDER’s
workshop.
|
(3)
|
We
also IRREVOCABLY, ABSOLUTELY and UNCONDITIONALLY guarantee, as
primary
obligor and not merely as surety, the due and punctual payment
by the
BUYER of interest on each installment guaranteed hereunder at the
rate of
four per cent (4%) per annum from and including the first day after
the
date of installment in default until the date of full payment by
us of
such amount guaranteed hereunder.
|
(4)
|
In
the event that the BUYER fails to punctually pay any Installment
guaranteed hereunder or the BUYER fails to pay any interest thereon,
and
any such default
|
(5)
|
We
hereby agree that at your option this Guarantee and the undertaking
hereunder shall be assignable to and if so assigned shall inure
to the
benefit of any 3rd party designated by you or ______________, the
People’s
Republic of China as your assignee as if any such third party or
______________, the People’s Republic of China were originally named
herein.
|
(6) |
Any
payment by us under this Guarantee shall be made in the Unites
States
Dollars by telegraphic transfer to [
(bank)]
as receiving bank
nominated
by you, for credit to the account of you with [ (bank)] or through
other
receiving bank to be nominated by you from time to time, in favour
of you
or your assignee.
|
(7)
|
Our
obligations under this guarantee shall not be affected or prejudiced
by
any dispute between you as the BUILDER and the BUYER under the
Shipbuilding Contract or by the BUILDER’s delay in the construction and/or
delivery of the VESSEL due to whatever causes or by any variation
or
extension of their terms thereof or by any security or other indemnity
now
or hereafter held by you in respect thereof, or by any time or
indulgence
granted by you or any other person in connection therewith, or
by any
invalidity or unenforceability of the terms thereof, or by any
act,
omission, fact or circumstances whatsoever, which could or might,
but for
the foregoing, diminish in any way our obligations under this
Guarantee.
|
(8)
|
Any
claim or demand shall be in writing signed by one of your officers
and may
be served on us either by hand or by post and if sent by post
to_________________________(or such other address as we may notify
to you
in writing), or by tested telex (telex NO:______________)
via_____________, with confirmation in
writing.
|
(
9
)
|
This
Letter of Guarantee shall come into full force and effect upon
delivery to
you of this Guarantee and shall continue in force and effect until
the
VESSEL is delivered to and accepted by the BUYER and the BUYER
shall have
performed all its obligations for taking delivery thereof or until
the
full payment of 2nd installment together with the aforesaid interests
by
the BUYER or us, whichever first
occurs.
|
(10)
|
The
maximum amount, however, that we are obliged to pay to you under
this
Guarantee shall not exceed the aggregate amount of U.S. Dollars
_________
being an amount equal to the sum
of:-
|
(a)
|
All
the 2nd installment guaranteed hereunder in the total amount of
United
|
(b)
|
Interest
at the rate of four percent (4%) per annum on the installments
for a
period of sixty (60) days in the amount of United States Dollars
Sixteen
Million Two Hundred Thousand
(US$16,200,000.00)
|
(11)
|
All
payments by us under this Guarantee shall be made without any set-off
or
counterclaim and without deduction or withholding for or on account
of any
taxes, duties, or charges whatsoever unless we are compelled by
law to
deduct or withhold the same. In the latter event we shall make
the minimum
deduction or withholding permitted and will pay such additional
amounts as
may be necessary in order that the net amount received by you after
such
deductions or withholdings shall equal the amount which would have
been
received had no such deduction or withholding been required to
be
made.
|
(12)
|
This
Letter of Guarantee shall be construed in accordance with and governed
by
the Laws of England. We hereby submit to the non-exclusive jurisdiction
of
the English courts for the purposes of any legal action or proceedings
in
connection herewith in England.
|
(13)
|
This
Letter of Guarantee shall have expired as aforesaid, you will return
the
same to us without any request or demand from
us.
|
(14)
|
IN
WITNESS WHEREOF, we have caused this Letter of Guarantee to be
executed
and delivered by our duly authorized representative the day and
year above
written.
|
Very
Truly Yours
|
||
By:
|
For
and on behalf of the
BUILDER
|
For
and on behalf of the
BUYER
|
(Authorised
Representative)
|
|
Dated:
|
Dated:
|
For
and on behalf of the
|
|
CLASSIFICATION
SOCIETY
|
|
Dated:
|
INDEX
|
PAGE
|
|
PREAMBLE
|
5
|
|
ARTICLE
I - DESCRIPTION AND CLASS
|
6
|
|
1.
|
Description:
|
6
|
2.
|
Class
and Rules:
|
6
|
3.
|
Principal
Particulars of the VESSEL:
|
8
|
4.
|
Subcontracting
Construction outside Builder’s Premise:
|
9
|
5.
|
Registration:
|
9
|
ARTICLE
II - CONTRACT PRICE AND TERMS OF PAYMENT
|
10
|
|
1.
|
Contract
Price:
|
10
|
2.
|
Adjustment
of Contract Price:
|
10
|
3.
|
Currency:
|
10
|
4.
|
Terms
of Payment:
|
10
|
5.
|
Method
of Payment:
|
12
|
6.
|
Prepayment:
|
14
|
7.
|
Refunds:
|
14
|
8.
|
Security
for Payment of Instalments before Delivery:
|
14
|
ARTICLE
III - ADJUSTMENT OF CONTRACT PRICE
|
16
|
|
1.
|
Delivery:
|
16
|
2.
|
Speed:
|
17
|
3.
|
Fuel
Consumption:
|
18
|
4.
|
Deadweight:
|
18
|
5.
|
Effect
of Rescission:
|
19
|
6.
|
Method
of Settlement:
|
19
|
ARTICLE
IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING
CONSTRUCTION
|
20
|
|
1.
|
Approval
of Plans and Drawings:
|
20
|
2.
|
Appointment
of the BUYER’s REPRESENTATIVE:
|
21
|
3.
|
Inspection
by REPRESENTATIVE:
|
21
|
4.
|
Facilities:
|
23
|
5.
|
Liability
of the BUILDER:
|
23
|
6.
|
Responsibility
of the BUYER:
|
24
|
7.
|
Salaries
and Expenses:
|
24
|
ARTICLE
V - MODIFICATION
|
25
|
|
1.
|
Modification
of Specifications:
|
25
|
2.
|
Change
in Class, etc.:
|
26
|
3.
|
Substitution
of Materials:
|
26
|
ARTICLE
VI - TRIALS AND ACCEPTANCE
|
28
|
|
1.
|
Notice:
|
28
|
2.
|
Weather
Condition:
|
28
|
3.
|
How
Conducted:
|
29
|
4.
|
Method
of Acceptance or Rejection:
|
29
|
5.
|
Effect
of Acceptance:
|
30
|
6.
|
Disposition
of Surplus Consumable Stores:
|
30
|
ARTICLE
VII - DELIVERY
|
31
|
|
1.
|
Time
and Place:
|
31
|
2.
|
Notice:
|
31
|
3.
|
When
and How Effected:
|
31
|
4.
|
Documents
to be Delivered to the BUYER:
|
31
|
5.
|
Tender
of the VESSEL:
|
33
|
6.
|
Title
and Risk:
|
33
|
7.
|
Removal
of the VESSEL:
|
34
|
ARTICLE
VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE
MAJEURE)
|
35
|
|
1.
|
Causes
of Delay:
|
35
|
2.
|
Notice
of Delays:
|
35
|
3.
|
Definition
of Permissible Delays:
|
36
|
4.
|
Definition
of Non-Permissible Delays:
|
36
|
5.
|
Right
to Rescind for Excessive Delay:
|
36
|
1.
|
Guarantee
of Material, Workmanship:
|
38
|
2.
|
Notice
of Defects:
|
38
|
3.
|
Remedy
of Defects:
|
39
|
4.
|
Extent
of BUILDER’s Liability:
|
41
|
ARTICLE
X - RESCISSION OF THE CONTRACT
|
43
|
|
1.
|
Notice:
|
43
|
2.
|
Refund
by the BUILDER:
|
43
|
3.
|
Discharge
of Obligations:
|
43
|
4.
|
Refundment
Guarantee:
|
44
|
ARTICLE
XI - BUYER’S DEFAULT
|
45
|
|
1.
|
Definition
of Default:
|
45
|
2.
|
Interest
and Charge:
|
45
|
3.
|
Effect
of Default:
|
46
|
4.
|
Sale
of the VESSEL:
|
46
|
ARTICLE
XII - INSURANCE
|
48
|
|
1.
|
Extent
of Insurance Coverage:
|
48
|
2.
|
Application
of Recovered Amount:
|
48
|
3.
|
Termination
of the BUILDER’s obligation to insure:
|
49
|
4.
|
Insurance
Confirmation:
|
49
|
ARTICLE
XIII - DISPUTES AND ARBITRATION
|
51
|
|
1.
|
Proceedings:
|
51
|
2.
|
Notice
of Award:
|
52
|
3.
|
Expenses:
|
52
|
4.
|
Entry
in Court:
|
52
|
5.
|
Alteration
of Delivery Time:
|
52
|
ARTICLE
XIV - RIGHTS OF ASSIGNMENT
|
53
|
|
1.
|
Assignment:
|
53
|
2.
|
Assignment
of Guarantee Claims:
|
53
|
ARTICLE
XV - TAXES AND DUTIES
|
54
|
|
Taxes
and Duties in the People’s Republic of China:
|
54
|
|
ARTICLE
XVI - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
|
55
|
|
1.
|
Patents,
Trademarks and Copyrights:
|
55
|
2.
|
General
Plans, Specifications and Working Drawings:
|
55
|
ARTICLE
XVII - BUYER’s SUPPLIES
|
56
|
|
1.
|
Responsibility
of the BUYER:
|
56
|
2.
|
Responsibility
of the BUILDER:
|
57
|
3.
|
Joint
Responsibility of the Parties hereto:
|
57
|
ARTICLE
XVIII - NOTICE AND CORRESPONDENCE
|
58
|
|
1.
|
Address:
|
58
|
2.
|
Language:
|
58
|
ARTICLE
XIX - EFFECTIVE DATE OF CONTRACT
|
59
|
|
ARTICLE
XX - INTERPRETATION
|
60
|
|
1.
|
Laws
Applicable:
|
60
|
2.
|
Discrepancies:
|
60
|
3.
|
Entire
Agreement:
|
60
|
ARTICLE
XXI - CONFIDENTIALITY
|
61
|
|
EXHIBIT
A
|
63
|
|
EXHIBIT
B
|
65
|
1. |
Description:
|
(1) |
Specification
for 176,000 DWT Bulk Carrier (Drawing No. SC4481-010-02SM(0000101B))
(For
avoidance of any doubt, this VESSEL technically does not comply with
IMO
Performance Standard for Protective Coatings for dedicated seawater
ballast tanks.)
|
(2) |
General
Arrangement (Drawing No. 0000001)
|
(3) |
Midship
Section (Drawing No. 0000002)
|
(4) |
Makers
List for Equipment (Drawing No.
SC4481-010-05MX)
|
(5) |
Memo
(Ref. No.:
SC4481-010-02SM(0000101B)-M1)
|
2. |
Class
and Rules:
|
3. |
Principal
Particulars of the
VESSEL:
|
(a) |
Hull:
|
Length
overall
|
abt.
291.80 m
|
Length
between perpendiculars
|
282.20
m
|
Breadth
moulded
|
45.00
m
|
Depth
moulded
|
24.75
m
|
Designed
draught moulded
|
16.50
m
|
Scantling
draught moulded
|
18.25
m
|
Deadweight
at scantling draft (summer load line) in sea water of 1.025 specific
gravity
|
176,000
mt
|
(b) |
Propelling
Machinery and Guaranteed Speed:
|
(c) |
Guaranteed
Deadweight:
|
(d) |
Guaranteed
Fuel Oil Consumption:
|
4. |
Subcontracting
Construction outside Builder’s
Premise:
|
5. |
Registration:
|
1. |
Contract
Price:
|
2. |
Adjustment
of Contract Price:
|
3. |
Currency:
|
4. |
Terms
of Payment:
|
(a) |
1st
Instalment:
|
(b) |
2nd
Instalment
|
(c) |
3rd
Instalment:
|
(d) |
4th
Instalment:
|
(e) |
5th
Instalment:
|
5. |
Method
of Payment:
|
(a) |
1st
Instalment:
|
(b) |
2nd
Instalment:
|
(c) |
3rd
Instalment:
|
(d) |
4th
Instalment:
|
(e) |
5th
Instalment:
|
6. |
Prepayment:
|
7. |
Refunds:
|
8. |
Security
for Payment of Instalments before
Delivery:
|
1. |
Delivery:
|
(a) |
No
adjustment shall be made and the Contract Price shall remain unchanged
for
the first thirty (30) days of delay in delivery of the VESSEL beyond
the
Delivery Date as defined in Article VII hereof (ending as of twelve
o’clock midnight China Standard Time of the thirtieth (30th) day of
delay).
|
(b) |
If
the delivery of the VESSEL is delayed more than thirty (30) days
after the
Delivery Date, then, in such event, beginning at twelve o’clock midnight
of the thirtieth (30th) day after the Delivery Date, the Contract
Price
shall be reduced by deducting therefrom the sum of United States
Dollar
fifteen thousand only (US$15,000.-) per day from the thirtieth (30th)
day
till the date of actual delivery as set forth in Article VII
hereof.
|
(c) |
But
if the delay in delivery of the VESSEL should continue for a period
of one
hundred eighty (180) days from the thirty-first (31st) day after
the
Delivery Date, then, in such event, and after such period has expired,
the
BUYER may at its option rescind or cancel this Contract in accordance
with
the provisions of Article X hereof. The BUILDER may, at any time
after the
expiration of the aforementioned one hundred eighty (180) days of
delay in
delivery, if the BUYER has not served notice of rescission as provided
in
Article X hereof, demand in writing that the BUYER shall make an
election,
in which case the BUYER shall, within fifteen (15) days after such
demand
is received by the BUYER, notify the BUILDER of its intention either
to
rescind/cancel this Contract or to consent to the acceptance of the
VESSEL
at agreed reduction price and at agreed future date (the “Newly Planned
Delivery Date”); it being understood by the parties hereto that, if the
VESSEL is not delivered by such Newly Planned Delivery Date, the
BUYER
shall have the same right of rescission or cancellation upon the
same
terms and conditions as hereinabove
provided.
|
(d) |
For
the purpose of this Article, the delivery of the VESSEL shall be
deemed to
be delayed when and if the VESSEL, after taking into full account
all
postponements of the Delivery Date by reason of Permissible Delays
as
|
(f) |
In
the event that the BUILDER is unable to deliver the Vessel on the
Newly
Planned Delivery Date as declared, the VESSEL can, nevertheless,
be
delivered by the BUILDER at a date after such declared Newly Planned
Date.
|
2. |
Speed:
|
(a) |
The
Contract Price shall not be affected or changed by reason of the
actual
speed, as determined by trial run, being less than three-tenths (3/10)
of
one (1) knot below the Guaranteed Speed of the VESSEL specified and
required under Paragraph 3(b) of Article I of this Contract (hereinafter
called the Guaranteed Speed”).
|
(b) |
However,
commencing with and including such deficiency of three-tenths (3/10)
of
one (1) knot in actual speed below the Guaranteed Speed of the VESSEL,
the
Contract Price shall be reduced as follows (but disregarding fractions
of
one-tenth (1/10) of a knot):
|
(c) |
If
the deficiency in actual speed of the VESSEL upon trial run is more
than
nine-tenths (9/10) of a knot below the Guaranteed Speed of the VESSEL,
then the BUYER may, at its option, reject the VESSEL and rescind
this
Contract in accordance with the provisions of Article X hereof, or
may
accept the VESSEL at a reduction in the Contract Price as above provided,
that is, at a total reduction of United States Dollars seven hundred
thousand only (U.S.$700,000.-).
|
3. |
Fuel
Consumption:
|
(a) |
The
Contract Price shall not be affected or changed by reason of the
fuel
consumption of the Main Engine, as determined by shop trial as per
the
Specifications, being more than the Guaranteed Fuel Consumption of
the
Main Engine of 169
grams
/(
kilowatt
x
hour
)
at MCR specified and required under Paragraph 3(d) of Article I of
this
Contract, if such excess is not more than five percent (5%) over
the
Guaranteed Fuel Consumption.
|
(b) |
However,
commencing with and including an excess of five percent (5%) in the
actual
fuel consumption over the Guaranteed Fuel Consumption of the Main
Engine,
the Contract Price shall be reduced by the sum of United States Dollars
(US$100,000.-) for each full one percent (1%) increase in fuel consumption
above said five percent (5%) (fractions of one percent (1%) to be
prorated), up to a maximum of eight percent (8%) over the Guaranteed
Fuel
Consumption of the Main Engine.
|
(c) |
If
such actual fuel consumption exceeds eight percent (8%) of the Guaranteed
Fuel Consumption of the Main Engine, the BUYER may, at its option,
reject
the VESSEL and rescind this Contract in accordance with the provisions
of
Article X hereof, or may accept the VESSEL at a reduction in the
Contract
Price as above specified for eight percent (8%) only, that is, at
a total
reduction of United States Dollars three hundred thousand
(US$300,000.-).
|
4. |
Deadweight:
|
(a) |
The
Contract Price shall not be affected or changed by reason of the
actual
deadweight tonnage determined as provided for in the Specifications
being
below the deadweight tonnage specified and required under Paragraph
3(c)
of Article I of this Contract (hereinafter called the “Guaranteed
Deadweight”), if such deficiency in the actual deadweight tonnage is not
more than one thousand (1,000) metric
tons.
|
(b) |
In
the event that the actual deadweight of the VESSEL as determined
in
accordance with the Specifications is less than the guaranteed deadweight
of the VESSEL, the Contract Price shall be reduced by the sum of
United
States Dollars one thousand (US$1,000.-) for each full metric ton
of such
deficiency being more than one thousand (1,000) metric tons, up to
a
maximum reduction of United States Dollars one million five hundred
(U.S.$1,500,000.-) but disregarding fractions of one (1) metric
ton.
|
(c) |
In
the event of such deficiency in the actual deadweight of the VESSEL
being
two thousand five hundred (2,500) metric tons or more, then the BUYER
may,
at its option, reject the VESSEL and rescind this Contract in accordance
with the provisions of Article X hereof, or may accept the VESSEL
at a
reduction in the Contract Price as above provided for metric tons
only,
that is, at a total reduction of United States Dollars one million
five
hundred (US$1,500,000.-).
|
5. |
Effect
of Rescission:
|
6. |
Method
of Settlement:
|
1. |
Approval
of Plans and Drawings:
|
(a) |
The
BUILDER shall submit to the BUYER four (4) copies each of the plans
and
drawings to be submitted thereto for its approval at its address
as set
forth in Article XVIII hereof.
|
(b) |
When
and if the REPRESENTATIVE (as defined hereinafter) shall have been
sent by
the BUYER to the SHIPYARD in accordance with Paragraph 2 of this
Article,
the BUILDER may, however at the BUYER’s express written consent only,
submit the remainder, if any, of the plans and drawings in the agreed
list, to the REPRESENTATIVE for his approval. The REPRESENTATIVE
shall,
within two (2) weeks after receipt thereof, return to the BUILDER
one (1)
copy of such plans and drawings with his approval or qualified approval
with comments written thereon, if
any.
|
(c) |
In
the event that the BUYER or the REPRESENTATIVE shall fail to return
the
plans and drawings to the BUILDER within the time limit as hereinabove
specified, such plans and drawings shall be deemed to have been
automatically approved without any
comment.
|
(d) |
All
documents, drawings, calculations, instruction manuals, etc. which
are
submitted to the BUYER, shall be in English
only.
|
2. |
Appointment
of the BUYER’s
REPRESENTATIVE:
|
3. |
Inspection
by REPRESENTATIVE:
|
4. |
Facilities:
|
5. |
Liability
of the BUILDER:
|
6. |
Responsibility
of the BUYER:
|
7. |
Salaries
and Expenses:
|
1. |
Modification
of Specifications:
|
2. |
Change
in Class, etc.:
|
(i) |
As
to any reasonable increase or decrease in the Contract Price of the
VESSEL
that is occasioned by the cost for such compliance according to and
in
compliance with Paragraph 1 of this Article V;
and/or
|
(ii) |
As
to any extension in the time for delivery of the VESSEL that is necessary
due to such compliance; and/or
|
(iii) |
As
to any decrease in the Guaranteed Deadweight and the Guaranteed Speed
of
the VESSEL, if such compliance results in reduced deadweight, cargo
capacity and speed; and/or
|
(iv) |
As
to any other alterations in the terms of this Contract, if such compliance
makes such alterations of the terms
necessary.
|
3. |
Substitution
of Materials:
|
1. |
Notice:
|
2. |
Weather
Condition:
|
3. |
How
Conducted:
|
4. |
Method
of Acceptance or
Rejection:
|
(a) |
Upon
completion of the trial run, the BUILDER shall give the BUYER a notice
of
completion of the trial run together with written reports recording
off
all the trials, as and if the BUILDER considers that the results
of the
trial run indicate conformity of the VESSEL to this Contract and
the
Specifications. The BUYER shall, within five (5) banking days after
receipt of such notice from the BUILDER notify the BUILDER by telefax
of
its acceptance or of its rejection of the Trial Run results, together
with
the reasons therefor.
|
(b) |
However,
should the result of the Trial Run indicate that the VESSEL or any
part
thereof including its equipment does not conform to the requirements
of
this Contract, the BUILDER shall investigate together with the
REPRESENTATIVE the cause of such non-conformance and determine the
proper
steps to be taken to remedy the same and make whatever corrections
and
alterations and/or re-Trial Run or Trial Runs as may be necessary
without
extra cost to the BUYER, and upon notification by the BUILDER of
the
completion of such alterations or corrections and/or re-Trial or
re-Trials
the BUYER shall, within five (5) business days, notify the BUILDER
by
telefax
|
(c) |
In
the event that the BUYER fails to notify the BUILDER by facsimile
of the
acceptance, or the rejection of the trial run together with the reason
therefor within the period as provided in the above Sub-paragraph
(a) or
(b), the BUYER shall be deemed to have accepted the
VESSEL.
|
(d) |
Any
dispute arising between the parties hereto as to whether the VESSEL
and
its equipment and machinery comply with this Contract and/or
Specifications, or as to the result of any trial run of the VESSEL,
or
relating to the BUYER’s rejection to take delivery of the VESSEL, shall be
resolved in accordance with Article
XIII.
|
(e) |
Nothing
herein shall preclude the BUYER from accepting the VESSEL with its
qualifications and/or remarks following the Trial Run and/or further
tests
or trials as aforesaid and the BUILDER shall be obliged to comply
with
and/or remove such qualifications and/or remarks (if such qualifications
and/or remarks are reasonably acceptable to the BUILDER) at the time
before effecting delivery of the VESSEL to the BUYER under this
Contract.
|
5. |
Effect
of Acceptance:
|
6. |
Disposition
of Surplus Consumable
Stores:
|
1. |
Time
and Place:
|
2. |
Notice:
|
3. |
When
and How Effected:
|
4. |
Documents
to be Delivered to the
BUYER:
|
(a) |
PROTOCOL
OF TRIALS OF THE VESSEL made pursuant to the
Specifications.
|
(b) |
PROTOCOL
OF INVENTORY of the equipment of the VESSEL, including spare parts
and the
like, all as specified in the
Specifications.
|
(c) |
PROTOCOL
OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6 of Article
VI
hereof, including the original purchase price
thereof.
|
(d) |
ALL
CERTIFICATES including three (3) originals of the BUILDER’s CERTIFICATE
(duly attested by notary public if necessary) required to be furnished
upon delivery of the VESSEL pursuant to this Contract and the
Specifications. All other certificates, except for BUILDER’s CERTIFICATE,
shall be delivered in one (1) original to the VESSEL and two (2)
copies to
the BUYER. It is agreed that if, through no fault on the part of
the
BUILDER, the classification certificate and/or other certificates
are not
available at the time of delivery of the VESSEL, provisional certificates
shall be accepted by the BUYER, provided that the BUILDER shall furnish
the BUYER with the formal certificates within three (3) months after
delivery of the VESSEL however in any event before the expiry of
such
provisional certificates, unless otherwise mutually
agreed.
|
(e) |
DECLARATION
OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER
free
and clear of any liens, charges, claims, mortgages, or other encumbrances
upon the BUYER’s title thereto, and in particular, that the VESSEL is
absolutely free of all burdens in the nature of imposts, taxes or
charges
imposed by the Chinese governmental authorities, as well as of all
liabilities of the BUILDER to its subcontractors, employees and crew,
and/or of all liabilities arising from the operation of the VESSEL
in
Trial Runs, or otherwise, prior to
delivery.
|
(f) |
FINISHED
DRAWINGS AND PLANS pertaining to the VESSEL as stipulated in the
Specifications.
|
(g) |
COMMERCIAL
INVOICE in triplicate, with main particulars of the
VESSEL.
|
(h) |
BILL
OF SALE in three (3) originals, duly notarized and legally
attested.
|
(i) |
PROTOCOL
OF DEADWEIGHT DETERMINATION and inclining
experiments.
|
(j) |
NON-REGISTRATION-CERTIFICATE,
as a copy, issued by the competent local authority, stating that
the
VESSEL is not registered at the time of Delivery; the original instrument
shall be delivered within thirty (30) business days after delivery
of such
copy; and
|
(k) |
Any
other reasonable document required by flag authority for the registration
of the VESSEL;
|
5. |
Tender
of the VESSEL:
|
6. |
Title
and Risk:
|
7. |
Removal
of the VESSEL:
|
1. |
Causes
of Delay:
|
2. |
Notice
of Delays:
|
3. |
Definition
of Permissible Delays:
|
4. |
Definition
of Non-Permissible
Delays:
|
5. |
Right
to Rescind for Excessive
Delay:
|
1. |
Guarantee
of Material,
Workmanship:
|
2. |
Notice
of Defects:
|
3. |
Remedy
of Defects:
|
(a) |
The
BUILDER shall remedy, at its expense, any defect against which the
VESSEL
or any part of equipment thereof is guaranteed under this Article
IX by
repairing or replacing the defective parts in the BUILDER’s SHIPYARD. Such
repairs or replacing defective parts will be made by the BUILDER
free of
charge.
|
(b) |
Such
repairs or replacement will be made at the BUILDER’s SHIPYARD unless the
VESSEL cannot be conveniently brought
there.
|
(aa) |
upon
the BUILDER’s acceptance of the defects as justifying remedy under this
Article, which shall not be unreasonably withheld;
or
|
(bb) |
if
the BUILDER neither accepts nor rejects the defects, nor requests
arbitration within fifteen (15) days after its receipt of the BUYER’s
notice of defects; or
|
(cc) |
upon
determination in an arbitration process in accordance with Article
XIII
that the defect(s) in question fall within the provisions of this
Article
IX.
|
(c) |
In
the event it is necessary to forward the replacement for the defective
parts under the BUILDER’s Guarantee, the BUILDER shall forward the same at
Cost Insurance and Freight by sea. However, if such replacement(s)
is/are
indispensably essential to and urgently required for the seaworthiness
of
the VESSEL, the BUILDER shall forward the same at Cost Insurance
and
Freight by airfreight. Seafreight and/or airfreight thereby incurred
are
for account of the BUILDER.
|
(d) |
If
all the defects for which the BUILDER is responsible under this Article
are discovered and notified before the expiration of the guarantee
period,
then these defects shall be agreed in writing between the Parties
hereto
as being guarantee items by the end of guarantee period and shall
be
repaired or replaced in the manner provided hereinabove in principle
within four (4) months after such expiration of the guarantee period
or at
a later date to be mutually agreed
upon.
|
(e) |
The
VESSEL shall, at the sole discretion of the BUYER, drydock for guarantee
termination survey in China on or before the expiry date of the 12-months
|
(f) |
In
any case, the VESSEL shall be taken at the BUYER’s cost and responsibility
to the place elected, ready in all respects for such repairs or
replacements.
|
4. |
Extent
of BUILDER’s
Liability:
|
1. |
Notice:
|
2. |
Refund
by the BUILDER:
|
3. |
Discharge
of Obligations:
|
4. |
Refundment
Guarantee:
|
1. |
Definition
of Default:
|
(a) |
If
the BUYER fails to pay any of the first, second, third and fourth
instalments to the BUILDER after such instalment becomes due and
payable
under the provision of Article II hereof;
or
|
(b) |
If
the BUYER fails to pay the fifth Instalment to the BUILDER concurrently
with the delivery of the VESSEL by the BUILDER to the BUYER as provided
in
Article II hereof; or
|
(c) |
If
the BUYER fails to take delivery of the VESSEL, when the VESSEL is
duly
tendered for delivery by the BUILDER under the provisions of Article
VII
hereof.
|
2. |
Interest
and Charge:
|
3. |
Effect
of Default:
|
(a) |
If
any default by the BUYER occurs as provided hereinbefore, the Delivery
Date shall be automatically postponed for a period of continuance
of such
default by the BUYER.
|
(b) |
If
any such default by the BUYER continues for a period of twenty-five
(25)
business days, the BUILDER may, at its option, rescind this Contract
by
giving notice of such effect to the BUYER by facsimile confirmed
in
writing. Upon receipt by the BUYER of such notice of rescission,
this
Contract shall forthwith become null and void, and any lien, interest
or
property right that the BUYER may have in and to the VESSEL or to
any part
or equipment thereof and to any material or part acquired for construction
of the VESSEL but not yet utilized for such purpose, shall forthwith
cease, and the VESSEL and all parts and equipment thereof shall become
the
sole property of the BUILDER.
|
4. |
Sale
of the VESSEL:
|
(a) |
In
the event of rescission of this Contract as above provided, the BUILDER
shall have full right and power either to complete or not to complete
the
VESSEL as it deems fit, and to sell the VESSEL at a public sale on
such
terms and conditions as the BUILDER thinks fit without being answerable
for any loss or damage.
|
(b) |
In
the event of the sale of the VESSEL in its completed state, the proceeds
of the sale received by the BUILDER shall be applied firstly to payment
of
all expenses attending such sale and otherwise incurred by the BUILDER
as
a result of the BUYER’s default, and then to payment of all unpaid
instalments of the Contract Price and interest on such instalments
at the
rate of eight percent (8%) per annum from the respective due dates
thereof
to the date of application.
|
(c) |
In
the event of sale of the VESSEL in its incomplete state, the proceeds
of
sale received by the BUILDER shall be applied firstly to all expenses
attending
|
(d) |
In
either of the above events of sale, if the proceeds of sale exceeds
the
total amount to which such proceeds are to be applied as aforesaid,
the
BUILDER shall promptly pay the excess to the BUYER without interest,
provided however, that the amount of such payment to the BUYER shall
in no
event exceed the total amount of instalments already paid by the
BUYER and
the cost of the BUYER’s Supplies, if
any.
|
(e) |
If
the proceeds of sale are insufficient to pay such total amounts payable
as
aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER
upon
request.
|
1. |
Extent
of Insurance Coverage:
|
2. |
Application
of Recovered Amount:
|
(a) |
Partial
Loss:
|
(b) |
Total
Loss:
|
(i) |
Proceed
in accordance with the terms of this Contract, in which case the
amount
recovered under said insurance policy shall be applied to the
reconstruction of the VESSEL’s damage, provided the parties hereto shall
have first agreed in writing as to such reasonable postponement of
the
Delivery Date and adjustment of other terms of this Contract including
the
Contract Price as may be necessary for the completion of such
reconstruction; or
|
(ii) |
Refluid
immediately to the BUYER the amount of all instalments paid to the
BUILDER
under this Contract with the interest at the rate of eight percent
(8%)
per annum, whereupon this Contract shall be deemed to be rescinded
and all
rights, duties, liabilities and obligations of each of the parties
to the
other shall terminate forthwith.
|
3. |
Termination
of the BUILDER’s obligation to
insure:
|
4. |
Insurance
Confirmation:
|
1. |
Proceedings:
|
(a) |
Decision
by the Classification Society:
|
(b) |
Proceedings
of Arbitration:
|
2. |
Notice
of Award:
|
3. |
Expenses:
|
4. |
Entry
in Court:
|
5. |
Alteration
of Delivery Time:
|
1. |
Assignment:
|
2. |
Assignment
of Guarantee Claims:
|
1. |
Patents,
Trademarks and
Copyrights:
|
2. |
General
Plans, Specifications and Working
Drawings:
|
1. |
Responsibility
of the BUYER:
|
(a) |
The
BUYER shall, at its own risk, cost and expense, supply and deliver
to the
SHIPYARD all of the items to be furnished by the BUYER as specified
in the
Specifications (herein called throughout this Contract the “BUYER’s
Supplies”) at the warehouse or other storage of the SHIPYARD in the proper
condition ready for installation in or on the VESSEL, in accordance
with
the time schedule designated by the
BUILDER.
|
(b) |
In
order to facilitate installation by the BUILDER of the BUYER’s Supplies in
or on the VESSEL, the BUYER shall furnish the BUILDER with necessary
specifications, plans, drawings, instruction books, manuals, test
reports
and certificates required by the rules and regulations. The BUYER,
if so
requested by the BUILDER in writing, shall, without any charge to
the
BUILDER, cause the representatives of the manufacturers of the BUYER’s
Supplies to assist the BUILDER in installation thereof in or on the
VESSEL
and/or to carry out installation thereof by themselves or to make
necessary adjustments thereof at the
SHIPYARD.
|
(c) |
Any
and all of the BUYER’s Supplies shall be subject to the BUILDER’s
reasonable right of rejection, as and if they are found to be unsuitable
or in improper condition for installation. However, if so requested
by the
BUYER, the BUILDER shall repair or adjust the BUYER’s Supplies without
prejudice to the BUILDER’s other rights hereunder and without being
responsible for any consequences therefrom. In such case, the BUYER
shall
reimburse the BUILDER for all costs and expenses incurred by the
BUILDER
in such repair or adjustment and the Delivery Date shall be postponed
for
a period of time necessary for such repair or replacement, if the
BUILDER
requests.
|
(d) |
Should
the BUYER fail to deliver any of the BUYER’s Supplies within the time
designated by the BUILDER, the Delivery Date shall be automatically
extended for a period of such delay in delivery, provided that such
delay
in delivery shall affect delivery of the VESSEL. In such event, the
BUYER
shall be responsible and pay to the BUILDER for all losses and damages
incurred by the BUILDER by reason of such delay in delivery of the
BUYER’s
Supplies and such payment shall be made upon delivery of the
VESSEL.
|
2. |
Responsibility
of the BUILDER:
|
3. |
Joint
Responsibility of the Parties
hereto:
|
1. |
Address:
|
To
the BUYER:
|
MAXPENTE
SHIPPING CORPORATION.
|
C/O:
SAFETY
MANAGEMENT OVERSEAS S.A.
|
|
32
Karamanli Avenue
|
|
166
73 Voula
|
|
Athens,
Greece
|
|
Telefax
No.:
|
+30-210-859
6900
|
To
the BUILDER:
|
Jiangsu
Rongsheng Heavy
|
Industries
Group Co., Ltd.
|
|
No.
882, Hong Qiao Road,
|
|
SHANGHAI,
200030
|
|
The
People’s Republic of China
|
|
Telefax
No. :
|
+86-21-64484727
|
2. |
Language:
|
1. |
Laws
Applicable:
|
2. |
Discrepancies:
|
3. |
Entire
Agreement:
|
BUYER:
|
BUILDER:
|
|
MAXPENTE
SHIPPING
CORPORATION. |
Jiangsu
Rongsheng
Heavy
Industries Group Co., Ltd.
|
|
/s/
Ioannis Fotinos
|
/s/
Chen Qiang
|
|
Attorney-in-Fact:
IOANNIS FOTINOS
|
Attorney-in-Fact:
Chen Qiang
|
1. |
This
Letter of Guarantee shall come into force when you have effected
the
payment of this instalment as per the
Contract.
|
2. |
The
maximum amount that the Bank, the undersigned, in any eventuality
may be
obliged to pay to your shall be the sum of United States Dollars
Sixteen
Million
|
3. |
This
Letter of Guarantee shall become null and void upon receipt by your
company of the amount guaranteed hereby together with interest thereon
or
upon the acceptance by your company of the delivery of the Vessel
constructed in accordance with terms of the said Contract as evidenced
by
the Protocol of Delivery and Acceptance of the VESSEL duly signed
by the
BUILDER and you and in this case this Letter of Guarantee shall be
returned to us.
|
4. |
This
Letter of Guarantee shall benefit and ensure to the assignee and
successor
of this Contract.
|
5. |
This
Letter of Guarantee shall be governed by and construed in accordance
with
the laws of the England. In the event that dispute should arise between
yourself and your assignee and us, such dispute shall be settled
by
arbitration in London in accordance with the laws of
England.
|
(1) |
In
consideration of your entering into a Ship Sale Contract dated
_____________ (“the Shipbuilding Contract”) with SAFETY MANAGEMENT
OVERSEAS S.A. as the buyer (“the BUYER”) for the construction of one (1)
176,000 Metric Tons Deadweight Bulk Carrier bearing Hull No. H1075
(the
“VESSEL”), we, _____________________, hereby IRREVOCABLY, ABSOLUTELY and
UNCONDITIONALLY guarantee, as the primary obligor and not merely
as the
surety, the due and punctual payment by the BUYER of the 2nd installment
of the Contract Price amounting to a sum of United States Dollars
Sixteen
Million
(US$16,000,000.00)
as specified in (2) below.
|
(2) |
The
Installments guaranteed hereunder, pursuant to the terms of the
Shipbuilding Contract, comprise the 2nd instalment in the amount
of United
States Dollars Sixteen Million
(US$16,000,000.00) payable by the BUYER within five (5) New York
banking
days after cutting of the first steel plate in your BUILDER’s
workshop.
|
(3) |
We
also IRREVOCABLY, ABSOLUTELY and
UNCONDITIONALLY
|
(4) |
In
the event that the BUYER fails to punctually pay any Installment
guaranteed hereunder or the BUYER fails to pay any interest thereon,
and
any such default continues for a period of fifteen (15) days, then,
upon
receipt by us of your first written demand, we shall immediately
pay to
you or your assignee all unpaid 2nd, 3rd and 4th installments, together
with the interest as specified in paragraph (3) hereof, without requesting
you to take any or further action, procedure or step against the
BUYER or
with respect to any other security which you may
hold.
|
(5) |
We
hereby agree that at your option this Guarantee and the undertaking
hereunder shall be assignable to and if so assigned shall inure to
the
benefit of any 3rd party designated by you or __________________,
the
People’s Republic of China as your assignee as if any such third party or
__________________, the People’s Republic of China were originally named
herein.
|
(6) |
Any
payment by us under this Guarantee shall be made in the Unites States
Dollars by telegraphic transfer to
[ (bank)]
as receiving bank nominated by you, for credit to the account of
you with
[
(bank)] or through other receiving bank to be nominated by you from
time
to time, in favour of you or your
assignee.
|
(7) |
Our
obligations under this guarantee shall not be affected or prejudiced
by
any dispute between you as the BUILDER and the BUYER under the
Shipbuilding Contract or by the BUILDER’s delay in the construction and/or
delivery of the VESSEL due to whatever causes or by any variation
or
extension of their terms thereof or by any security or other indemnity
now
or hereafter held by you in respect thereof, or by any time or indulgence
granted by you or any other person in connection therewith, or by
any
invalidity or unenforceability of the terms thereof, or by any act,
omission, fact or circumstances whatsoever, which could or might,
but for
the foregoing, diminish in any way our obligations under this
Guarantee.
|
(8) |
Any
claim or demand shall be in writing signed by one of your officers
and may
be served on us either by hand or by post and if sent by post to
__________________ (or such other address as we may notify to you
in
writing), or by tested telex (telex NO: _____________) via _____________,
with confirmation in writing.
|
(9) |
This
Letter of Guarantee shall come into full force and effect upon delivery
to
you of this Guarantee and shall continue in force and effect until
the
VESSEL is delivered to and accepted by the BUYER and the BUYER shall
have
performed all its obligations for taking delivery thereof or until
the
full payment of 2nd installment together with the aforesaid interests
by
the BUYER or us, whichever first
occurs.
|
(10) |
The
maximum amount, however, that we are obliged to pay to you under
this
Guarantee shall not exceed the aggregate amount of U.S. Dollars
__________________ being an amount equal to the sum
of:-
|
(a) |
All
the 2nd installment guaranteed hereunder in the total amount of United
States Dollars Sixteen Million
(US$16,000,000.00);
and
|
(b) |
Interest
at the rate of four percent (4%) per annum on the installments for
a
period of sixty (60) days in the amount of United States Dollars
Sixteen
Million
(US$16,000,000.00)
|
(11) |
All
payments by us under this Guarantee shall be made without any set-off
or
counterclaim and without deduction or withholding for or on account
of any
taxes, duties, or charges whatsoever unless we are compelled by law
to
deduct or withhold the same. In the latter event we shall make the
minimum
deduction or withholding permitted and will pay such additional amounts
as
may be necessary in order that the net amount received by you after
such
deductions or withholdings shall equal the amount which would have
been
received had no such deduction or withholding been required to be
made.
|
(12) |
This
Letter of Guarantee shall be construed in accordance with and governed
by
the Laws of England. We hereby submit to the non-exclusive jurisdiction
of
|
(13) |
This
Letter of Guarantee shall have expired as aforesaid, you will return
the
same to us without any request or demand from
us.
|
(14) |
IN
WITNESS WHEREOF, we have caused this Letter of Guarantee to be executed
and delivered by our duly authorized representative the day and year
above
written.
|
For
and on behalf of the
BUILDER
|
For
and on behalf of the
BUYER
(Authorised Representative) |
Dated:
|
Dated:
|
MEMORANDUM
OF AGREEMENT
Dated:
26
October 2007
|
Norwegian
Shipbrokers’ Association’s
Memo-
randum of Agreement for sale and purchase of ships. Adopted by The Baltic and International Maritime Council (BIMCO) in 1956.
Code-name:
SALEFORM
1993
Revised
1966, 1983 and 1986-87.
|
Built:
expected
on or before 31 July
2009 |
By:
Sungdong
Shipyard & Marine Engineering Co., Ltd. of
Korea
and Sungdong Heavy Industries Co., Ltd. of Korea
(together
the “Builders” and each a “Builder”)
|
Flag:
|
Place
of Registration:
see
clause 8 hereof
|
Call
Sign:
n/a,
see clause 8 hereof
|
Grt/Nrt:
In accordance with the
Specifications
|
1. |
Purchase
Price
|
2. |
Deposit
|
3. |
Payment
|
4. |
Inspections
(See Clause 20)
|
5. |
Notices,
time and place of delivery (See also Clause 18)
|
a)
|
The
Sellers shall keep the Buyers regularly posted with regards to the
estimated time of delivery of the Vessel and
shall
|
provide
the Buyers with
30,
21, 15, 10, 5,
and
3
days
approximate notice and 1 day’s definite notice there of
When
the Vessel is in every respect ready for delivery in accordance with
this
Agreement, the Sellers shall give the Buyers a written Notice of
Readiness
for delivery of the Vessel. Sellers to keep Buyers informed about
the
Vessel’s building schedule and progress of all major construction stages,
such as Steel Cutting, Keel Laying, Launching and delivery date,
until the
Vessel is completed.
|
The
Vessel will be delivered to the Buyers immediately and as soon as
practical after the Vessel has been delivered from the shipyard to
the
Seller, the Sellers to have the option to register the Vessel in
their
registry under the name given by the Buyers prior to transferring
the
vessel to the Buyers under this Memorandum of
Agreeement.
|
b)
|
Subject
to the Vessel having completed her sea trial in accordance with
the
|
Shipbuilding
Contract and the Specifications,
the Vessel shall be delivered and taken over safely afloat at a safe
and
accessible berth or safe anchorage
alongside
the pier or the anchorage at the
Shipyard.
|
Expected
time of delivery:
As
per the Shipbuilding Contract on or before 31 July
2009.
|
Date
of cancelling (see and clause
14
):
means
either of the dates on
which
the Sellers, but for Clause 23 hereof, could terminate the
Shipbuilding Contract either pursuant to Article III of the
Shipbuilding Contract or Article VIII of the Shipbuilding
Contract.
|
d)
|
Should
the Vessel become an actual, constructive or compromised total loss
before
delivery The deposit together with interest earned shall be released
immediately to the Buyers whereafter this Agreement shall be null
and
void.
|
6. |
Drydocking/Divers
Inspection
|
7. |
Spares/bunkers,
etc.
|
8. |
Documentation
|
a)
|
Four
original
l
egal
Bills of Sale in a form recordable in
(
the
port and the country in
which
the
Buyers are
to
register the Vessel) and which the Buyers should nominate at least
30
running days
prior
to the delivery of the Vessel, warranting that the Vessel is free
from all
charters,
encumbrances,
mortgages and maritime liens or any other taxes, debts or claims
whatsoever, duly notarially attested and legalized by the consul
of such
country or other competent authority.
|
b)
|
All
documents to be delivered to the Sellers by the Builders pursuant
to
Article VII.3 of
the
Shipbuilding Contract, including the documents called “Bill of Sale” and
“Builder’s Certificate”
|
c)
|
Any
such additional documents as may reasonably be required by the competent
authorities for the purpose of registering the
Vessel.
|
9. |
Encumbrances
|
10. |
Taxes,
etc.
|
11. |
Condition
on delivery
|
12. |
Name/markings
(See Clause24)
|
13. |
Buyers’
default
|
14. |
Sellers’
default
|
15. |
Buyers’
representatives (see also Clause 17 hereof)
|
16. |
Arbitration
|
a)*
|
This
Agreement shall be governed by and construed in accordance with English
law and any dispute arising out of this Agreement shall be referred
to
arbitration in London in accordance with the Arbitration Act 1996
or any
statutory modification or re-enactment thereof for the time being
in
force, one arbitrator being appointed by each party. On the receipt
by one
party of the nomination in writing of the other party’s arbitrator, that
party shall appoint their arbitrator within fourteen days, failing
which
the decision of the single arbitrator appointed shall apply. If two
arbitrators are properly appointed they shall in turn appoint a third
arbitrator and the three arbitrators will be deciding by majority
and
their majority decision shall be final. In the event the two arbitrators
appointed by the parties hereto fail agree on the appointment of
the third
arbitrator then the President of the Lloyds Maritime Arbitration
Association at the relevant time shall be asked by either party to
appoint
the third arbitrator.
|
17.
|
Supervision
and plan approval during construction of the Vessel to be carried
out by
Sellers. Buyers to have the right to use one observer for this as
for the
Hull 1050, i.e only one observer for both Hull 1039 and Hull 1050
at
Sungdong Shipyard immediately after the Keelaying of the Vessel.
This
observer is to form part of the Sellers’ supervision team but all costs
connected with their stay at the Shipyard are to be for the Buyers’
account. This observer shall have no authority in the construction,
drawing approval and shall only liaise/communicate with Sellers’
supervision team and not the Shipyard directly, Office facilities
with
phone, fax, e-mail to be provided by Sellers within Sellers’ supervision
team site office, all direct costs associated with Buyers’ observers’ use
of these offices to be for Buyers’
account.
|
18.
|
With
effect from the delivery of the Vessel under this Agreement, the
Sellers
undertake to assign to the Buyers all their rights, interest and
title a)
under the relevant article of the Shipbuilding Contract dealing with
the
Vessel’s so called warranty of quality, b) in any claims made thereunder
outstanding at the time of such assignment, and c) under any other
suppliers’ or equipment manufaturers’ warranties that are available to the
Sellers, such assignments being subject to the consent of the Builder
and
such other suppliers. The assignment of the rights described above
shall
be effected by a) the Sellers executing a deed in a form acceptable
to the
Buyers and b) the Builder, or such other relevant supplier or manufacturer
countersigning a Notice of Assignment again in a form acceptable
to the
Buyers, such notice to be duly executed, provided, however, that
in the
event that the Builder or any supplier or manufacturer, does not
consent
to the assignment of the relevant warranty, the Sellers hereby further
undertake to act as the agent of the Buyers in raising, handling
and
closing any claims that the Buyers may want to raise under the said
warranty always following the instructions of the Buyers. The Sellers
shall not refuse any request by the Buyers to raise a claim under
the said
warranty of quality on the understanding that the Sellers shall not
be
liable to meet a claim if there is a failure to recover the same
from the
|
19.
|
The
Vessel shall be delivered to the Sellers in accordance with the
Shipbuilding Contract and the Specifications, as these may be amended
and/or supplemented from time to time in accordance with the provisions
of
this Clause.
|
20.
|
The
Buyers have received and approved the Specifications, the Makers
List and
the Shipbuilding Contract, and therefore this Sale is outright and
definite, subject only to the terms and conditions of this
Agreement.
|
21.
|
The
Buyers shall have the right to assign as security any of their rights
under this Agreement to a bank or other financial institution providing
the Buyers with finance in relation to the acquisition of the
Vessel.
|
22.
|
To
the extent that the Sellers for any reason whatsoever receive the
benefit
of a reduction (the “
reduction
”)
in the purchase price to be paid by them under the Shipbuilding Contract,
then the Buyers would automatically be entitled to receive, in the
Buyer’s
option, either a reduction in the Purchase Price or a lump sum payment
by
the Sellers to the Buyers on delivery of the Vessel under this Agreement,
in either case equal to the amount of the
reduction.
|
23.
|
If
for any reason whatsoever the Seller become entitled under the
Shipbuilding Contract to terminate the Shipbuilding Contract or to
reject
the Vessel, then the Sellers shall,
before
|
(a) |
if
they wish the relevant agreement to be terminated or, as the case
may be,
the Vessel to be rejected. Upon such notice being given the deposit
together with the interest earned shall be released immediately to
the
Buyers after which this Agreement shall be null and void;
or
|
(b) |
if
they do not wish the relevant agreement to be terminated or, as the
case
may be, the Vessel to be rejected, of the terms, if any, upon which
the
Buyers will be willing for the Sellers to continue the Shipbuilding
Contract or accept the Vessel. Upon receipt by the Sellers of the
said
notice and depending on the instructions contained therein, the Sellers
would either (i) if the Buyers have given instructions to negotiate
terms,
negotiate the terms on which delivery of the Vessel would be taken
or the
Shipbuilding Contract would be continued or (ii) if there are no
instructions to negotiate terms but merely instrctions to continue,
unconditionally continue the Shipbuilding Contract, take delivery
of the
Vessel and deliver the Vessel to the Buyers. In the event that the
Builders do not agree to the terms requested by the Buyers in their
notice
to the Sellers, then the Sellers, having first obtained the Buyers’ prior
written consent, shall be entitled to terminate the Shipbuilding
Contract,
or, as the case may be, reject the Vessel whereupon the provisions
of
sub-paragraph (a) shall apply.
|
24
|
Subject
to the Builders’ concent it is hereby agreed that it will be for the
Buyers and not for the Sellers to provide the marking of the Vessel
and
Sellers agree, subject to receiving adequate notice, that they will
pass
the Buyers’ proposed markings to the Builders and arrange that the same is
imprinted by the Builders on the Vessel’s hull, funnel and on the Vessel’s
papers. To the extent the Builders require any additional payment
for
making such imprints, then such payment shall be for the Buyers’
account.
|
25
|
The
Sellers undertake only on Major issues to provide the Buyers with
copy of
important matters in connection with the Shipbuilding Contract. Failure
to
provide such documentation shall not be considered a breach of this
Memorandum of Agreement.
|
26
|
Any
and all notices and communications in connection with this Agreement
shall
be in English and addressed as
follos:
|
The
Sellers:
Songa Shipping Pte Ltd. Of One Temasek Avenue, 22-05 Millenia Tower Singapore 039192 |
The
Buyers:
Maxdodeka Shipping Corporation of 80 Broad Street, Monrovia, Liberia always to be fully guaranteed by Safety Management Overseas S.A. of Panama |
/s/
Sissel Grefsrud
|
/s/
George Papadopoulos
|
|
SISSEL
GREFSRUD
Attorney-in-fact
|
GEORGE
PAPADOPOULOS
Attorney-in-fact |
MEMORANDUM
OF AGREEMENT
Dated:
26
October 2007
|
Norwegian Shipbrokers’ Association’s Memorandum
of
Agreement for sale and purchase of ships.
Adopted by The Baltic and International Maritime
Council
(BIMCO) in 1956.
Code
name
SALEFORM
1993
Revised
1966, 1983 and 1986/87.
|
Built:
expected
on or before 31
|
By:
Sungdong
Shipyard & Marine Engineering Co., Ltd. of
|
March 2010 |
Korea
and Sungdong Heavy Industries Co., Ltd. of
Korea
|
(together
the “Builders” and each a “Builder”)
|
|
Flag:
|
Place
of Registration:
see
clause 8 hereof
|
Call
Sign:
n/a,
see clause 8 hereof
|
Grt/Nrt:
in
accordance with the Specifications
|
IMO Number: n/a, see clause 8 hereof |
1. |
Purchase
Price
|
2. |
Deposit
|
Copyright:
Norwegian Shipbrokers' Association, Oslo, Norway.
|
Printed
by BIMCO's
idea
|
3. |
Payment
|
4. |
Inspections
(See Clause 20)
|
5. |
Notices,
time and place of delivery (See also Clause
18)
|
a) |
The
Sellers shall keep the Buyers regularly posted with regards to the
estimated time of delivery of the Vessel and shall provide the Buyers
with
30,
21, 15, 10, 5,
and
3
days approximate notice and
1
day’s
definite notice there of When the Vessel is in every respect ready
for
delivery in accordance with this Agreement, the Sellers shall give
the
Buyers a written Notice of Readiness for delivery of the Vessel.
Sellers
to keep Buyers informed about the Vessel’s building schedule and progress
of all major construction stages, such as Steel Cutting, Keel Laying,
Launching and delivery date, until the Vessel is
completed.
|
b) |
Subject
to the Vessel having completed her sea trial in accordance with
the
|
d) |
Should
the Vessel become an actual, constructive or compromised total loss
before
delivery The deposit together with interest earned shall be released
immediately to the Buyers whereafter this Agreement shall be null
and
void.
|
6. |
Drydocking/Divers
Inspection
|
7. |
Spares/bunkers,
etc.
|
8. |
Documentation
|
a) |
Four
original legal Bills of Sale in a form recordable in
the port and the country in which the Buyers are to register the
Vessel
and which the Buyers should nominate at least 30 running days prior
to the
delivery of the Vessel, warranting that the Vessel is free from all
charters, encumbrances, mortgages and maritime liens or any other
taxes,
debts or claims whatsoever, duly notarially attested and legalized
by the
consul of such country or other competent authority.
|
b) |
All
documents to be delivered to the Sellers by the Builders pursuant
to
Article VII.3 of the Shipbuilding Contract, including the documents
called
“Bill of Sale” and “Builder’s Certificate”
|
c) |
Any
such additional documents as may reasonably be required by the competent
authorities for the purpose of registering the Vessel.
|
9. |
Encumbrances
|
10. |
Taxes,
etc.
|
11. |
Condition
on delivery
|
12. |
Name/markings
(See Clause24)
|
13. |
Buyers’
default
|
14. |
Sellers’
default
|
15. |
Buyers’
representatives (see also Clause 17 hereof)
|
16. |
Arbitration
|
a)* |
This
Agreement shall be governed by and construed in accordance with English
law and any dispute arising out of this Agreement shall be referred
to
arbitration in London in accordance with the Arbitration Act 1996
or any
statutory modification or
re-enactment
thereof for the time being in force, one arbitrator being appointed
by
each party. On the receipt by one party of the nomination in writing
of
the other party’s arbitrator, that party shall appoint their arbitrator
within fourteen days, failing which the decision of the single arbitrator
appointed shall apply. If two arbitrators are properly appointed
they
shall in turn appoint a third arbitrator and the three arbitrators
will be
deciding by majority and their majority decision shall be final.
In the
event the two arbitrators appointed by the parties hereto fail agree
on
the appointment of the third arbitrator then the President of the
Lloyds
Maritime Arbitration Association at the relevant time shall be asked
by
either party to appoint the third
arbitrator.
|
17. |
Supervision
and plan approval during construction of the Vessel to be carried
out by
Sellers. Buyers to have the right for Hull 1050 to use the same observer
as for the Hull 1039, i.e. only one observer for both Hull 1050 and
Hull
1039 at Sungdong Shipyard immediately after the Keelaying of the
Vessel.
This observer is to form part of the Sellers’ supervision team but all
costs connected with their stay at the Shipyard are to be for the
Buyers’
account. This observer shall have no authority in the construction,
drawing approval and shall only liaise/communicate with Sellers’
supervision team and not the Shipyard directly. Office facilities
with
phone, fax, e-mail to be provided by Sellers within Sellers’ supervision
team site office, all direct costs associated with Buyers’ observers’ use
of these offices to be for Buyers’
account.
|
18. |
With
effect from the delivery of the Vessel under this Agreement, the
Sellers
undertake to assign to the Buyers all their rights, interest and
title a)
under the relevant article of the Shipbuilding Contract dealing with
the
Vessel’s so called warranty of quality, b) in any claims made thereunder
outstanding at the time of such assignment, and c) under any other
suppliers’ or equipment manufaturers’ warranties that are available to the
Sellers, such assignments being subject to the consent of the Builder
and
such other suppliers. The assignment of the rights described above
shall
be effected by a) the Sellers executing a deed in a form acceptable
to the
Buyers and b) the Builder, or such other relevant supplier or manufacturer
countersigning a Notice of Assignment again in a form acceptable
to the
Buyers, such notice to be duly executed, provided, however, that
in the
event that the Builder or any supplier or manufacturer, does not
consent
to the assignment of the relevant warranty, the Sellers hereby further
undertake to act as the agent of the Buyers in raising, handling
and
closing any claims that the Buyers may want to raise under the said
warranty always following the instructions of the Buyers. The Sellers
shall not refuse any request by the Buyers to raise a claim under
the said
warranty of quality on the understanding that the Sellers shall not
be
liable to meet a claim if there is a failure to recover the same
from the
|
19. |
The
Vessel shall be delivered to the Sellers in accordance with the
Shipbuilding Contract and the Specifications, as these may be amended
and/or supplemented from time to time in
accordance
with the provisions of this Clause.
|
20. |
The
Buyers have received and approved the Specifications, the Makers
List and
the Shipbuilding Contract, and therefore this Sale is outright and
definite, subject only to the terms and conditions of this
Agreement.
|
21. |
The
Buyers shall have the right to assign as security any of their rights
under this Agreement to a bank or other financial institution providing
the Buyers with finance in relation to the acquisition of the
Vessel.
|
22. |
To
the extent that the Sellers for any reason whatsoever receive the
benefit
of a reduction (the “
reduction
”)
in the purchase price to be paid by them under the Shipbuilding Contract,
then the Buyers would automatically be entitled to receive, in the
Buyer’s
option, either a reduction in the Purchase Price or a lump sum payment
by
the Sellers to the Buyers on delivery of the Vessel under this Agreement,
in either case equal to the amount of the
reduction.
|
23. |
If
for any reason whatsoever the Seller become entitled under the
Shipbuilding Contract to terminate the Shipbuilding Contract or to
reject
the Vessel, then the Sellers shall, before
|
(a) |
if
they wish the relevant agreement to be terminated or, as the case
may be,
the Vessel to be rejected. Upon such notice being given the deposit
together with the interest earned shall be released immediately to
the
Buyers after which this Agreement shall be null and void;
or
|
(b) |
if
they do not wish the relevant agreement to be terminated or, as the
case
may be, the Vessel to be rejected, of the terms, if any, upon which
the
Buyers will be willing for the Sellers to continue the Shipbuilding
Contract or accept the Vessel. Upon receipt by the Sellers of the
said
notice and depending on the instructions contained therein, the Sellers
would either (i) if the Buyers have given instructions to negotiate
terms,
negotiate the terms on which delivery of the Vessel would be taken
or the
Shipbuilding Contract would be continued or (ii) if there are no
instructions to negotiate terms but merely instrctions to continue,
unconditionally continue the Shipbuilding Contract, take delivery
of the
Vessel and deliver the Vessel to the Buyers. In the event that the
Builders do not agree to the terms requested by the Buyers in their
notice
to the Sellers, then the Sellers, having first obtained the Buyers’ prior
written consent, shall be entitled to terminate the Shipbuilding
Contract,
or, as the case may be, reject the Vessel whereupon the provisions
of
sub-paragraph (a) shall apply.
|
24 |
Subject
to the Builders’ concent it is hereby agreed that it will be for the
Buyers and not for the Sellers to provide the marking of the Vessel
and
Sellers agree, subject to receiving adequate notice, that they will
pass
the Buyers’ proposed markings to the Builders and arrange that the same is
imprinted by the Builders on the Vessel’s hull, funnel and on the Vessel’s
papers. To the extent the Builders require any additional payment
for
making such imprints, then such payment shall be for the Buyers’
account.
|
25 |
The
Sellers undertake only on Major issues to provide the Buyers with
copy of
important matters in connection with the Shipbuilding Contract. Failure
to
provide such documentation shall not be considered a breach of this
Memorandum of Agreement.
|
26 |
Any
and all notices and communications in connection with this Agreement
shall
be in English and addressed as
follos:
|
Fax
number:
|
+30
210 895 6900
|
Attn.:
|
Dr.
Loucas N Barbaris
|
+65-6339
0559
|
|
+65-6339
0848
|
|
Attn.:
|
Sissel
Grefsrud
|
The
Sellers:
Songa
Shipping Pte Ltd.
Of One Temasek Avenue,
[SEAL]
22-05
Millenia Tower
Singapore
039192
|
The
Buyers:
Maxdekatria
Shipping Corporation
of
80 Broad Street, Monrovia, Liberia
always
to be fully guaranteed by
Safety
Management Overseas S.A. of Panama
|
|
/s/
Sissel Grefsrud
|
/s/
George Papadopoulos
|
|
SISSEL
GREFSRUD
Attorney-in-fact
|
GEORGE
PAPADOPOULOS
Attorney-in-fact
|
MEMORANDUM
OF AGREEMENT
Dated:
10 November 2007
|
Norwegian
Shipbrokers' Association's Memo-
randum
of Agreement for sale and purchase of ships.
Adopted
by the Baltic and International Maritime
Council
(BIMCO) in 1956
Code-name
SALEFORM
1993
Revised
1966, 1983 and 1986/87.
|
Built:
expected
on or before 31 March
|
By:
STX
Shipbuilding Co., Ltd. of 100 Wonpo-dong, Jinhae,
|
2010
|
Gyeongsangnam-do,
Korea (the "Builder")
|
Flag:
see
clause 8, line 206 hereof
|
Place
of Registration:
see
clause 8, line 206 hereof
|
Call
Sign:
n/a,
see clause 8, line 206
|
Grt/Nrt:
in
accordance with the Specifications
hereof
|
Printed
by BIMCO's idea
|
5. |
Notices,
time and place of
delivery
|
a) |
The
Sellers shall keep the buyers well informed of the Vessel's
estimated
time
of
delivery and shall provide the Buyers with
15,
10 and 3 days approximate notice
and
3
day
definite
notice
thereof. When the Vessel is in every respect physically ready for
delivery
in accordance with this Agreement, the Sellers shall give the Buyers
a
written Notice of Readiness for
delivery.
|
b) |
Subject
to the Vessel having completed her sea trials in accordance with
the
Shipbuilding Contract and the Specifications. the Vessel shall
be
delivered and taken over safely afloat at a safe and accessible
berth or
anchorage at/
the
Shipyard
alongside the Builder's pier or the Builder's anchorage. If the
Vessel
is
delivered to the Buyers a the Builder's pier, the Buyers shall
remove the
Vessel therefrom as soon as practically possible after being instructed
by
the Builder to do so. Expected time of delivery:
upon
delivery of the Vessel from the Builder to the
Sellers
|
Date
of canceling (see
Clauses
5c
)
and
14
):
means
either of the dates on which the Sellers, but for Clause 21 hereof,
could terminate the Shipbuilding Contract pursuant to Article 3 of
the Shipbuilding Contract or Article 8 of the Shipbuilding
Contract.
|
d) |
Should
the Vessel become an actual, constructive or compromised total
loss before
delivery then the Sellers shall discuss with the Builder in accordance
with the terms of Article 17(b) whether the Vessel shall be reconstructed
or the Shipbuilding Contract shall be terminated. The Sellers shall
not
reach an agreement with the Builder to reconstruct the Vessel in
accordance with the terms of Article 17(b)(i) of the Shipbuilding
Contract
unless such agreement is on the terms acceptable to the Buyers.
In the
case that agreement between
|
the
Sellers and the Builder is reached on terms acceptable to the
Buyers, this
Agreement shall continue in place and the terms agreed in connection
with
the Shipbuilding Contract shall be also incorporated in this
Agreement to
the extent required. If there is no Agreement reached between
the Sellers
and the Builder under Article 17 of the Shipbuilding Contract
within two
months from the date of the total loss occuring or if the agreement
to be
reached is not acceptable to the Buyers, then the deposit together
with
interest earned shall be released immediately to the Buyers
whereafter
this Agreement shall be null and
void.
|
6. |
Drydocking/Divers
Inspection
|
a) |
Any
original legal Bills of Sale in a form recordable in the port and
the
country in which the Buyers are to register the Vessel and which
the
Buyers should nominate at least 10 running days prior to the delivery
of
the Vessel, warranting that the Vessel is free from all encumbrances,
mortgages and maritime liens or any other debts or claims whatsoever,
duly
notarially attested and legalized by the consul of such country
or other
competent authority.
|
b) |
All
documents to be delivered to the Sellers by the Builder pursuant
to
Article 7(c) of the Shipbuilding Contract, including the document
called
the "Builder's Certificate"
|
f) |
Any
such additional documents as may reasonably be required by the
competent
authorities for the purpose of registering the Vessel, as well
as any such
additional documents that the Buyers shall require for the purpose
of
ascertaining (i) the proper constitution of the Sellers and the
Builder
and (ii) that all appropriate corporate and other action has been
taken in
connection with the authorisation and the performance by the Sellers
and
the Builder of this Agreement and the assignment of the warranty
of
quality as provided in Clause 18 hereof together with any documents
referred therein, provided the Buyers notify the Sellers of any
such
documents as soon as possible after the date of this
Agreement.
|
a) |
This
Agreement shall be governed by and construed in accordance with
English
law and any dispute arising out of this Agreement shall be referred
to
arbitration in London in accordance with the Arbitration Act 1996
or any
statutory modification or re-enactment thereof for the time being
in
force, one arbitrator being appointed by each party. On the receipt
by one
party of the nomination in writing of the other party's arbitrator,
that
party shall appoint their arbitrator within fourteen days, failing
which
the decision of the single arbitrator appointed shall apply. If
two
arbitrators are properly appointed they shall in turn appoint
a
third arbitrator and the three arbitrators will be deciding by
majority
and their majority decision shall be final. In the event the two
arbitrators appointed by the parties hereto fail to agree on the
appointment of the third arbitraor then the President of the Lloyds
Maritime Arbitration Association at the relevant time shall be
asked by
either party to appoint the third
arbitator,.
|
No
term of this Agreement shall be enforceable under the Contracts
(Rights of
Third Parties) Act of 1999 by a person who is not a party to this
Agreement.
|
(a) |
at
the Buyers' expense, provide the Buyers on the date of delivery
of the
Vessel to the Buyers under this Agreement with a true and complete
certified copy of the Shipbuilding Contract pursuant to which the
Sellers
have obtained the benefit of the relevant warranties as well as
list of
any claims made thereunder;
|
(b) |
not
in any manner vary, waive, surrender, assign to any person other
than the
Buyers or suspend any of their rights under the relevant warranties;
and
|
(c) |
advise
the Buyers of any event that falls within any of the warranties
to be
assigned to the Buyers hereunder.
|
(i) |
if
they wish the Shipbuilding Contract to be terminated or, as the
case may
be, the Vessel to be rejected. Upon such notice the deposit together
with
the interest earned shall be released immediately to the Buyers
after
which this Agreement shall be null and void;
or
|
(ii) |
if
they do not wish the Shipbuilding Contract to be terminated or,
as the
case may be, the Vessel to be rejected, of the terms, if any, upon
which
the Buyers will be willing for the Sellers to continue the Shipbuilding
Contract or accept the Vessel. Upon receipt by the Sellers of the
said
notice and depending on the instructions contained therein, the
Sellers
would either (a) if the Buyers have given instructions to negotiate
terms,
negotiate the terms on which delivery of the Vessel would be taken
or the
Shipbuilding Contract would be continued or (b) if there are no
instructions to negotiate terms but merely instructions to continue,
unconditionally continue the Shipbuilding Contract, take delivery
of the
Vessel and deliver the Vessel to the Buyers. In the event that
the Builder
does not agree to
|
the
terms requested by the Buyers in their notice to the Sellers, then
the
Sellers, having first obtained the Buyers' prior written consent,
shall be
entitled to terminate the Shipbuilding Contract, or, as the case
may be,
reject the Vessel whereupon the provisions of sub-paragraph (i)
shall
apply.
|
Fax
number:
|
+30
210 8956900
|
Attn.:
|
Dr.
Loucas N. Barbaris
|
+1
212 50 98 681
|
|
Attn:
|
Mr.
Nicos Notias
|
|
|
Signed for and on behalf of | |
TROJAN MARITIME INC. | |
by: |
|
|
Signed for and on behalf of | |
MAXDEKA SHIPPING CORP. | |
by: |
MEMORANDUM
OF AGREEMENT
Dated: 10 November 2007 |
Norwegian Shipbrokers’ Association’s Memo-
randum of Agreement for sale and purchase of ships.
Adopted by The Baltic and International Maritime
Council
(BIMCO) in 1956.
Code-name:
SALEFORM
1993
Revised
1966, 1983 and 1986-87.
|
Built:
expected
on or before 31 May
2010
|
By:
STX
Shipbuilding
Co.,
Ltd.
of
100
Wonpo-dong,
Jinhee,
Gyeongsangnam-do,
Korea (the “Builder”)
|
Flag:
see
clause 8, line 206 hereof
|
Place
of Registration:
see
clause 8, line 206 hereof
|
Call
Sign:
n/a,
see clause 8, line 206 hereof
|
Grt/Nrt:
In accordance with the
Specifications
|
1. |
Purchase
Price
|
2. |
Deposit
|
3. |
Payment
|
4. |
Inspections—-see
Clause 20
|
5. |
Notices,
time and place of delivery
|
a) |
The
Sellers shall keep the Buyers well informed of the Vessel’s
estimated
time
of
delivery and shall
provide
the Buyers with 15, 10, and 3 days approximate notice and 3 days
definite notice
thereof
When
the Vessel is
in
every respect physically ready for delivery in accordance with this
Agreement, the Sellers shall give the Buyers a written Notice of
Readiness
for delivery.
|
b) |
Subject
to the Vessel having completed her sea trials in accordance with
the
Shipbuilding
Contract
and the Specifications,
the Vessel shall be delivered and taken over safely afloat at a safe
and
accessible berth or
anchorage
at/
the
Shipyard
alongside
the Builder’s pier or the Builder’s anchorage. If the Vessel
is
delivered
to the Buyers at the Builder’s pier, the Buyers shall remove the Vessel
therefrom as soon as practically possible after being instructed
by the
Builder to do so. Expected time of delivery: upon delivery of the
Vessel
from the Builder to the Sellers
|
d) |
Should
the Vessel become an actual, constructive or compromised total loss
before
delivery then the Sellers shall discuss with the Builder in accordance
with the terms of Article 17(b) whether the Vessel shall be
reconstructed or the Shipbuilding Contract shall be terminated. The
Sellers shall not reach an agreement with the Builder to reconstruct
the
Vessel in accordance with the terms of Article 17(b)I(i) of the
Shipbuilding Contract unless such agreement is on the terms acceptable
to
the Buyers. In the case that agreement between
|
6. |
Drydocking/Divers
Inspection
|
7. |
Spares/bunkers,
etc.
|
8. |
Documentation
|
a) |
Four
original
l
egal
Bills of Sale in a form recordable in
the port and the
country in which the Buyers are to register the Vessel and which
the
Buyers should nominate at least 10 running days prior to the delivery
of
the Vessel, warranting that the Vessel is free from all encumbrances,
mortgages and maritime liens or any other debts or claims whatsoever,
duly
notarially attested and legalized by the consul of such country or
other
competent authority.
|
b) |
All
documents to be delivered to the Sellers by the Builders pursuant
to
Article 7(c) of the Shipbuilding Contract, including the documents
called ““Builder’s Certificate”
|
f) |
Any
such additional documents as may reasonably be required by the competent
authorities for the purpose of registering the Vessel, as well as
any such
additional documents that the Buyers shall require for the purpose
of
ascertaining (i) the proper constitution of the Sellers and the Builder
and (ii) that all appropriate corporate and other action has been
taken in
connection with the authorisation and the performance by the Sellers
and
the Builder of this Agreement and the assignment of the warranty
of
quality as provided in Clause 18 hereof together with any documents
referred therein, provided the Buyers notify the Sellers of any such
documents as soon as possible after the date of this Agreement.
|
9.
|
Encumbrances
|
10. |
Taxes,
etc.
|
11. |
Condition
on delivery
|
* |
Notes,
if any, in the surveyor’s report which are accepted by the Classification
Society without condition/recommendation are not to be taken into
account.
|
12. |
Name/markings
|
13. |
Buyers’
default
|
14. |
Sellers’
default
|
15. |
Buyers’
representatives – see Clause 20
|
16. |
Arbitration
|
a)* |
This
Agreement shall be governed by and construed in accordance with English
law and any dispute arising out of this Agreement shall be referred
to
arbitration in London in accordance with the Arbitration Acts 1996
or any
statutory modification or re-enactment thereof for the time being
in
force, one arbitrator being appointed by each party. On the receipt
by one
party of the nomination in writing of the other party’s arbitrator, that
party shall appoint their arbitrator within fourteen days, failing
which
the decision of the single arbitrator appointed shall apply. If two
arbitrators are properly appointed they shall in turn appoint a third
arbitrator and the three arbitrators will be deciding by majority
and
their majority decision shall be final.
In the event the two arbitrators appointed by the parties hereto
fail to
agree on the appointment of the third arbitraor then the President
of the
Lloyds Maritime Arbitration Association at the relevant time shall
be
asked by either party to appoint the third
arbitrator,.
|
(a) |
at
the Buyers’ expense, provide the Buyers on the date of delivery of the
Vessel to the Buyers under this Agreement with a true and complete
certified copy of the Shipbuilding Contract pursuant to which the
Sellers
have obtained the benefit of the relevant warranties as well as list
of
any claims made thereunder;
|
(b) |
not
in any manner vary, waive, surrender, assign to any person other
than the
Buyers or suspend any of their rights under the relevant warranties;
and
|
(c) |
advise
the Buyers of any event that falls within any of the warranties to
be
assigned to the Buyers hereunder.
|
(i) |
if
they wish the Shipbuilding Contract to be terminated or, as the case
may
be, the Vessel to be rejected. Upon such notice the deposit together
with
the interest earned shall be released immediately to the Buyers after
which this Agreement shall be null and void;
or
|
(ii) |
if
they do not wish the Shipbuilding Contract to be terminated or, as
the
case may be, the Vessel to be rejected, of the terms, if any, upon
which
the Buyers will be willing for the Sellers to continue the Shipbuilding
Contract or accept the Vessel. Upon receipt by the Sellers of the
said
notice and depending on the instructions contained therein, the Sellers
would either (a) if the Buyers have given instructions to negotiate
terms,
negotiate the terms on which delivery of the Vessel would be taken
or the
Shipbuilding Contract would be continued or (b) if there are no
instructions to negotiate terms but merely instructions to continue,
unconditionally continue the Shipbuilding Contract, take delivery
of the
Vessel and deliver the Vessel to the Buyers. In the event that the
Builder
does not agree to the terms requested by the Buyers in their notice
to the
Sellers, then the Sellers, having first obtained the Buyers’ prior written
consent, shall be entitled to terminate the Shipbuilding Contract,
or, as
the case may be, reject the Vessel whereupon the provisions of
sub-paragraph (i) shall apply.
|
Fax number:
|
+30
210 8956900
|
Attn.:
|
Dr.
Loucas N. Barbaris
|
Fax number:
|
+1
212 50 98 681
|
Attn:
|
Mr.
Nicos Notias
|
EXHIBIT 21.1
SUBSIDIARIES OF SAFE BULKERS, INC.
1
Maxdekatria Shipping Corporation (Liberia)
Eniadefhi Shipping Corporation (Liberia)
Eniaprohi Shipping Corporation (Liberia)
Eptaprohi Shipping Corporation (Liberia)
Efragel Shipping Corporation (Liberia)
Marindou Shipping Corporation (Liberia)
Avstes Shipping Corporation (Liberia)
Kerasies Shipping Corporation (Liberia)
Marathassa Shipping Corporation (Liberia)
Staloudi Shipping Corporation (Liberia)
Maxdeka Shipping Corporation (Liberia)
Pemer Shipping Ltd. (Liberia)
Petra Shipping Ltd. (Liberia)
Marinouki Shipping Corporation (Liberia)
Pelea Shipping Ltd. (Liberia)
Soffive Shipping Corporation (Liberia)
Maxpente Shipping Corporation (Liberia)
Maxenteka Shipping Corporation (Liberia)
EXHIBIT 23.1
Deloitte |
Hadjipavlou Sofianos &
Cambanis S.A. Assurance & Advisory Services 250 - 254 Kifissias Ave. GR - 152 31 Halandri Athens, Greece Tel.: +30 (210) 6781.100 Fax: +30 (210) 6776.221 -2 www.deloitte.gr |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form F-1 of our reports dated May 15, 2008, relating to the combined financial statements of the Predecessor Businesses of Safe Bulkers, Inc. and of Safe Bulkers, Inc. appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading Experts in such Prospectus.
\s\ Deloitte. Hadjipavlou, Sofianos & Cambanis S.A.
Athens, Greece
May 15, 2008
Hadjipavlou Sofianos & Cambanis S.A. | Member of | |
Assurance & Advisory Services | Deloitte Touche Tohmatsu | |
Co. Reg. No. 28953/01AT/B93/2052 | ||
|
||
Thessaloniki: Adrianoupoleos Str., GR - 551 33 Kalamaria, | ||
Tel.: +30 (2310) 406.500, Fax: +30 (2310) 416.447 |
EXHIBIT 23.4
Drewry Shipping
Consultants Ltd., Drewry House, Meridian Gate, 213 Marsh Wall, London E14
9FJ, England
Telephone: +44 (0) 20 7538 0191 Facsimile:+44 (0) 20 7987 9396
Email: enquiries@drewry.co.uk Website: www.drewry.co.uk
Safe Bulkers, Inc.
32 Avenue Karamanli
16673 Voula
Athens, Greece
May 15, 2008
Dear Sir/Madam:
Reference is made to the prospectus (the Prospectus) included in the registration statement on Form F-l relating to the initial public offering of common stock of Safe Bulkers, Inc.(the Company).
We have reviewed the sections in the Prospectus entitled Prospectus SummaryDrybulk Industry Trends, Risk Factors, Business and The International Drybulk Shipping Industry and confirm that they accurately describe the international containership and drybulk shipping markets. We further advise the Company that our role has been limited to the provision of the data, graphs, and tables set forth in the sections of the Prospectus entitled Prospectus SummaryDrybulk Industry Trends, Risk Factors, Business and The International Drybulk Shipping Industry. With respect to such statistical data, graphs and tables supplied by us, we advise you that:
Some industry data included in this discussion is derived from estimates or subjective judgments;
The published information of other maritime data collection agencies may differ from this data; and
While we have taken reasonable care in the compilation of the industry statistical data, graphs and tables and believe them to be accurate and correct, data compilation is subject to limited audit and validation procedures.
We hereby consent to all references to our name in the Prospectus and to the use of the graphical and statistical information supplied by us set forth in the sections of the Prospectus entitled Prospectus SummaryDrybulk Industry Trends, Risk Factors, Business and The International Drybulk Shipping Industry.
We hereby consent to the filing of this letter as an exhibit to the Registration Statement of the Company on Form F-l to be filed with the U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, and to the reference to our firm in the section of the Prospectus entitled Experts.
Yours faithfully
Drewry Shipping Consultants Limited registered in London, England No. 3289135
EXHIBIT 23.5
CONSENT OF DIRECTOR NOMINEE
I hereby consent to being named as a director nominee of Safe Bulkers, Inc., a Marshall Islands corporation in the Registration Statement on Form F-1 of Safe Bulkers, Inc. (including the prospectus contained therein), and in all subsequent amendments and post-effective amendments or supplements thereto, filed with the U.S. Securities and Exchange Commission.
Dated: May 11th, 2008 | ||
Signature:
/s/ Ole Wikborg
Ole Wikborg |
EXHIBIT 23.6
CONSENT OF DIRECTOR NOMINEE
I hereby consent to being named as a director nominee of Safe Bulkers, Inc., a Marshall Islands corporation in the Registration Statement on Form F-l of Safe Bulkers, Inc. (including the prospectus contained therein), and in all subsequent amendments and post-effective amendments or supplements thereto, filed with the U.S. Securities and Exchange Commission.
Dated: May 12th , 2008 | ||
Signature:
/s/ Basil
Sakellis
Basil Sakellis |
EXHIBIT 23.7
CONSENT OF DIRECTOR NOMINEE
I hereby consent to being named as a director nominee of Safe Bulkers, Inc., a Marshall Islands corporation in the Registration Statement on Form F-1 of Safe Bulkers, Inc. (including the prospectus contained therein), and in all subsequent amendments and post-effective amendments or supplements thereto, filed with the U.S. Securities and Exchange Commission.
Dated: May 11th, 2008 | ||
Signature:
/s/ Frank Sica
Frank Sica |