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TABLE OF CONTENTS
TABLE OF CONTENTS2
As filed with the Securities and Exchange Commission on April 6, 2018
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment
No. 1 to
FORM 20-F
(Mark One) | ||
ý |
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or |
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o |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended |
or |
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
or |
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o |
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
Commission file number:
Grindrod Shipping Holdings Ltd.
*
(Exact name of registrant as specified in its charter) |
(Not Applicable) (Translation of the registrant's name into English) |
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Republic of Singapore (Jurisdiction of incorporation or organization) |
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#03-01 Southpoint 200 Cantonment Road Singapore 089763 (Address of principal executive offices) |
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With copies to: Martyn Wade Tel: 65 6632 1315 Fax: 65 6323 0046 #03-01 Southpoint 200 Cantonment Road Singapore 089763 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) |
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and |
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Joshua Wechsler Fried, Frank, Harris, Shriver & Jacobson LLP Tel: (212) 859-8000 Fax: (212) 859-4000 One New York Plaza New York, New York 10004 United States |
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Securities registered or to be registered pursuant to Section 12(b) of the Act |
Title of Each Class | Name of Each Exchange on Which Registered | |
---|---|---|
Ordinary shares, no par value | NASDAQ Global Select Market |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: N/A
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: o Yes o No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. o Yes o No
NoteChecking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. o Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer ý | smaller reporting company o | Emerging growth company ý |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o |
International Financial Reporting Standards as issued
by the International Accounting Standards Board ý |
Other o |
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. o Item 17 o Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes o No
The Spin-Off
The board of directors of Grindrod Limited, a public company incorporated in accordance with the laws of the Republic of South Africa, or Parent, approved the investigation of the demerger of its shipping business, which we refer to as the Spin-Off, on August 23, 2017. The board of directors of Parent passed the resolution necessary to implement the Spin-Off on March 23, 2018. It is expected that on or around June 18, 2018, or the Closing Date, Parent will sell all of the shares it holds in its wholly-owned subsidiaries, Grindrod Shipping Pte. Ltd., or GSPL, and Grindrod Shipping (South Africa) Pty Ltd, or GSSA, to Grindrod Shipping Holdings Pte. Ltd., or Grindrod Shipping, a newly formed entity incorporated in accordance with the laws of the Republic of Singapore, created to hold Parent's shipping business, in exchange for a market related consideration that will be settled by way of the issuance by Grindrod Shipping of compulsorily convertible notes, or the Convertible Notes, to Parent, which will be distributed to Parent's shareholders in the Spin-Off as described below. In the first quarter of 2018, we sold two of GSSA's businesses, Ocean Africa Container Lines division, or OACL, and Unicorn Bunker Services (Pty) Ltd, or Unicorn Bunker, to another Parent subsidiary and such businesses will not be part of our results of operations for periods following the disposal on January 1, 2018, however, the proceeds from these sales will remain with us following the Spin-Off. On the Closing Date, pursuant to Parent board and shareholder authorization, Parent will make a distribution in specie consisting of the Convertible Notes to be distributed on the Closing Date pro rata to all of Parent's ordinary shareholders. Parent's ordinary shareholders will receive one Convertible Note for every 40 shares of Parent's ordinary shares. The Convertible Notes will immediately and automatically convert into ordinary shares in Grindrod Shipping following the distribution of the Convertible Notes to Parent's ordinary shareholders. Each Convertible Note will convert into one ordinary share of Grindrod Shipping with shareholders of Grindrod Shipping holding Grindrod Shipping ordinary shares in the same proportion as they hold their Parent ordinary shares immediately following the consummation of the Spin-Off. Fractional interests will be reduced down to the nearest whole number and Parent ordinary shareholders will receive a cash payment, in South African rand, for the fractional interest. See "Item 9. The Offer and ListingOffer and Listing DetailsMechanics of the Spin-Off".
Our Company
As of the Closing Date, Parent and Grindrod Shipping will become independent, publicly traded companies and will have separate public ownership. Grindrod Shipping has appointed its own board of directors, a majority of whom will not overlap with Parent's board of directors. Grindrod Shipping will have the same management team that currently operates Parent's shipping business and will not be managed by Parent or any of Parent's shareholders, except to the extent that a member of senior management is a beneficial owner of Parent's ordinary shares and receives ordinary Grindrod Shipping shares in the Spin-Off.
On November 2, 2017, Grindrod Shipping Holdings Pte. Ltd. was incorporated as a private company in accordance with the laws of the Republic of Singapore. On or prior to the Closing Date, Grindrod Shipping Holdings Pte. Ltd. will convert into Grindrod Shipping Holdings Ltd., a public company incorporated in accordance with the laws of the Republic of Singapore.
This registration statement on Form 20-F relates to the registration of Grindrod Shipping ordinary shares under Section 12(b) of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act. Grindrod Shipping has applied to list its ordinary shares on the NASDAQ Global Select Market, or NASDAQ. Grindrod Shipping has also applied in South Africa for its shares to be admitted to the official list of the JSE Limited, or the JSE, and its ordinary shares are expected to be listed and quoted on the Main Board of the JSE.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Our combined financial statements and, unless otherwise indicated, other financial information concerning us included in this registration statement, are presented in U.S. dollars. We have prepared our combined financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standard Board, or IASB.
Our audited combined financial statements as of and for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 are presented as combined financial statements and have been
i
derived from combining the financial statements of Parent's wholly-owned shipping business subsidiaries, GSPL and GSSA, that we will acquire immediately prior to the Spin-Off. In addition, the combined financial statements include components of Parent's shipping business which will not be transferred to us in the Spin-Off. In the first quarter of 2018, we sold two of GSSA's businesses, OACL and Unicorn Bunker, to another Parent subsidiary and such businesses will not be part of our results of operations for periods following the disposal on January 1, 2018, however, the proceeds from these sales will remain with us following the Spin-Off. The historical combined financial information has been prepared with the objective of presenting the results and net assets of Grindrod Shipping over the periods presented. Consequently, this historical combined financial information may not necessarily be indicative of the financial performance that would have been achieved had Grindrod Shipping operated as a stand-alone entity for the periods presented. Furthermore, it may not be indicative of the financial results in future periods.
Unaudited Pro Forma Condensed Financial Information
The historical column in the unaudited pro forma condensed statement of financial position and statement of profit or loss included in this registration statement has been derived from the audited combined financial statements of GSPL and GSSA included elsewhere in this registration statement as of and for the fiscal year ended December 31, 2017 and gives effect to the Spin-Off and the sale of OACL and Unicorn Bunker to another Parent subsidiary. Grindrod Shipping's unaudited pro forma condensed financial information, or the Unaudited Pro Forma Condensed Financial Information, does not represent the actual financial position or results of operations of Grindrod Shipping as at and for the dates indicated, and is being furnished solely for illustrative purposes. Furthermore, the Unaudited Pro Forma Condensed Financial Information does not purport to project Grindrod Shipping's results of operations or financial position for any future period or as of any future date. See "Item 18. Financial StatementsUnaudited Pro Forma Condensed Financial Information".
This registration statements includes estimates regarding market and industry data that we prepared based on our management's knowledge and experience in the markets in which we operate, together with information obtained from various sources, including publicly available information, industry reports and publications, surveys, our customers, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate.
In presenting this information, we have made certain assumptions that we believe to be reasonable based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets for our products and services. Market share data is subject to change and may be limited by the availability of raw data, the voluntary nature of the data gathering process and other limitations inherent in any statistical survey of market share data. In addition, customer preferences are subject to change. Accordingly, you are cautioned not to place undue reliance on such market share data or any other such estimates. While we believe such information is reliable, we cannot guarantee the accuracy or completeness of this information, we have not independently verified any third-party information and data from our internal research has not been verified by any independent source. While we believe the estimated market and industry data included in this registration statement are generally reliable, such information, which is derived in part from management's estimates and beliefs, is inherently uncertain and imprecise.
Projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Item 3. Key InformationRisk Factors" and "Cautionary Statement Regarding Forward-Looking Statements." These and other factors could cause results to differ materially from those expressed in the estimates made by any third parties and by us.
In this registration statement, unless otherwise indicated, all references to "we", "us," "our" and Grindrod Shipping refer to Grindrod Shipping Holdings Pte. Ltd. and its subsidiaries. Grindrod Shipping Holdings Pte. Ltd. is a private company incorporated under the laws of the Republic of Singapore and will convert, on or prior to the Closing Date, into Grindrod Shipping Holdings Ltd., a public company incorporated in accordance with the laws of the Republic of Singapore.
ii
In this registration statement, all references to "Singapore" mean the Republic of Singapore, all references to "South Africa" mean the Republic of South Africa and all references to the "United States" and "U.S." mean the United States of America, its territories and possessions and any state of the United States and the District of Columbia.
In this registration statement, "R" and "Rand" refer to the South African Rand and "Rand cents" refers to subunits of the South African Rand, "$", "U.S.$" and "U.S. dollars" refer to United States dollars and "U.S. cents" refers to subunits of the U.S. dollar.
This registration statement contains descriptions of shipping and the shipping industry. In order to facilitate a better understanding of these descriptions, below is a glossary defining a number of technical and shipping terms as used in this registration statement.
Glossary of Shipping Terms
The following explanations are not intended as technical definitions, but rather are intended to assist the reader in understanding some of the shipping terms used in this registration statement.
Available days. The total number of calendar days a vessel is in our possession for the relevant period after subtracting off-hire days for scheduled drydocking and special surveys. The shipping industry uses available days to measure the number of days in a relevant period during which vessels should be available for generating revenues.
Baltic Clean Tanker Index. The Baltic Clean Tanker Index, or BCTI, is a daily index of charter rates for key clean tanker routes published by the Baltic Exchange Limited.
Baltic Dry Index. The Baltic Dry Index, or BDI, is a leading daily drybulk charter market indicator published by the Baltic Exchange Limited, which combines information for handysize, supramax, panamax and capesize drybulk vessels.
Bareboat charter. Charter for an agreed period of time during which the vessel owner provides only the vessel, while the charterer provides the crew, together with all stores and bunkers and pays all vessel operating costs, including maintenance and repairs.
Drybulk carrier. Vessel designed to carry dry, loose cargoes in bulk.
Bunker(s). Fuel, consisting principally of fuel oil and diesel, burned in the vessel's engines and certain ancillary equipment.
Capesize vessel. Drybulk carrier with a capacity of about 130,000 to 200,000 dwt which, due to its size, must transit when loaded the Atlantic to the Pacific via Cape Horn or the Cape of Good Hope and is typically used for long voyages in the coal and iron ore trades.
Charter hire. The basic payment from the charterer for the use of the vessel under time charter. The amount is usually for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, or current market rates.
Charterer. A person, firm or company hiring or employing a vessel for the carriage of goods or other purposes.
Charter party. A document containing all the terms and conditions of the contract between the owner of a vessel and a charterer for the use of a vessel, signed by both parties or their agents, for the hire of a vessel or the space in a vessel.
Commercial management. Management of those aspects of vessel owning and operation that relate to obtaining economic value from the vessel which may include vessel financing, sale and purchase, chartering or vessel employment, voyage execution, insurance and claims handling, accounting and corporate administration.
Commercial pools. A pooling of vessels for the purpose of economies of scale and where the earnings of each vessel in the pool are not determined by the specific voyages undertaken by the individual vessel but by an agreed allocation of the pooled earnings of all the vessels in the pool. A pool manager is responsible for the commercial operation of the commercial pool service.
iii
Contract of affreightment. A contract of affreightment, or COA, is similar to a voyage charter, but covers two or more shipments over an agreed period of time (this could be over a number of months or years) and a particular vessel is not necessarily specified.
Deadweight tonne, or dwt. The unit of measurement of weight capacity of vessels, which is the total weight (usually in metric tons) the vessel can carry, including cargo, bunkers, water, stores, spares and crew at a specified draft.
Demurrage. An agreed amount payable to the vessel owner or disponent owner by the charterer when the agreed time allowed for loading or unloading cargo has been exceeded through no fault of the owner.
Disponent Owner. A person or a company that is not registered as owner of a vessel, but who has control over the commercial operations of the vessel through a bareboat or time charter, and has, as a disponent owner, the right to "dispose of" the ship by sub-chartering it to a third party.
Drydocking. The removal of a vessel from the water for inspection, maintenance and/or repair of parts that are normally submerged.
Flag state or Flagged. The country where the vessel is registered.
Fleet utilization. The percentage of time that vessels are available for generating revenue, determined by dividing the number of operating days during a relevant period by the number of available days during that period. The shipping industry uses fleet utilization to measure a company's efficiency in technically managing its vessels.
Forward freight agreement. A forward freight agreement, or FFA, is a derivative instrument that can be used as a means of hedging exposure to charter rate market risk through the purchase or sale of specified time charter rates or freight rates for forward positions. Settlement is in cash, against a daily market index published by the Baltic Exchange.
Freight rates. The revenue earned by a vessel owner or disponent owner pursuant to a voyage charter or a contract of affreightment.
Handysize drybulk vessel. Drybulk carrier of less than 40,000 dwt which is commonly equipped with cargo gear such as cranes. This type of vessel carries principally minor bulk cargoes and limited quantities of major bulk cargoes. It is well suited for transporting cargoes to ports that may have draft restrictions or are not equipped with gear for loading or discharging drybulk cargoes.
IMO. International Maritime Organization, the international United Nations advisory body on transport by sea.
In ballast. The period of time during which a vessel performs a voyage without cargo on board.
Major bulk. Drybulk cargoes such as iron ore, coal and grain.
Medium range tanker. A tanker of about 25,000 dwt to 60,000 dwt.
Minor bulk. Drybulk cargoes such as forest products, iron and steel products, fertilizers, agricultural products, minerals and petcoke, bauxite and alumina, cement, other construction materials and salt.
Newbuilding. A vessel under construction or on order for construction.
Off-hire. The period during which a vessel is not available for service due primarily to scheduled and unscheduled repairs or drydockings.
Operating days. Operating days are the number of available days in the relevant period a vessel is controlled by us after subtracting the aggregate number of days that the vessel is off-hire due to a reason other than scheduled drydocking and special surveys, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a relevant period during which vessels are actually available to generate revenues.
P&I. Protection and indemnity insurance coverage taken by a vessel owner or charterer against third-party liabilities such as those arising from oil pollution, cargo damage, crew injury or loss of life.
Product tanker. A tanker designed to carry refined petroleum products in bulk.
iv
Spot market. The market for immediate chartering of a vessel, usually for a single voyage or short-term trading.
Spot market-oriented pool. A commercial pool that primarily employs vessels in the spot market.
Spot rate. Charter rate agreed on the basis of the prevailing spot market.
Supramax vessel. Drybulk carrier of about 40,000 dwt to 65,000 dwt, which is usually grab fitted and carries a wide variety of cargoes including major bulk and minor bulk cargoes.
Small tanker. A tanker of about 10,000 dwt to 25,000 dwt.
Technical management. Management of those aspects of vessel owning and operation that relate to the physical operation of a vessel, including the provision of crew, routine maintenance, repairs, drydocking, supplies of stores and spares, compliance with all applicable international regulations, safety and quality management, environment protection, newbuilding plan approval, newbuilding supervision, oversight of third-party contracted supervisors, and related technical and financial reporting.
Time charter. Charter for an agreed period of time where the vessel owner or disponent owner as the case may be is paid on a per-day basis and is responsible for operating the vessel and paying the vessel operating costs while the charterer is responsible for paying the charter hire and the voyage costs and bears the risk of filling the vessel with cargo and any delays at port or during the voyage, except where caused by a defect of the vessel.
TCE Revenue or TCE. TCE, or time charter equivalent, revenue is defined as vessel revenues less voyage expenses. Such TCE revenue, divided by the number of our operating days during the period, is TCE per day. Vessel revenues and voyage expenses as reported for our operating segments include a proportionate share of vessel revenues and voyage expenses attributable to our joint ventures based on our proportionate ownership of the joint ventures. The number of operating days used to calculate TCE revenue per day also includes the proportionate share of our joint ventures' operating days and also includes charter-in days. TCE per day is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters have to cover voyage costs and are generally not expressed in per-day amounts while charter hire rates for vessels on time charters do not cover voyage costs and generally are expressed in per-day amounts.
Tonnage. A generic term referring to any kind of ocean-going cargo vessel or vessels.
Vessel operating costs. Costs associated with technical management of the Fleet, including crew expenses; repairs and maintenance; insurance; and other such costs.
Voyage charters. Charters under which a vessel owner or disponent owner is paid on the basis of transporting cargo from a load port to a discharge port and is responsible for paying vessel operating costs, voyage expenses, and charter hire costs, as applicable.
Voyage expenses. All direct costs associated with operating a vessel between loading and discharge at the relevant ports. These expenses include pool distributions (which consist of net earnings payable to third-party and joint venture owners of vessels in the pools we manage); fuel expenses; port expenses; and FFAs.
Conversion Rates
Certain information in this registration statement presented in Rand has been translated into U.S. dollars. Unless otherwise stated, the conversion rate for these translations is R12.39 per $1.00 which was the closing rate on December 31, 2017. By including the U.S. dollar equivalents, Grindrod Shipping is not representing that the Rand amounts actually represent the U.S. dollar amounts shown or that these amounts could be converted into U.S. dollars at the rates indicated.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This registration statement and the exhibits to this registration statement contain forward-looking statements with respect to our financial condition, results of operations, cash flows, business strategies, operating efficiencies, competitive position, growth opportunities, plans and objectives of management, markets for stock and other matters.
v
These forward-looking statements, including, among others, those relating to our future business prospects, revenues and income, wherever they may occur in this registration statement and the exhibits to this registration statement, are necessarily estimates and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in this registration statement. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:
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We undertake no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this registration statement or to reflect the occurrence of unanticipated events.
NOTICE TO PROSPECTIVE INVESTORS IN SINGAPORE
Grindrod Shipping's ordinary shares may not be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) pursuant to a prospectus registration exemption under Subdivision (4) of Division 1 of Part XIII of the Securities and Futures Act, Chapter 289 of Singapore, or (ii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the Securities and Futures Act, Chapter 289 of Singapore, in each case subject to compliance with conditions set forth therein.
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Directors and Senior Management
Directors
The table below details the names of, and information about, the individuals that are currently serving as, or that we expect to serve as, directors or alternate directors of Grindrod Shipping.
Name
|
Age | Position | Term Expires | |||
---|---|---|---|---|---|---|
Cato Brahde |
63 | Director / Chairman | First Annual General Meeting | |||
Michael Hankinson (1) |
68 | Director | First Annual General Meeting | |||
John Herholdt |
69 | Director | First Annual General Meeting | |||
Quah Ban Huat |
51 | Director | First Annual General Meeting | |||
Stephen Griffiths |
57 | Director | * | |||
Pieter Uys (1) |
55 | Director | First Annual General Meeting | |||
Martyn Wade |
58 | Director | * | |||
Alternate Director: |
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Andrew Waller (1)(2) |
55 | Alternate Director | First Annual General Meeting |
The business address of each of Messrs. Wade and Griffiths is Grindrod Shipping's executive offices at #03-01 Southpoint, 200 Cantonment Road, Singapore 089763. The business address of each of Messrs. Brahde, Hankinson, Herholdt, Quah and Uys is c/o MS Nominees Pte. Ltd., 10 Anson Road, #32-15 International Plaza, Singapore 079903. Please see "Item 6. Directors, Senior Management and Employees" for more information about our Directors.
Senior Management
The table below details the names of, and information about, the individuals we expect to serve as members of the senior management of Grindrod Shipping, or the Executive Officers:
Name
|
Age | Position | ||
---|---|---|---|---|
Martyn Wade (1) |
58 | Chief Executive Officer | ||
Stephen Griffiths (2) |
57 | Chief Financial Officer |
The business address of the persons noted above is Grindrod Shipping's executive offices at #03-01 Southpoint, 200 Cantonment Road, Singapore 089763. Please see "Item 6. Directors, Senior Management and Employees" for more information.
Advisers
Grindrod Shipping's legal counsel as to matters of U.S. law is Fried, Frank, Harris, Shriver & Jacobson LLP, One New York Plaza, New York, New York, 10004, United States. Grindrod Shipping's legal counsel as to matters of South African law is ENSafrica, 150 West Street, Sandton, Johannesburg 2196, South Africa. Grindrod Shipping's legal counsel as to matters of Singapore law is Wong Tan & Molly Lim LLC, 80 Robinson Road, #17-02, Singapore 068898 with Watson Farley and Williams LLP, 6 Battery Road #28-00, Singapore 049909 as Singapore-based coordinating counsel.
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Auditors
Grindrod Shipping's auditors are Deloitte & Touche LLP, 6 Shenton Way, #33-00, Singapore 068809. Deloitte & Touche LLP is an independent registered public accounting firm registered with the Public Company Accounting Oversight Board.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Offer Statistics
Not applicable.
Method and Expected Timetable
Not applicable.
Selected Financial Data
The selected historical combined financial data set out below as of and for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 have been derived from the combined financial statements of GSSA and GSPL for those periods and as of those dates and the related notes included elsewhere in this filing. See "Item 5. Operating and Financial Review and Prospects" for additional information. The other operating data presented has been calculated as described in the footnotes to the table below. This table contains certain information regarding TCE revenue per day, which is a non-GAAP measure. For a discussion and reconciliation of this measure, see "Item 5. Operating and Financial Review and ProspectsNon-GAAP Financial Measures".
2
The following table sets forth certain other operating data for our drybulk carriers and tanker businesses. This data should be read together with "Item 5. Operating and Financial Review and Prospects."
|
Year Ended December 31, | |||||||||
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|
2017 | 2016 | 2015 | |||||||
Other Operating Data |
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Drybulk Carriers Business |
|
|
|
|||||||
Handysize Segment Data |
|
|
|
|||||||
Calendar days (1) |
7,942 | 7,616 | 7,877 | |||||||
Available days (2) |
7,840 | 7,559 | 7,762 | |||||||
Operating days (3) |
7,720 | 7,460 | 7,692 | |||||||
Fleet utilization (4) |
98.5 | % | 98.7 | % | 99.1 | % | ||||
Vessels operating at period end (5) |
21.2 | 20.4 | 21.1 | |||||||
Handysize Segment Average Daily Results |
|
|
|
|||||||
TCE per day (6) |
$ | 7,675 | $ | 5,881 | $ | 7,487 | ||||
Vessel operating costs per day (7) |
$ | 5,034 | $ | 5,091 | $ | 5,160 | ||||
Supramax Segment Data |
|
|
|
|||||||
Calendar days (1) |
7,702 | 7,700 | 7,952 | |||||||
Available days (2) |
7,702 | 7,700 | 7,952 | |||||||
Operating days (3) |
7,584 | 7,654 | 7,774 | |||||||
Fleet utilization (4) |
98.5 | % | 99.4 | % | 97.8 | % | ||||
Vessels operating at period end (5) |
20.8 | 20.9 | 21.3 | |||||||
Supramax Segment Average Daily Results |
|
|
|
|||||||
TCE per day (6) |
10,551 | $ | 7,861 | $ | 10,232 | |||||
Vessel operating costs per day (7) |
$ | 4,519 | $ | 4,433 | $ | 4,297 | ||||
Tankers Business |
|
|
|
|||||||
Medium Range Tankers Segment Data |
|
|
|
|||||||
Calendar days (1) |
3,055 | 3,140 | 3,288 | |||||||
Available days (2) |
2,999 | 3,140 | 3,288 | |||||||
Operating days (3) |
2,994 | 3,140 | 3,271 | |||||||
Fleet utilization (4) |
100 | % | 100 | % | 99.5 | % | ||||
Vessels operating at period end (5) |
7.5 | 9 | 8 | |||||||
Medium Range Tankers Segment Average Daily Results |
|
|
|
|||||||
TCE per day (6) |
$ | 11,691 | $ | 13,902 | $ | 20,569 | ||||
Vessel operating costs per day (7) |
$ | 6,869 | $ | 7,053 | $ | 7,458 | ||||
Small Tankers Segment Data |
|
|
|
|||||||
Calendar days (1) |
1,469 | 1,657 | 2,163 | |||||||
Available days (2) |
1,461 | 1,603 | 2,136 | |||||||
Operating days (3) |
1,461 | 1,572 | 2,096 | |||||||
Fleet utilization (4) |
99 | % | 98.1 | % | 98.2 | % | ||||
Vessels operating at period end (5) |
3.5 | 5 | 5 | |||||||
Small Tankers Segment Average Daily Results |
|
|
|
|||||||
TCE per day (6) |
$ | 13,014 | $ | 12,154 | $ | 11,291 | ||||
Vessel operating costs per day (7) |
$ | 7,427 | $ | 7,479 | $ | 7,676 |
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Summary Unaudited Pro Forma Condensed Financial Information
The table below presents summary unaudited pro forma condensed financial information. We derived the summary unaudited pro forma condensed statements from the unaudited pro forma condensed statement of profit or loss for the year ended December 31, 2017 and the unaudited pro forma condensed statement of financial position as of December 31, 2017. The summary unaudited pro forma condensed financial information set forth below should be read in conjunction with the information under "Item 3. Key InformationSelected Financial Data", "Item 5. Operating and Financial Review and Prospects" and our historical annual combined financial statements and related notes thereto included in "Item 18. Financial StatementsHistorical Combined Financial Statements". In the first quarter of 2018, we sold two of GSSA's businesses, OACL and Unicorn Bunker, to another Parent subsidiary and such businesses will not be part of our results of operations for periods following the disposal on January 1, 2018, however, the proceeds from these sales will remain with us following the Spin-Off. The unaudited pro forma condensed statements of profit or loss has been adjusted to give effect to these transactions as if they had occurred or became effective as of January 1, 2017. The unaudited pro forma condensed statement of financial position has been adjusted to give effect to these transactions as though the transactions had occurred as of December 31, 2017. In addition, the assumptions and estimates underlying the unaudited adjustments to the pro forma condensed financial statements are described in the accompanying notes, which should be read together with the pro forma condensed financial statements. See "Item 18. Financial StatementsUnaudited Pro Forma Condensed Financial Information".
|
Pro Forma
For the Year Ended December 31, |
|||
---|---|---|---|---|
(In thousands of U.S. dollars)
|
2017 | |||
Revenue |
$ | 354,583 | ||
Cost of sales |
(348,741 | ) | ||
Gross profit (loss) |
5,842 | |||
Loss for the period |
(68,312 | ) | ||
Total assets as of December 31, 2017 |
475,312 | |||
Total equity and liabilities as of December 31, 2017 |
475,312 |
Capitalization and Indebtedness
The following table presents Grindrod Shipping's capitalization as of December 31, 2017.
The information below is not necessarily indicative of what Grindrod Shipping's capitalization or indebtedness would have been had the Spin-Off been completed as of December 31, 2017. In addition, it is not indicative of Grindrod Shipping's future capitalization or indebtedness. The information below includes the capitalization and indebtedness of OACL and Unicorn Bunker, which will not be part of Grindrod Shipping's capitalization or indebtedness for periods following the disposal on January 1, 2018.
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This table should be read in conjunction with the Historical Combined Financial Statements, and related notes thereto, included elsewhere in this registration statement. See "Item 18. Financial Statements".
|
As of
December 31, |
|||
---|---|---|---|---|
(In thousands of U.S. dollars)
|
2017 | |||
Debt |
||||
Short-term borrowings (secured) |
$ | 89,573 | ||
Long-term borrowings (secured) |
27,131 | |||
| | | | |
Total Debt |
116,704 | |||
Total Equity |
353,676 | |||
| | | | |
Total Capitalization |
$ | 470,380 | ||
| | | | |
| | | | |
| | | | |
Reasons for the Offer and Use of Proceeds
Not applicable.
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In addition to the other information included in this registration statement, the considerations listed below could have a material adverse effect on our business, financial condition or results of operations, or cash flows, or ability to pay dividends, or future prospects, or financial performance, resulting in a decline in the trading price of Grindrod Shipping's ordinary shares. The risks set forth below comprise all material risks currently known to us. These factors should be considered carefully, together with the information and financial data set forth in this registration statement.
Risks Related to Our Industry
Weak economic conditions throughout the world, in particular in China and the rest of the Asia-Pacific region, could negatively affect the markets in which we operate which could have a material adverse effect on our business, financial condition, cash flows, results of operations and ability to obtain financing.
Negative trends in the global economy that emerged in 2008 continue to adversely affect global economic conditions. In addition, the world economy is currently facing a number of new challenges, including recent turmoil and hostilities in various regions, including Russia, North Korea, the Middle East, including Iran, Iraq, Syria, Egypt and North Africa. The weakness in the global economy has caused, and may cause, a decrease in worldwide demand for certain goods, and, thus, shipping. Additionally, there has historically been a strong link between the development of the world economy and demand for energy, including oil and gas, and other commodities. An extended period of deterioration in the outlook for the world economy could reduce the overall demand for oil and gas and other commodities and for our services. Continuing economic instability could have a material adverse effect on our ability to implement our business strategy.
The United States, Europe and other parts of the world have exhibited weak economic trends. The credit markets in the United States and Europe have experienced significant contraction, deleveraging and reduced liquidity, and the U.S. federal and state governments and European authorities have implemented and are considering a broad variety of governmental action and/or new regulation of the financial markets and may implement additional regulations in the future. Securities and futures markets and the credit markets are subject to comprehensive statutes, regulations and other requirements. The Securities and Exchange Commission, or the SEC, other regulators, self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies, and may effect changes in law or interpretations of existing laws.
Continued economic slowdown in the Asia Pacific region, particularly in China, may exacerbate the effect on us, as we anticipate a significant number of the port calls made by our vessels and those of our competitors will continue to involve the loading or discharging of drybulk and liquid bulk commodities in ports in the Asia Pacific region. Before the global financial crisis that began in 2008, China had one of the world's fastest growing economies in terms of GDP, which had a significant impact on shipping demand. The growth rate of China's GDP is estimated to have increased to approximately 6.9% for the year ended December 31, 2017 though it continues to remain below pre-2008 levels despite the overall level of demand for seaborne cargoes from China having increased since 2008. It is possible that China and other countries in the Asia Pacific region will continue to experience slowed or even negative economic growth in the future. Moreover, the current economic slowdown in the economies of the United States, Europe and other Asian countries may further adversely affect economic growth in China and elsewhere. Our business, financial condition, cash flows and results of operations, as well as our future prospects, will likely be materially and adversely affected by a further economic downturn in any of these countries or geographic regions.
Global financial markets and economic conditions have been and continue to be volatile. Credit markets and the debt and equity capital markets have been distressed and the uncertainty surrounding the future of the global credit markets has resulted in reduced access to credit worldwide. These issues, along with significant write-offs in the financial services sector, the re-pricing of credit risk and the current weak economic conditions, have made, and will likely continue to make, it challenging to obtain additional financing. In addition, the current state of global financial markets and current economic conditions might adversely impact our ability to issue additional equity at prices which will not be dilutive to our existing shareholders or preclude us from issuing equity at all.
Also, as a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets has increased as many lenders have increased interest rates, enacted tighter lending standards, refused to refinance existing debt
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at all or on terms similar to current debt and reduced, and in some cases ceased to provide, funding to borrowers. Due to these factors, we cannot be certain that financing will be available to the extent required to implement our business strategy, or that we will be able to refinance our credit facilities in due course, on acceptable terms or at all. If financing or refinancing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they become due or we may be unable to enhance our existing business, acquire newbuildings and additional vessels or otherwise take advantage of business opportunities as they arise.
We face risks attendant to changes in economic environments, changes in interest rates, and instability in the banking and securities markets around the world, among other factors. Major market disruptions and adverse changes in market conditions and regulatory climate in the United States and worldwide may adversely affect our business or affect our ability to borrow amounts under credit facilities or any future financial arrangements. The recent and developing economic and governmental factors, together with possible further declines in charter rates and vessel values, could have a material adverse effect on our business, financial condition, cash flows and results of operations.
In the global economy, operating businesses have recently faced tightening credit, weakening demand for goods and services, weak international liquidity conditions, and declining markets. In particular, lower demand growth for drybulk and tanker cargoes as well as diminished trade credit available for the delivery of such cargoes have led to decreased demand for drybulk carriers and tankers, creating downward pressure on charter rates, the spot market and vessel values. These global economic conditions have and may continue to have a number of adverse consequences for drybulk, tanker and other shipping sectors, including, among other things:
The occurrence of one or more of these events could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Charter rates for drybulk carriers are volatile and have declined significantly since their historic highs and may remain at relatively low levels or decrease in the future, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
The drybulk shipping industry is cyclical with high volatility in charter rates and profitability. The degree of charter rate volatility among different types of drybulk carriers has varied widely; however, the downturn in the drybulk charter market has severely affected the entire drybulk shipping industry and charter rates for drybulk carriers have declined significantly from historically high levels. In the past, time charter and voyage charter rates for drybulk carriers have declined below operating costs of vessels. The Baltic Dry Index, or the BDI, an index of daily average of charter rates for key drybulk routes published by the Baltic Exchange Limited, which has long been viewed as the main benchmark to monitor the movements of the drybulk vessel charter market and the performance of the entire drybulk shipping market, declined approximately 97.6% from its high of almost 12,000 in June 2008 to 290 on February 10, 2016 and has remained volatile since then. During the year ended December 31, 2017, the BDI fluctuated in a range between 685 and 1,743. As of December 31, 2017, the BDI was 1,366.
Fluctuations in charter rates result from changes in the supply of and demand for vessel capacity and changes in the supply of and demand for the major drybulk commodities carried by water internationally. Because the factors affecting the supply of and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in industry conditions are also unpredictable. Since we currently employ our vessels primarily in the spot market or spot market-oriented pools and do not have a significant amount of fixed revenue cover, we are exposed to the cyclicality and volatility of the spot market. Spot market charter rates may fluctuate significantly based upon the supply of and demand for seaborne shipping capacity, and we may employ our vessels in these short-term markets at lower rates. Alternatively, charter rates available in the spot market may be insufficient to enable our
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vessels to operate profitably. A significant decrease in charter rates would adversely affect asset values and our profitability, cash flows and ability to pay dividends, if any, in the future, on our ordinary shares, and capital and interest on our indebtedness. Furthermore, a significant decrease in charter rates would cause asset values to decline and we may have to record an impairment charge in our combined financial statements which could adversely affect our financial results.
Factors that influence demand for drybulk carrier capacity include:
Factors that influence the supply of drybulk carrier capacity include:
In addition to the prevailing and anticipated charter rates, factors that affect the rate of newbuilding, scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to newbuilding and scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance and insurance coverage costs, the efficiency and age profile of the existing drybulk fleet in the market and government and industry regulation of maritime transportation practices, particularly environmental protection laws and regulations. These and other factors influencing the supply of and demand for shipping capacity are outside of our control, and we may not be able to correctly assess the nature, timing and degree of changes in industry conditions.
We anticipate that the future demand for our drybulk carriers will be dependent upon economic growth in the world's economies, mainly China and India, seasonal and regional changes in demand, changes in the capacity of the global drybulk fleet and the sources and supply of drybulk cargo to be transported by sea.
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Adverse economic, political, social or other developments could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Charter rates for tankers are volatile, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
The tanker industry is cyclical and volatile in terms of charter rates and profitability. A worsening of current global economic conditions may cause tanker charter rates to decline and thereby adversely affect our ability to employ our vessels or to sell them on the expiration or termination of their employment, or any renewal or replacement employment that we enter into may not be sufficient to allow us to operate our vessels profitably. Fluctuations in charter rates and vessel values result from changes in the supply of and demand for tanker capacity and changes in the supply of and demand for oil and oil products and other liquid bulk cargoes. The factors affecting the supply of and demand for tankers are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable. The BCTI, an index of daily average of charter rates for key clean tanker routes published by the Baltic Exchange Limited, which has long been viewed as a main benchmark to monitor the movements of the clean tanker vessel charter market and the performance of the entire clean tanker shipping market, declined approximately 82.3% from its high of 1,955 in December 2000 to 345 in April 2009 and has remained volatile since then. During the year ended December 31, 2017, the BCTI fluctuated in a range between 508 and 867. As of December 31, 2017, the BCTI was 720.
Fluctuations in charter rates result from changes in the supply of and demand for vessel capacity and changes in the supply of and demand for the major large bulk liquid commodities carried by water internationally. Because the factors affecting the supply of and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in industry conditions are also unpredictable. Since we currently employ our vessels primarily in the spot market or spot market-oriented pools and do not have a significant amount of fixed revenue cover, we are exposed to the cyclicality and volatility of the spot market. Spot market charter rates may fluctuate significantly based upon the supply of and demand for seaborne shipping capacity, and we may be unable to keep our vessels fully employed in these short-term markets. Alternatively, charter rates available in the spot market may be insufficient to enable our vessels to operate profitably. A significant decrease in charter rates would adversely affect asset values and our profitability, cash flows and ability to pay dividends, if any, in the future, on our ordinary shares, and capital and interest on our indebtedness. Furthermore, a significant decrease in charter rates would cause asset values to decline and we may have to record an impairment charge in our combined financial statements which could adversely affect our financial results.
The factors that influence demand for clean tanker capacity include:
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The factors that influence the supply of tanker capacity include:
In addition to the prevailing and anticipated charter rates, factors that affect the rate of newbuilding, scrapping and laying-up, include newbuilding prices, secondhand vessel values in relation to scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance costs, insurance coverage costs, the efficiency and age profile of the existing tanker fleet in the market, and government and industry regulation of maritime transportation practices, particularly environmental protection laws and regulations. These factors influencing the supply of and demand for shipping capacity are outside of our control, and we may not be able to correctly assess the nature, timing and degree of changes in industry conditions.
We anticipate that the future demand for our tankers will be dependent upon economic growth in the world's economies, seasonal and regional changes in demand, changes in the capacity of the global tanker fleet and the sources and supply of oil and petroleum products and other liquid bulk cargoes to be transported by sea. Given the number of new tankers currently on order with the shipyards, the capacity of the global tanker fleet seems likely to increase and there can be no assurance as to the timing or extent of future economic growth. Adverse economic, political, social or other developments could have a material adverse effect on our business, financial condition, cash flows and results of operations.
The fair market values of our drybulk carriers and tankers are volatile and may decline in the future, which could limit the amount of funds that we can borrow, cause us to breach certain financial covenants in our credit facilities, or result in an impairment charge, and we may incur a loss if we sell a vessel following a decline in its market value.
The fair market values of our drybulk carriers and tankers have generally experienced high volatility and have declined significantly from time to time. The fair market value of our vessels may continue to fluctuate depending on a number of factors, including:
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If the fair market values of our vessels decline, the amount of funds we may draw down under our credit facilities may be limited and we may not be in compliance with certain covenants contained in our credit facilities, which may result in an event of default. In such circumstances, we may not be able to refinance our debt or obtain additional financing. If we are not able to comply with the covenants in our credit facilities, and are unable to remedy the relevant breach, our lenders could accelerate our debt and foreclose on the mortgaged vessels in our Fleet. In addition, if we sell one or more of our vessels at a time when vessel prices have fallen, the sale may be less than the vessel's carrying value on our combined financial statements, resulting in a loss on sale and a reduction in earnings, which could be material. See "Item 5. Operating and Financial Review and ProspectsLiquidity and Capital Resources".
Conversely, if vessel values are elevated at a time when we wish to acquire additional vessels, the cost of such acquisitions may increase and this could have a material adverse effect on our business, financial condition, cash flows and results of operations.
An inability to effectively time investments in and divestments of vessels could prevent the implementation of our business strategy and negatively impact our business, financial condition, cash flows and results of operations.
In order to maintain a young fleet we are required to replace older vessels with newer ones over time. In order to do so, we will grow our fleet by entering into long-term chartering and newbuildings contracts and making acquisitions and disposals in the resale and second-hand markets. Our business is greatly influenced by long-term chartering contracts, the timing of investments and/or divestments, the exercise of our purchase options to acquire vessels and contracting of newbuildings. As of December 31, 2017, we had purchase options to acquire five vessels that we time charter. For a discussion of the terms of these purchase options, see "Item 5. Operating and Financial Review and ProspectsLiquidity and Capital ResourcesOverview". If we are unable to identify the optimal timing of such investments, of the exercise of our purchase options, of divestments or of contracting of newbuildings in relation to the shipping value cycle or unable to execute at the optimal timing due to capital constraints or other reasons, this could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Drybulk carrier and tanker values have generally experienced high volatility. Investors can expect the fair market value of our vessels to fluctuate, depending on general economic and market conditions affecting the drybulk and tanker industries and competition from other shipping companies, types and sizes of vessels and other modes of transportation. In addition, as vessels age, they generally decline in value. These factors will affect the value of our vessels for purposes of covenant compliance under the credit facilities and at the time of any vessel sale. If for any reason we sell a vessel at a time when vessel prices have fallen, the sale may be at less than such vessel's carrying amount on our financial statements, with the result that we could also incur a material loss on the sale and a reduction in earnings and reserves. The carrying values of our vessels may not represent their fair market value at any point in time. At the end of each reporting period and on a continuous basis, if indicators of impairment are present, the carrying amount of tangible and intangible assets is assessed to determine whether there is any indication that those assets may have suffered an impairment loss. We also assess the carrying value of an asset when we make a decision to divest of the asset for any reason, including the age of our vessels, if a joint venture that owns vessels comes to an end in accordance with its terms or if the asset no longer fits into our strategic planning. See "Item 5. Operating and Financial Review and ProspectsCritical Accounting Policies".
An over-supply of drybulk carrier and tanker capacity may prolong or lead to a reduction or depression in drybulk carrier or tanker charter rates, as has happened in the past, and lead to a reduction in the value of our vessels, which may limit our ability to operate our drybulk carriers and tankers profitably.
The market supply of drybulk carriers has increased significantly since the beginning of 2005. As of December 31, 2017, newbuilding orders, which extend to 2021 and beyond, had been placed for approximately 9.3% of the existing global drybulk fleet capacity and the orderbook may increase further. Drybulk carrier supply growth has been outpacing drybulk carrier demand growth over the past few years, causing downward pressure on drybulk charter rates. If the capacity of new drybulk carriers delivered exceeds the capacity of drybulk carriers being scrapped, drybulk capacity will increase. Until the new supply is fully absorbed by the market, drybulk charter rates may continue to be under pressure in the near
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to medium term and this could have a material adverse effect on our business, financial condition, cash flows and results of operations.
The market supply of tankers is affected by a number of factors, such as supply of and demand for energy resources, including oil and petroleum products, supply of and demand for seaborne transportation of such energy resources and other liquid bulk cargoes, and the current and expected purchase orders for newbuildings. If the capacity of new tankers delivered exceeds the capacity of tankers being scrapped and converted to non-trading tankers, global tanker capacity will increase. As of December 31, 2017, the newbuilding order book, which extends to 2022 and beyond, equaled approximately 11.4% of the existing global tanker fleet and the order book may increase further in proportion to the existing global tanker fleet. If the supply of tanker capacity increases and if the demand for tanker capacity does not increase correspondingly or declines, charter rates could materially decline. A reduction in charter rates and the value of our vessels could have a material adverse effect on our business, financial condition, cash flows and results of operations. In addition, tankers may be "cleaned up" from "dirty/crude" trades and swapped back into the clean tanker market which would increase the available clean tanker tonnage which may affect the supply and demand balance for clean tankers and could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We operate in the highly competitive international shipping industry and we may not be able to compete for charters and COAs with new entrants or established companies with greater resources, and, as a result, we may be unable to employ our vessels profitably.
Our vessels are employed in a highly competitive market that is capital intensive and highly fragmented. The competition in the market is based primarily on supply and demand and we compete for charters and COAs on the basis of price, vessel location, size, age, the condition of the vessel, our and our third-party commercial managers' reputations, and, particularly in the tanker sector, the acceptability of the vessel and its technical managers and operators to the charterers.
We compete primarily with other independent and state-owned drybulk and tanker vessel-owners. Our competitors may have more resources than us and may operate vessels that are newer, and therefore more attractive to charterers, than our vessels. Ownership and control of drybulk carriers and tankers is highly fragmented and is divided among a large number of players including publicly listed and privately owned shipping companies, major oil companies, mining companies, commodity trading houses, private equity and other investment funds and state-controlled owners. In the tanker market a part of the trade is captive especially to major and national oil company fleets. Ownership and control in the drybulk sector is rather more fragmented than in the case of the tanker sector. Due in part to the highly fragmented markets in which we operate, competitors with greater resources could enter the drybulk or tanker shipping industries and operate larger fleets through consolidations or acquisitions and may be able to offer lower charter rates and higher quality vessels than we are able to offer. If we are unable to successfully compete with other drybulk or tanker shipping companies, our competitors may be able to offer better prices than us, which could result in our achieving lower revenues from our vessels and our business, financial condition, cash flows and results of operations could be materially adversely affected.
Our drybulk and tanker shipping charter rates will be subject to seasonal fluctuations, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We operate our drybulk carriers and tankers in markets that have historically exhibited seasonal variations in demand and, as a result, in charter rates. This seasonality may result in volatility in our operating results to the extent that we enter into new charter agreements or renew existing agreements during a time when charter rates are weaker or we operate our vessels in the spot market or on index-based time charters or have index-based COAs, which may result in quarter-to-quarter volatility in our operating results.
The drybulk sector is typically stronger in the northern hemisphere fall and winter months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere. The celebration of Chinese New Year in the first quarter of each year, also results in lower volumes of seaborne trade into China during this period.
The tanker sector is typically stronger in the northern hemisphere winter months as a result of increased oil consumption in the northern hemisphere but can be weaker in the summer months as a result of lower oil consumption in the northern hemisphere and refinery maintenance that is typically conducted in the summer months. The oil price volatility resulting from these factors has historically led to increased oil trading activities in the winter months.
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In addition, unpredictable weather patterns tend to disrupt vessel routing and scheduling as well as the supplies of certain commodities.
We are subject to complex laws and regulations, including environmental and safety regulations that can adversely affect the cost, manner or feasibility of doing business.
Our operations are subject to numerous international, national, state and local laws, regulations, treaties and conventions in force in international waters and the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. These laws and regulations include, but are not limited to, the U.S. Oil Pollution Act of 1990, or OPA, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, the U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990, or the CAA, the U.S. Clean Water Act, or the CWA, and the U.S. Maritime Transportation Security Act of 2002, or the MTSA, and regulations of the UN International Maritime Organization, or IMO, including the International Convention for the Prevention of Pollution from Ships of 1973 (as from time to time amended and generally referred to as MARPOL) including the designation of Emission Control Areas, or ECAs, thereunder, the International Convention for the Safety of Life at Sea of 1974 (as from time to time amended and generally referred to as SOLAS), the International Convention on Civil Liability for Bunker Oil Pollution Damage of 2001 (as from time to time amended and generally referred to as BUNKER), the International Convention of Civil Liability for Oil Pollution Damage of 1969 (as from time to time amended and generally referred to as CLC), the International Ship and Port Facility Security Code, or the ISPS code, and the International Convention on Load Lines of 1966 (as from time to time amended), or the LL Convention.
Compliance with such laws, regulations and standards, where applicable, may require installation of costly equipment or implementation of operational changes and the need for such actions may affect the resale value or useful lives of our vessels. These costs could have a material adverse effect on our business, financial condition, cash flows and results of operations. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with them or the impact thereof on the fair market values or useful lives of our vessels. 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. For example, the International Convention for the Control and Management of Ships' Ballast Water and Sediments, or the BWM Convention, adopted by the IMO in February 2004, calls for the phased introduction of mandatory reducing living organism limits in ballast water over time (as discussed further below). In order to comply with these living organism limits, vessel owners may have to install expensive ballast water treatment systems or make port facility disposal arrangements and modify existing vessels to accommodate those systems. The BWM Convention entered into force on September 8, 2017 and while we believe that our vessels have been or will be fitted with systems that will comply with the standards, we cannot be assured that these systems will be approved by the regulatory bodies of every jurisdiction in which we may wish to conduct our business. If they are not approved it could have a materially adverse impact on our business, financial condition, cash flows and results of operations depending on the available ballast water treatment systems and the extent to which existing vessels must be modified to accommodate such systems, the direct costs thereof and the time our vessels may be off hire to effect such modifications.
Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States (unless the spill results solely from, under certain limited circumstances, the act or omission of a third party, an act of God or an act of war). An oil spill could result in significant liability, including fines, penalties, criminal liability and remediation costs for natural resource damages under other international and U.S. federal, state and local laws, as well as third-party damages, including punitive damages, and could harm our reputation with current or potential charterers of our drybulk carriers and tankers.
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We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, and certificates with respect to our operations, and satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although we have insurance to cover certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on our business, financial condition, cash flows, results of operations. See "Item 4. Information on the CompanyBusiness OverviewEnvironmental and Other Regulations".
Our growth depends on continued growth in demand for oil and coal and the continued demand for seaborne transportation of such cargoes. A shift in consumer demand from oil and coal towards other energy sources or changes to trade patterns for refined oil products or coal could have a material adverse effect on our business, financial condition, cash flows and results of operations.
A significant portion of our earnings are related, directly or indirectly, to the global demand for oil and coal. A shift in the consumer demand from oil and coal towards other energy resources such as liquefied natural gas, wind energy, solar energy, or water energy will potentially affect the demand for our drybulk carriers and tankers. This could have a material adverse effect on our business, financial condition, cash flows and results of operations.
In addition, our growth depends on continued growth in world and regional demand for refined petroleum products and bulk liquid chemicals and the transportation of such cargoes by sea, which could be negatively affected by a number of factors, including:
Seaborne trading and distribution patterns are primarily influenced by the relative advantage of the various sources and locations of production, locations of consumption, pricing differentials and seasonality. Changes to the trade patterns of refined oil products or coal may have a significant negative or positive impact on the revenue. This could have a material adverse effect on our business, financial condition, cash flows and results of operations.
The refining and chemical industries may respond to any economic downturn and demand weakness by reducing operating rates partially or completely closing refineries and plants and by reducing or cancelling certain investment expansion plans, including plans for additional refining capacity, in the case of the refining industry. Continued reduced demand for refined petroleum products and other bulk liquids and the shipping of such cargoes or the increased availability of pipelines used to transport refined petroleum products and bulk liquid chemicals would have a material adverse effect on our future growth and could have a material adverse effect on our business, financial condition, cash flows and results of operations.
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If we cannot meet our customers' quality and compliance requirements we may not be able to operate our vessels profitably which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Customers, and in particular those in the oil industry, have a high and increasing focus on quality and compliance standards with their suppliers across the entire value chain, including the shipping and transportation segment. Our continuous compliance with these standards and quality requirements is vital for our operations. Related risks could materialize in multiple ways, including a sudden and unexpected breach in quality and/or compliance concerning one or more vessels, and a continuous decrease in the quality concerning one or more vessels occurring over time. Moreover, continuously increasing requirements from oil industry constituents can further complicate our ability to meet the standards. Any noncompliance by us, either suddenly or over a period of time, on one or more vessels, or an increase in requirements by oil operators above and beyond what we deliver, could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Increasing self-sufficiency in energy by the United States could lead to a decrease in imports of oil to that country, which to date has been one of the largest importers of oil worldwide.
The United States is expected to overtake Saudi Arabia as the world's top oil producer in 2018, according to the International Energy Agency, or IEA. The steep rise in shale oil and gas production is expected to push the country toward self-sufficiency in energy. In recent years the share of total U.S. consumption met by total liquid fuel net imports, including both crude oil and products, has been decreasing since peaking at over 60% in 2005. The IEA said that U.S. crude oil imports will, overall, decline over the period from 2015 through 2021. A slowdown in oil imports to or exports from the United States, one of the most important oil trading nations worldwide, may result in decreased demand for our vessels and lower charter rates, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
World events could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Past terrorist attacks, as well as the threat of future terrorist attacks around the world, continue to cause uncertainty in the world's financial markets and may affect our business, operating results and financial condition. Continuing conflicts and recent developments in Russia, North Korea, the Middle East, including Iran, Iraq, Syria, Egypt and North Africa, and the presence of United States or other armed forces 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. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. War in a country in which a material supplier, including crew supply services, or customer of ours is located could impact that supply to us or our ability to earn revenue from that customer. 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, the Gulf of Aden off the coast of Somalia and West Africa. Any of these occurrences could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Acts of piracy on ocean-going vessels may have a material adverse effect on our business, financial condition, cash flows and results of operations.
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Indian Ocean and in the Gulf of Aden off the coast of Somalia. Sea piracy incidents continue to occur, particularly in the Gulf of Aden off the coast of Somalia, in the Gulf of Guinea and the west coast of Africa, with drybulk carriers and tankers particularly vulnerable to such attacks. Acts of piracy may result in death or injury to persons or damage to property. If these piracy attacks result in regions in which our vessels are deployed being characterized as "war risk" zones by insurers or by the Joint War Committee of Lloyds Insurance and IUA Company, or Joint War Committee, as "war and strikes" listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including costs of employing on-board security guards, could increase in such circumstances. In some circumstances where one of our vessels is chartered-out or on time charter, the time charterer may have limited liability for charter payments in the event of an act of piracy and may also claim that a vessel seized by pirates is not "on-hire" for a certain
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number of days and that they are therefore entitled to cancel the charter party, a claim that we would dispute. Voyage charterers do not bear any of the liability relating to acts of piracy except for possible contributions in general. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on our business, financial condition, cash flows and results of operations. In addition, any hijacking as a result of an act of piracy against our vessels, or an increase in cost, or unavailability, of insurance for our vessels, could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We are subject to international safety regulations and requirements imposed by our classification societies and the failure to comply with these regulations and requirements may subject us to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.
The operation of our vessels is affected by the requirements set forth in the International Management Code for the Safe Operation of Ships and for Pollution Prevention, or the ISM Code. The ISM Code requires vessel owners, vessel managers and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation of vessels and describing procedures for dealing with emergencies. In addition, vessel classification societies impose significant safety and other requirements on our vessels.
The failure of a vessel owner or bareboat charterer to comply with the ISM Code may subject it to increased liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports. Each of our vessels is ISM Code-certified or will be ISM Code-certified when delivered to us. However, if we are subject to increased liability for non-compliance, if our insurance coverage is adversely impacted as a result of non-compliance or if any of our vessels are denied access to, or are detained in, certain ports as a result of non-compliance with the ISM Code, it could have a material adverse effect on our business, financial condition, cash flows and results of operations.
In addition, 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 SOLAS. The cost of maintaining our vessels' classifications, or class, may be substantial. If any vessel does not maintain its class or fails any annual, intermediate or special survey, the vessel will be unable to trade between ports and will be unemployable and uninsurable, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.
International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination and trans-shipment points. Inspection procedures may result in the seizure of contents of our vessels, delays in the loading, offloading, trans-shipment or delivery and the levying of customs duties, fines or other penalties against us.
It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. 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 uneconomical or impractical. Any such changes or developments could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Changes in fuel, or bunker, prices may adversely affect our profits.
Fuel, or bunkers, is a significant portion of our expenses when we are responsible for voyage expenses in operating our vessels and changes 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 of and demand for oil and gas, actions by the Organization of the Petroleum Exporting Countries, or OPEC, and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Further, fuel may become much more expensive in the future, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
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A number of vessel owners have ordered so-called "eco-type" vessel designs, which may offer substantial bunker savings as compared to older designs. Increased demand for and supply of "eco-type" vessels could reduce demand for those of our vessels that are not considered as such and expose us to lower vessel utilization and/or decreased charter rates.
New vessel designs purport to offer material bunker savings compared to older designs, which include certain of our vessels. Such savings could result in a substantial reduction of bunker cost for charterers compared to vessels of ours. As the supply of "eco-type" vessels increases and if charterers prefer such vessels over our vessels that are not classified as such, this may reduce demand for our non-"eco-type" vessels, impair our ability to re-charter such vessels at competitive rates and could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We operate drybulk carriers and tankers worldwide and as a result, our business has inherent operational risks, which may reduce our revenues or increase our expenses, and we may not be adequately covered by insurance.
The international shipping industry is an inherently risky business involving global operations of ocean-going vessels. Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather, mechanical failures, human error, environmental accidents, war, terrorism, piracy and other circumstances or events. In addition, transporting cargoes across a wide variety of international jurisdictions creates a risk of business interruptions due to political circumstances in foreign countries, hostilities, labor strikes and boycotts, the potential for changes in tax rates or policies, and the potential for government expropriation of our vessels. Any of these events may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.
Changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These hazards may result in death or injury to persons, loss of revenues or property, payment of ransoms, environmental damage, higher insurance rates, damage to our customer relationships, market disruptions, and interference with shipping routes (such as delay or rerouting), which may reduce our revenues or increase our expenses and also subject us to litigation.
If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and can be substantial. We may have to pay drydocking costs that our insurance does not cover in full. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. We may be unable to find space at a suitable drydocking facility or we may be forced to travel to a drydocking facility that is distant from the relevant vessel's position. The loss of earnings while our vessels are being repaired and repositioned or from being forced to wait for space, as well as the actual cost of repairs, could have a material adverse effect on our business, financial condition, cash flows and results of operations. Additionally, in certain cases we bareboat charter our vessels. Such vessels could require significant repairs when the vessel is returned to us.
The operation of any 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.
In addition, the operation of tankers has unique operational risks associated with the transportation of oil. An oil spill may cause significant environmental damage, and the associated costs could exceed the insurance coverage available to us. Compared to other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision, or other cause, due to the high flammability and high volume of the oil transported in tankers.
Furthermore, the operation of certain vessel types, such as drybulk carriers, also has certain unique risks. With a drybulk carrier, the cargo itself and its interaction with the vessel can be an operational risk. By their nature, drybulk cargoes are often heavy, dense, easily shifted, and react badly to water exposure. In addition, drybulk carriers 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 at sea. Hull breaches in drybulk carriers may lead to the flooding of the vessel's holds. If a drybulk carrier suffers flooding in its forward holds, the bulk cargo may become so dense and waterlogged that its pressure may buckle the vessel's 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. Other bulk cargoes
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will include a certain amount of moisture and may "liquefy" under certain conditions. Any of these circumstances or events could have a material adverse effect on our business, financial condition, cash flows and results of operations. In addition, the loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator.
In the event of a casualty to a vessel or other catastrophic event, we will rely on our insurance to pay the insured value of the vessel or the damages incurred. We procure insurance for the vessels in our Fleet against those risks that we believe the shipping industry commonly insures against. These insurances include marine hull and machinery insurance, protection and indemnity insurance, war risk insurance and freight, demurrage and defense insurance, or FD&D insurance. We insure our vessels for third-party liability claims subject to and in accordance with the rules of the P&I Associations in which the vessels are entered. In this regard we are insured against some contractual claims and tort claims, including environmental damage, pollution and crew personal injury and illness claims (currently the amount of insurance coverage for pollution claims available to us on commercially reasonable terms through P&I Associations is limited to $1 billion per vessel per incident). The objective of a P&I Association is to provide mutual insurance based on the aggregate tonnage of a member's vessels entered into the association. Claims are paid through the aggregate premiums of all members of the association, although members remain subject to calls for additional funds if the aggregate premiums are insufficient to cover claims payable by the association. Claims payable by the association may include those incurred by members of the association, as well as claims payable by the association from other P&I Associations with which our P&I Association has entered into inter-association agreements. We cannot assure you that the P&I Associations to which we belong will remain viable or that we will not become subject to additional funding calls which could adversely affect us.
We do not currently maintain insurance against loss of hire on our vessels resulting from business interruptions that result from the loss of use of a vessel other than limited loss coverage relating to defined war risk events. The insurers may not pay particular claims as the payment of some claims may be treated as discretionary by the board of directors of the P&I Association. Our insurance policies may contain deductibles for which we will be responsible and limitations and exclusions which may increase our costs or lower our revenue or prevent recovery. Moreover, insurers may default on claims they are required to pay.
We cannot assure you that we will be adequately insured against all risks or that we will be able to obtain adequate insurance coverage at reasonable rates for our vessels in the future, or that we will be able to obtain certain insurance coverage. For example, in the past more stringent environmental regulations have led to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. Additionally, our insurers may refuse to pay particular claims. Any significant loss or liability for which we are not insured could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Maritime claimants could arrest or attach one or more of our vessels, which could interrupt our cash flows.
Crew members, suppliers of goods and services to a vessel, shippers of cargo, lenders, and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting or attaching a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could 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 that is subject to the claimant's 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 of our vessels for claims relating to another one of our vessels. The occurrence of any of the above events could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Labor interruptions could disrupt our business.
We could be subject to industrial action or other labor unrest that could prevent or hinder our operations from being carried out normally. If not resolved in a timely and cost-effective manner, such business interruptions could have a material adverse effect on our business, financial condition, cash flows and results of operations. These effects would be exacerbated if such a disruption were to occur on one of our vessels that are manned by masters, officers and crews that are employed by third parties that we do not control.
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Our vessels may call on ports located in countries that are subject to restrictions imposed by the United States, United Kingdom, United Nations or other governments, which could adversely affect our reputation and the market for our ordinary shares.
Although we do not expect that our vessels will call on ports located in countries subject to sanctions and embargoes imposed by the U.S. government and other authorities or countries identified by the U.S. government or other authorities as state sponsors of terrorism, from time to time on charterers' instructions, our vessels may call on ports located in such countries in the future. Our vessels have called on ports in Cuba and Sudan on very limited occasions in compliance with applicable sanctions, including with respect to humanitarian shipments arranged by the United States Agency for International Development, or USAID. Prior to each voyage on behalf of USAID, we confirmed that the charterer possessed a license authorizing the transactions under U.S. sanctions laws. The U.S. sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time. In 2010, the United States enacted the Comprehensive Iran Sanctions Accountability and Divestment Act, or CISADA, which amended the Iran Sanctions Act. Among other things, CISADA introduced limits on the ability of companies and persons to do business or trade with Iran when such activities relate to the investment, supply or export of refined petroleum or petroleum products. In 2012, President Obama signed Executive Order 13608 which prohibits foreign persons from violating or attempting to violate, or causing a violation of any sanctions in effect against Iran or facilitating any deceptive transactions for or on behalf of any person subject to U.S. sanctions. Any persons found to be in violation of Executive Order 13608 will be deemed a foreign sanctions evader and will be banned from all contacts with the United States, including conducting business in U.S. dollars. Also in 2012, President Obama signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012, or the Iran Threat Reduction Act, which created new sanctions and strengthened existing sanctions. Among other things, the Iran Threat Reduction Act intensifies existing sanctions regarding the provision of goods, services, infrastructure or technology to Iran's petroleum or petrochemical sector. The Iran Threat Reduction Act also includes a provision requiring the President of the United States to impose five or more sanctions from Section 6(a) of the Iran Sanctions Act, as amended, on a person the President determines is a controlling beneficial owner of, or otherwise owns, operates, or controls or insures a vessel that was used to transport crude oil from Iran to another country and (1) if the person is a controlling beneficial owner of the vessel, the person had actual knowledge the vessel was so used or (2) if the person otherwise owns, operates, or controls, or insures the vessel, the person knew or should have known the vessel was so used. Such a person could be subject to a variety of sanctions, including exclusion from U.S. capital markets, exclusion from financial transactions subject to U.S. jurisdiction, and exclusion of that person's vessels from U.S. ports for up to two years.
On November 24, 2013, the P5+1 (the United States, United Kingdom, Germany, France, Russia and China) entered into an interim agreement with Iran entitled the "Joint Plan of Action", or the JPOA. Under the JPOA it was agreed that, in exchange for Iran taking certain voluntary measures to ensure that its nuclear program is used only for peaceful purposes, the United States and E.U. would voluntarily suspend certain sanctions for a period of six months. On January 20, 2014, the United States and E.U. indicated that they would begin implementing the temporary relief measures provided for under the JPOA. These measures included, among other things, the suspension of certain sanctions on the Iranian petrochemicals, precious metals, and automotive industries from January 20, 2014 until July 20, 2014. The JPOA was subsequently extended twice.
On July 14, 2015, the P5+1 and the E.U. announced that they reached a landmark agreement with Iran titled the Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran's Nuclear Program, or the JCPOA, which is intended to significantly restrict Iran's ability to develop and produce nuclear weapons for 10 years while simultaneously easing sanctions directed toward non-U.S. persons for conduct involving Iran, but taking place outside of U.S. jurisdiction and does not involve U.S. persons. On January 16, 2016, which we refer to as Implementation Day, the United States joined the E.U. and the UN in lifting a significant number of their nuclear-related sanctions on Iran following an announcement by the International Atomic Energy Agency, or the IAEA, that Iran had satisfied its respective obligations under the JCPOA.
On August 2, 2017, the United States enacted the Countering America's Adversaries Through Sanctions Act, or CAATSA. CAATSA authorizes secondary sanctions on persons worldwide who conduct certain business with Iran, Russia, and North Korea. These include secondary sanctions on persons (1) dealing with most sectors of the North Korean economy, including the transportation sector, (2) engaging in any
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activity related to Iran's ballistic missile program, including transportation, and (3) dealing with certain activities in the Russian energy sector, including support of Russian energy export pipelines and certain energy projects. On September 21, 2017, President Trump issued an executive order imposing additional sanctions against North Korea, including a prohibition on vessels calling at ports in the United States that have called at North Korean ports within the past 180 days or that have engaged in vessel-to-vessel transfers with vessels that have called at North Korean ports within the past 180 days. On October 13, 2017, President Trump declined to certify Iran's compliance with the JCPOA. On January 12, 2018, President Trump announced that the United States did not intend to renew its sanctions waivers under the JCPOA when the waivers next expire on May 12, 2018 unless significant changes were made to the JCPOA. If the United States does not periodically renew its sanctions waivers under the JCPOA, it could result in the re-imposition of secondary sanctions against Iran.
Although we believe that we are in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in an occurrence of an event of default under our credit facilities, fines or other penalties and could severely impact our ability to access U.S. capital markets and conduct our business, and could result in some investors deciding, or being required, to divest their interest, or not to invest, in us. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, our securities may adversely affect the price at which our securities trade. Moreover, our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. In addition, our reputation and the market for our securities may be adversely affected if we engage in certain other activities, such as entering into charters with individuals or entities in countries subject to U.S. sanctions and embargo laws that are not controlled by the governments of those countries, or engaging in operations associated with those countries pursuant to contracts with third parties that are unrelated to those countries or entities controlled by their governments. Investor perception of the value of our securities may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, U.K. Bribery Act, and other applicable worldwide anti-corruption laws.
The U.S. Foreign Corrupt Practices Act, or FCPA, which we will be subject to following the Spin-Off, and other applicable worldwide anti-corruption laws generally prohibit corrupt payments by us, our employees, vendors, or agents. These laws include the U.K. Bribery Act, which became effective on July 1, 2011 and which is broader in scope than the FCPA, as it prohibits bribes to any person and contains no facilitating payments exception. Under the FCPA and other applicable anti-corruption laws, we may be held liable for some actions taken by strategic or local partners and agents. We operate our vessels in some jurisdictions that international corruption monitoring groups have identified as having high levels of corruption and may utilize vendors and agents to act on our behalf in those jurisdictions. Our activities create the risk of unauthorized payments or offers of payments by one of our employees, vendors, or agents that could be in violation of the FCPA or other applicable anti-corruption laws. While we devote substantial resources to our global compliance program and have implemented policies, training, and internal controls designed to reduce the risk of corrupt payments and to comply with the FCPA and other applicable anti-corruption laws, our employees, vendors, and agents may violate our policies. We also may not be able to adequately prevent or detect all possible violations of the FCPA and other applicable anti-corruption laws. If we are found to be responsible for violations of the FCPA or other applicable anti-corruption laws (either due to our own acts or our inadvertence, or due to the acts or inadvertence of others), our company and our employees could suffer from substantial civil and criminal penalties, including fines, incarceration, prohibitions or limitations on the conduct of our business, the loss of our financing facilities and significant reputational damage, including our relationships with our customers, all of which could have a material adverse effect on our business, financial condition, cash flows and results of operations. Government or regulatory investigations into potential violations of the FCPA or other applicable anti-corruption laws by our company could also have a material adverse effect on our business, financial condition, cash flows and results of operations. Furthermore, detecting, investigating, and resolving actual or alleged violations of the FCPA and other applicable anti-corruption laws is expensive and can consume significant time and attention of our senior management.
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The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.
We expect that our vessels will call in ports where smugglers attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face reputational damage and governmental or other regulatory claims which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Governments could requisition our vessels during a period of war or emergency, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
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 may 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 could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Risks Related to Our Business
A substantial number of our vessels are employed in either the spot market or in drybulk and tanker pools and any decrease in spot charter rates in the future could have a material adverse effect on our business, financial condition, cash flows and results of operations.
A substantial number of our drybulk carriers and tankers are currently employed in either the spot market or in spot market-oriented drybulk and tanker pools, some of which are managed by third parties. This exposes us to fluctuations in spot market charter rates. During the year ended December 31, 2017, we earned a substantial portion of our revenue from such spot market-oriented pools and spot market charters. The spot market may fluctuate significantly based upon drybulk carrier, tanker, cargo, energy resources, commodities, industrial products and oil supply and demand. The successful operation of our vessels in the competitive spot charter market, depends on, among other things, obtaining profitable spot contracts and minimizing, to the extent possible, time spent waiting for employment and time spent traveling unemployed to a demand area. The spot market is very volatile, and, in the past, there have been periods when spot market rates have declined below the operating cost of vessels. If future spot market rates decline, then we may be unable to operate our vessels trading in the spot market profitably, meet our obligations, including payments on indebtedness, or pay dividends in the future. Furthermore, as spot charters may last up to several weeks, during periods in which spot rates are rising we will generally experience delays in realizing the benefits from such increases.
Our ability to renew expiring contracts or obtain new contracts on favorable terms or at all will depend on the prevailing market conditions at the time. If we are not able to extend contracts in direct continuation of current contracts or we are not able to obtain new contracts for existing or new owned vessels or new chartered-in vessels upon their delivery to us, or if new charters are entered into with our customers at charter rates substantially below the existing charter rates or on terms otherwise less favorable compared to current charter terms, this could have a material adverse effect on our business, financial condition, cash flows and results of operations.
In addition, we cannot assure you that the drybulk and tanker pools our vessels operate in or pools that we manage will be successful in finding employment for all such vessels in the volatile spot market or whether any such employment will be at profitable rates. We cannot assure you that our vessels will be profitably operated by such pool or by ourselves where we commercially manage our vessels outside of pools.
Furthermore, vessels operated by unaffiliated third-parties may participate in such pools and may not be of a comparable design or quality to our vessels, negatively impacting the profitability of such pools. If such unaffiliated third-parties withdraw from the pools which we manage, such pools may no longer be able to operate profitability, or at all, due to the decreased number of vessels in the pool, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
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A reduction in charter rates, spot market rates and other market deterioration or the aging of our fleet may require us to record impairment charges related to our long-lived assets (our vessels) and such charges may be large and have a material impact on our combined financial statements.
At December 31, 2017, we had vessels of $235.4 million in total on our combined balance sheet, representing 74% of our shareholders' equity.
At the end of each reporting period, and on a continuous basis, if indicators of impairment are present, the carrying amount of tangible and intangible assets is assessed to determine whether there is any indication that those assets may have suffered an impairment loss. We also assess the carrying value of an asset when we make a decision to divest of the asset for any reason, including the age of our vessels, if a joint venture that owns vessels comes to an end in accordance with its terms or if the asset no longer fits into our strategic planning. During 2015 and 2016, we recorded an impairment loss of approximately $67.8 million and $12.6 million respectively relating to the reduction of the carrying value of our vessels based on value in use calculations. The impairments were largely due to the depressed charter rates and vessel values as a result of an oversupply of vessel capacity.
In addition, during the year ended December 31, 2017, we impaired the vessels to the extent of $16.5 million because we determined certain vessels no longer fit into our strategic planning.
If there is a reduction in our estimated charter rates, or if we intend to divest additional vessels, we may be required to record further impairment charges on our vessels, which would require us to write down the carrying value of these assets to their fair value. Since vessels and from time to time vessels under construction comprise a substantial portion of our balance sheet, such charges could have a material impact on our combined financial statements. See "Item 5. Operating and Financial Review and ProspectsCritical Accounting Policies".
We depend on certain customers for our revenue. Customers may terminate or default on their obligations to us and the terms of charters may be difficult to enforce.
For the years ended December 31, 2017, 2016 and 2015, respectively, no customers accounted for 10% or more of our revenues, one customer accounted for 10% or more of our revenues in the amount of approximately $40.9 million and two customers accounted for 10% or more of our revenues in the amounts of approximately $55.9 million and $44.1 million, respectively. For the year ended December 31, 2017, no customers accounted for 10% or more of our drybulk business revenues. For the years ended December 31, 2016 and 2015, one customer accounted for 10% or more of our drybulk business revenues in the amounts of approximately $40.9 million and $44.1 million, respectively. For the years ended December 31, 2017 and 2016, four customers accounted for 10% or more of tanker business revenues in the amounts of approximately $17.8 million, $15.7 million, $10.9 million and $8.9 million, respectively, in 2017, and $33.2 million, $12.3 million, $9.9 million and $9.1 million, respectively, in 2016. For the year ended December 31, 2015, two customers accounted for 10% or more of tanker business revenues in the amounts of approximately $55.9 million and $13.2 million, respectively. Each of the foregoing has been calculated excluding revenues attributable to the OACL and Union Bunker businesses which were sold in the first quarter of 2018. The loss of any of our significant customers, a customer's failure to make payments or perform under any of the applicable contracts, a customer's termination of any of the applicable contracts, or a decline in payments under the contracts could have a material adverse effect on our business, financial condition, cash flows and results of operations. Our contracts are governed by the law of a number of jurisdictions and provide for a variety of dispute resolution mechanisms and arbitration proceedings. There can be no assurance that we would be able to enforce any judgments against these charterers in jurisdictions where they are based or have their primary assets and operations. Even after a charter contract is entered, charterers may terminate charters early under certain circumstances.
A charterer may also terminate a charter for events that may or may not be within our control. The events or occurrences that will cause a charter to terminate or give the charterer the option to terminate the charter generally include a total or constructive total loss of the related vessel, the requisition for hire of the related vessel, the event of war in specified countries, the vessel becoming subject to seizure for more than a specified number of days, our failure to deliver the related vessel within a fixed period of time or the failure of the related vessel to meet specified performance criteria.
The ability of a customer to perform its obligations under a contract will depend on a number of factors that are beyond our control. These factors may include general economic conditions, conditions specific to the customer, the condition of the drybulk and tankers sectors of the shipping industry to which the
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customer is exposed, and the charter rates received for specific types of vessels. The costs associated with the default by a customer may be considerable and could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Our customers may go bankrupt or fail to perform their obligations under the contracts, they may delay payments or suspend payments altogether, they may terminate the contracts prior to the agreed-upon expiration date or they may attempt to renegotiate the terms of the contracts. The failure of a customer to perform its obligations under a contract may mean we increase our exposure to the spot market, which is subject to greater rate fluctuation than the time charter market. If we receive lower rates under replacement contracts or are unable to re-employ all of our vessels, it could have a material adverse effect on our business, financial condition, cash flows and results of operations.
A drop in spot market charter rates may provide an incentive for some charterers and other customers to default on their charters and contracts.
If spot market rates decline, charterers may no longer need a vessel that is then under charter or may be able to obtain a comparable vessel at lower rates. Currently, and in the future, we may employ certain of our vessels in fixed rate time charters. When we enter into a time charter, as well as bareboat charter or COA, charter rates under that charter or contract may be fixed for the term of the charter or contract. If the spot market or term charter rates available in the drybulk shipping market or tanker shipping market become significantly lower than the rates that a customer is obliged to pay us under our existing charters or contracts, the customer may have incentive to default under that charter or contract or attempt to renegotiate the charter or contract. If our charterers fail to meet their obligations to us or attempt to renegotiate our charter agreements, it may be difficult to secure substitute employment for such vessel, and any new employment we secure in the spot market or on time charters, or as bareboat charters or under COAs, may be at lower rates. As a result, we could sustain significant losses which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We are subject to certain risks with respect to our counterparties to contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We have entered into, and may enter into, various contracts, including pooling arrangements, time charters, spot voyage charters, shipbuilding contracts, credit facilities and other agreements. Such agreements subject us to counterparty risks. The ability and willingness of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime industries and the overall financial condition of the counterparty. Should a counterparty fail to honor its obligations under agreements with us, or seek to renegotiate the terms of the contract, we could sustain significant losses that could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Circumstances beyond our control could affect our customers' financial strength, and because many of our customers are privately held companies, information about the financial strength of our customers may not always be available. As a result, we might have little advance warning of financial or other problems affecting our customers and their non-performance, financial or other problems could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We may be unable to attract and retain key management personnel and other employees in the shipping industry, which may negatively affect the effectiveness of our management and our results of operations.
Our success depends to a significant extent upon the abilities and efforts of our management team and our ability to hire and retain key members of our management team. We do not intend to maintain "key man" life insurance on any of our officers. The loss of any of these individuals and difficulty in hiring and retaining personnel, including key personnel, could have a material adverse effect on our business, financial condition, cash flows and results of operations.
The aging of our vessels may result in increased operating costs in the future, which could have an adverse effect on our business, financial condition, cash flows and results of operations.
In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. As our vessels age typically they will become less fuel-efficient and more costly to maintain than more
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recently constructed vessels due to improvements in engine and other technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of vessels may also 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. See "A reduction in charter rates, spot market rates and other market deterioration or the aging of our fleet may require us to record impairment charges related to our long-lived assets (our vessels) and such charges may be large and have a material impact on our combined financial statements." above.
The employment of our tankers could be adversely affected by an inability to clear the oil majors' risk assessment process, and we could be in breach of our charter agreements.
The shipping industry, and especially the shipment of crude oil, refined petroleum products (clean and dirty) and bulk liquid chemicals, has been, and will remain, heavily regulated. The oil majors, together with a number of commodities traders, represent a significant percentage of the production, trading and shipping logistics (terminals) of crude oil and refined products worldwide. Concerns for the environment have led the oil majors to develop and implement a strict ongoing due diligence process when selecting their commercial partners. This vetting process has evolved into a sophisticated and comprehensive risk assessment of both the vessel operator and the vessel, including physical vessel inspections, completion of vessel inspection questionnaires performed by accredited inspectors and the production of comprehensive risk assessment reports. In the case of term charter relationships, additional factors are considered when awarding such contracts, including:
Under the terms of our charter agreements, our charterers require that these vessels and their technical managers are vetted and approved to transport oil products by multiple oil majors. Our failure to maintain any of our tankers to the standards required by the oil majors could put us in breach of the applicable charter agreement and lead to termination of such agreement, and could give rise to impairment in the value of our tankers.
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Should we not be able to successfully clear the oil majors' risk assessment processes on an ongoing basis, the future employment of our tankers, as well as our ability to obtain charters or freight contracts, whether spot, medium- or long-term, could be adversely affected. Such a situation may lead to the oil majors terminating existing charters and contracts and refusing to use our tankers in the future, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We may not have adequate insurance to compensate us if we lose our vessels or to compensate third parties.
There are a number of risks associated with the operation of ocean-going vessels, including mechanical failure, collision, human error, war, terrorism, piracy, loss of life, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. Any of these events may result in loss of revenues, increased costs and decreased cash flows. In addition, the operation of any 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.
We are insured against some contractual claims and tort claims (including claims related to environmental damage and pollution) through memberships in protection and indemnity associations or clubs, or P&I Associations. As a result of such membership, the P&I Associations provide us coverage for such tort and contractual claims. We also carry hull and machinery insurance and war risk insurance for our vessels. We insure our vessels for third-party liability claims subject to and in accordance with the rules of the P&I Associations in which the vessels are entered. We do not maintain cover for loss of hire or earnings arising out of insured peril events other than limited loss coverage relating to defined war risk events. We can give no assurance that we will be adequately insured against all risks. We may not be able to obtain adequate insurance coverage for our vessels in the future. The insurers may not pay particular claims. Our insurance policies contain deductibles for which we will be responsible and limitations and exclusions which may increase our costs or lower our revenue or prevent recovery.
The objective of a P&I Association is to provide mutual insurance based on the aggregate tonnage of a member's vessels entered into the association. Claims are paid through the aggregate premiums of all members of the association and the P&I Association's retained earnings, although members remain subject to calls for additional funds if the aggregate premiums are insufficient to cover claims payable by the association. Claims payable by the association may include those incurred by members of the association, as well as claims payable by the association from other P&I Associations with which our P&I Association has entered into interassociation agreements. We cannot assure you that the P&I Associations to which we belong will remain viable or that we will not become subject to additional funding calls which could adversely affect us.
We cannot assure you that we will be able to renew our insurance policies on the same or commercially reasonable terms, or at all, in the future. For example, more stringent environmental regulations have led in the past to increased costs for, and in the future may result in the lack of availability of, protection and indemnity insurance against risks of environmental damage or pollution. Any uninsured or underinsured loss could harm our business, financial condition, cash flows and results of operations. In addition, our insurance may be voidable by the insurers as a result of certain of our actions, such as our vessels failing to maintain certification with applicable maritime self-regulatory organizations. Further, we cannot assure you that our insurance policies will cover all losses that we incur, or that disputes over insurance claims will not arise with our insurance carriers. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material. In addition, our insurance policies are subject to limitations and exclusions, which may increase our costs or lower our revenues, and could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We may have difficulty managing our planned growth properly.
We operate a fleet of 48 vessels, which we refer to as our Fleet, which consists of 25 owned drybulk carriers (including 15 drybulk carriers that we own through joint ventures), eight long-term chartered-in drybulk carriers, 12 owned tankers (including six tankers that we own through joint ventures) and three long-term chartered-in tankers. One of our principal strategies is to continue to grow by expanding our operations, and we may, in the future, increase the size of our Fleet through timely and selective acquisitions. Our
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future growth will primarily depend upon a number of factors, some of which may not be within our control. These factors include our ability to:
Our failure to effectively identify, acquire, develop and integrate any drybulk or tanker vessels or businesses, or our inability to effectively manage our Fleet, could materially adversely affect our business, financial condition, cash flows and results of operations.
Furthermore, the number of employees that perform services for us and our current operating and financial systems may not be adequate as we expand the size of our Fleet, and we may not be able to effectively hire more employees or adequately improve those systems. In addition, if we further expand our Fleet, we will need to recruit suitable additional seafarers and shoreside administrative and management personnel. We cannot guarantee that we will be able to hire suitable employees as we expand our fleet. If we or our crewing agent encounters business or financial difficulties, we may not be able to adequately staff our vessels. If we are unable to enhance our financial and operating systems or to recruit suitable employees as we expand our Fleet, it could materially adversely affect our business, financial condition, cash flows and results of operations. Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel and managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. Acquisitions may require additional equity issuances, which may dilute our ordinary shareholders, or debt issuances (with amortization payments). The effect of an acquisition may be to lower our available cash. If any such events occur, it could have a material adverse effect on our business, financial condition, cash flows and results of operations.
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.
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 conduct all of our operations and own all of our operating assets. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to satisfy our financial obligations and to pay dividends to our shareholders depend on our subsidiaries and their ability to distribute funds to us. If we are unable to obtain funds from our subsidiaries, our board of directors may exercise its discretion not to declare or pay dividends.
Our future capital needs are uncertain and we may need to raise additional funds in the future. If we are unable to fund our future capital expenditure needs, we may not be able to continue to operate some of our vessels or continue with some or all of our fleet expansion plans, which would have a material adverse effect on our business, financial condition, cash flows and results of operations.
We may face liquidity issues if poor market conditions in the drybulk and/or tanker markets persist for a prolonged period. In addition, we may need to raise additional capital to maintain, replace and expand the operating capacity of our Fleet and fund our operations. Our future funding requirements will depend on
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many factors, including the cost and timing of vessel acquisitions, and the cost of retrofitting or modifying existing vessels as a result of technological advances in vessel design or equipment, changes in applicable environmental or other regulations or standards, customer requirements or otherwise.
In order to fund our capital expenditures, we may be required to incur borrowings or raise capital through the sale of debt or equity securities. As a result of the Spin-Off, it may become more expensive for Grindrod Shipping to raise funds through the issue of debt than it was prior to the consummation of the Spin-Off. Our ability to borrow money and access the capital markets through future offerings may be limited by a number of factors, including:
We cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our shareholders may experience dilution or reduced distributions. Any additional debt or equity financing that we raise may contain terms that are not favorable to us or our shareholders, including, in the case of debt financing, making us subject to more restrictive covenants than those applicable to our existing credit facilities.
Our failure to obtain the funds for necessary future capital expenditures could limit our ability to continue to operate some or all of our vessels or could cause us to impair the value of our vessels as well as limit our ability to continue with some or all of our fleet expansion plans. Any of these factors could have a material adverse effect on our business, financial condition, cash flows and results of operations. Even if we are successful in obtaining such funds through financings, the terms of such financings could further limit our ability to pay dividends.
Servicing our current or future indebtedness and meeting certain financing obligations limits funds available for other purposes and if we cannot service our debt and meet our other financing obligations, we may lose our vessels.
Borrowing under our credit facilities requires us to dedicate a part of our cash flow to paying interest and repaying capital on our indebtedness under such facilities. In addition, under the Leopard Tankers joint venture agreement with Vitol Shipping Singapore Pte. Ltd, or, together with its affiliates, Vitol, we and Vitol are obligated to fund on an equal basis certain funding shortfalls and have each guaranteed to the financiers of the Leopard Tankers credit facility up to 50% of the scheduled interest and principal payments of the joint ventures' $138.5 million Leopard Tankers credit facility, excluding any balloon payment at maturity. See "Item 4. Information on the CompanyBusiness OverviewOur Joint VenturesLeopard Tankers Pte. Ltd.".
These payments and certain financing obligations limit funds available for working capital, capital expenditures and other purposes, including further equity investments in our joint venture or debt financing in the future. Amounts borrowed under our credit facilities bear interest at variable rates. Increases in prevailing rates could increase the amounts that we would have to pay to our lenders, even though the outstanding principal amount remains the same, and our net income and cash flows would decrease. We expect our earnings and cash flow to vary from year to year due to the cyclical nature of the drybulk and tanker industries. If we do not generate or reserve enough cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as:
However, these alternative financing plans, if necessary, may not be sufficient to allow us to meet our debt obligations. In addition, our 37 owned vessels are pledged as collateral to secure our various debt
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obligations. If we are unable to meet our debt and other financing obligations or if some other default occurs under our or the Leopard Tankers credit facilities, lenders could elect to declare that debt, together with accrued interest and fees, to be immediately due and payable and proceed against the collateral vessels securing that debt or other assets.
We are exposed to volatility in the London Interbank Offered Rate, or LIBOR, and may selectively enter into derivative contracts, which can result in higher than market interest rates and charges against our income.
The loans under our credit facilities are generally advanced at a floating rate based on LIBOR, which was volatile in prior years and has been steadily increasing in recent years. LIBOR can affect the amount of interest payable on our debt, which, in turn, could have an adverse effect on our earnings and cash flow. In addition, although in recent years LIBOR has been at relatively low levels, LIBOR increased during 2016 and may continue to rise in the future as the current low interest rate environment comes to an end. Our financial condition could be materially adversely affected as we have not entered into interest rate hedging arrangements to hedge our exposure to the interest rates applicable to our credit facilities and may not enter into interest rate hedging arrangements for these or any other financing arrangements we may enter into in the future, including those we may enter into to finance a portion of the amounts payable with respect to newbuildings or acquisitions.
We may enter into derivative contracts to hedge our overall exposure to interest rate risk. Entering into swaps and other derivatives transactions is inherently risky and presents possibilities for incurring significant expenses. The derivatives strategies that we may employ may not be successful or effective, and we could, as a result, incur substantial additional interest and breakage costs.
We are leveraged, which could significantly limit our ability to execute our business strategy and we may be unable to comply with our covenants in our credit facilities that impose operating and financial restrictions on us, which could result in a default under the terms of these agreements.
As of December 31, 2017, we had $108.8 million of outstanding indebtedness under our credit facilities.
Our credit facilities impose operating and financial restrictions on us that limit our ability, or the ability of our subsidiaries party thereto, to:
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 may not be able to obtain our lenders' permission when needed. This may limit our ability to pay dividends on our ordinary shares if we determine to do so in the future, pay interest on our indebtedness, finance our future operations or capital requirements, make acquisitions or pursue business opportunities.
In addition, our credit facilities require us to maintain specified financial ratios and satisfy financial covenants, including ratios and covenants based on the market value of the vessels in our Fleet. Should our charter rates or vessel values materially decline in the future, we may seek to obtain waivers or amendments from our lenders with respect to such financial ratios and covenants, or we may be required to take action to reduce our debt or to act in a manner contrary to our business objectives to meet any such financial ratios and satisfy any such financial covenants.
Events beyond our control, including changes in the economic and business conditions in the shipping markets in which we operate, may affect our ability to comply with these covenants. We cannot assure you that we will meet these ratios or satisfy these covenants or that our lenders will waive any failure to do so or amend these requirements. A breach of any of the covenants in, or our inability to maintain the required financial ratios under, our credit facilities would prevent us from borrowing additional money under our credit facilities and could result in a default under our credit facilities. If a default occurs under our credit facilities, the lenders could elect to declare the outstanding debt, together with accrued interest and other
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fees, to be immediately due and payable and foreclose on the collateral securing that debt, which could constitute all or substantially all of our assets. Alternatively, if not repaid the interest rate on the outstanding debt can be increased. Moreover, in connection with any waivers or amendments to our credit facilities that we may obtain, our lenders may impose additional operating and financial restrictions on us or modify the terms of our existing credit facilities including an increase in the interest rate. These restrictions may further restrict our ability to, among other things, pay dividends, repurchase our ordinary shares, make capital expenditures, or incur additional indebtedness.
Furthermore, certain of our debt agreements contain cross-default provisions that may be triggered if we default under the terms of other of our financing agreements. In the event of default by us under one of our debt agreements, the lenders under our other debt agreements could determine that we are in default under such other financing agreements. Such cross defaults could result in the acceleration of the maturity of such debt under these agreements and the lenders thereunder may foreclose upon any collateral securing that debt, including our vessels, even if we were to subsequently cure such default. In the event of such acceleration or foreclosure, we might not have sufficient funds or other assets to satisfy all of our obligations, which would have a material adverse effect on our business, financial condition, cash flows and results of operations. Please see "Item 5. Operating and Financial Review and ProspectsLiquidity and Capital Resources".
We may be adversely affected by the introduction of new accounting rules for leasing.
The international accounting standard-setting board (the International Accounting Standards Board, or the IASB) has issued new accounting guidance that will require lessees to record most leases on their balance sheets as "right of use" assets and lease liabilities. Once adopted, the guidance will generally be expected to have the effect of bringing most off-balance sheet leases onto a lessee's balance sheet with the lease obligations as liabilities and the rights under the lease as assets, which would also change the income and expense recognition patterns of those items. We anticipate that the application of this new accounting guidance in the future may have a material impact on amounts reported in respect of our financial assets and financial liabilities as there are a significant number of our leases in operation that are currently accounted for through the income statement. Assets will increase on the recognition of "right of use" of an underlying asset and liabilities will increase for the obligation to make lease payments. Our profit and loss statement will be affected by an increase in depreciation of the asset and additional interest expenses although lease expenses will reduce. In addition, this new accounting rule may negatively impact covenant calculations under our existing loan agreements.
We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We may be, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings, toxic tort claims, employment matters, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. Although we intend to defend these matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and the ultimate outcome of any litigation or the costs and time to resolve them could have a material adverse effect on our business, financial condition, cash flows and results of operations. Insurance may not be applicable or sufficient in all cases and/or insurers may not remain solvent which could have a material adverse effect on our business, financial condition, cash flows and results of operations. See "Item 4. Information on the CompanyBusiness OverviewLegal Proceedings".
Some of the vessels in our Fleet are operated by third-party technical managers. Any failure of these technical managers to perform their obligations to us could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We have contracted the technical management for a portion of our Fleet, including crewing, maintenance and repair services, to third-party technical management companies. The failure of these technical managers to perform their obligations could have a material adverse effect on our business, financial condition, cash flows and results of operations. Although we may have rights against our third-party managers if they default on their obligations to us, we will receive the benefit of that recourse only to the extent that we recover funds.
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Some of the third-party managers for our vessels are privately held companies and there is little or no publicly available information about them.
Some of our vessels are managed by third parties. The ability of these third-party managers to render management services will depend in part on their own financial strength. Circumstances beyond our control could affect our third-party managers' financial strength. Because some of our third-party managers are privately held companies, we might have little advance warning of financial or other problems affecting our commercial manager or technical manager and if they are unable to provide the technical or commercial management services we have contracted for, we may have delays in operating our vessels which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Security breaches and disruptions to our information technology infrastructure could interfere with our operations and expose us to liability which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
In the ordinary course of business, we rely heavily on information technology networks and systems to process, transmit, and store electronic information, and to manage or support a variety of business processes and activities. Additionally, we collect and store certain data, including proprietary business information and customer and employee data, and may have access to other confidential information in the ordinary course of our business. Despite our cybersecurity measures (including monitoring of networks and systems, and maintenance of backup and protective systems) which are continuously reviewed and upgraded, our information technology networks and infrastructure may still be vulnerable to damage, disruptions, or shutdowns due to attack by hackers or breaches, employee error or malfeasance, data leakage, power outages, computer viruses and malware, telecommunication or utility failures, systems failures, natural disasters, or other catastrophic events. Any such events could result in legal claims or proceedings, liability or penalties under privacy or other laws, disruption in operations, and damage to our reputation, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
In addition, some of our technology networks and systems are managed by third-party service providers (including cloud-service providers) for a variety of reasons, and such providers also may have access to proprietary business information and customer and employee data, and may have access to confidential information on the conduct of our business. Like us, these third-party providers are subject to risks imposed by data breaches and disruptions to their technology infrastructure. A cyber-attack could defeat one or more of our third-party service providers' security measures, allowing an attacker access to proprietary information from our company including our employees', customers' and suppliers' data. Any such security breach or disruption to our third-party service providers could result in a disruption in operations and damage to our reputation and liability claims, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Because international shipping companies often generate most or all of their revenues in U.S. dollars, but incur a portion of their expenses in other currencies, exchange rate fluctuations could cause us to suffer exchange rate losses, thereby increasing expenses and reducing income.
We engage in worldwide commerce with a variety of entities. Although our operations may expose us to certain levels of foreign currency risk, our transactions are predominantly U.S. dollar-denominated and the U.S. dollar is our functional currency and the functional currency of all our subsidiaries and joint ventures except for one. Transactions in currencies other than the functional currency are translated at the exchange rate on the transaction date and the relevant payment is translated on the payment date, with the difference being reported in the income statement as an exchange gain or loss. Expenses incurred in foreign currencies against which the U.S. dollar falls in value can increase, decreasing our earnings. A greater percentage of our transactions and expenses in the future may be denominated in currencies other than the U.S. dollar. In addition a part of our debt obligations are denominated in currencies other than the U.S. dollar, being the Japanese Yen. Assets and liabilities denominated in currencies different from the functional currency are translated into the functional currency for the preparation of the balance sheet at the exchange rate prevailing on the balance sheet date. Differences in exchange rates between balance sheet dates may lead to gains or losses being reported in the income statement. Extraordinary transactions and the translation of the financial statements of the subsidiary whose functional currency is not the U.S. dollar for purposes of preparing our consolidated accounts, may follow different translation procedures. As part of our overall risk management policy, we may attempt to hedge these risks in exchange rate
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fluctuations from time to time. We may not always be successful in such hedging activities and, as a result, our operating results could suffer as a result of losses incurred as a result of un-hedged exchange rate fluctuations. We may enter into derivative contracts to hedge our overall exposure to exchange rate risk. Entering into swaps and other derivatives transactions is inherently risky and presents various possibilities for incurring significant expenses. The derivatives strategies that we may employ may not be successful or effective, and we could, as a result, incur substantial additional exchange rate costs.
If we are unable to operate our financial and operations systems effectively or to recruit suitable employees as we expand our Fleet, our performance may be adversely affected.
Our current financial and operating systems may not be adequate as we implement our plan to expand the size of our Fleet, and our attempts to improve those systems may be ineffective. If our current financial and operating systems infrastructure is unable to manage the additional volume of our operations as our business grows, our operating efficiency could decline. If we fail to hire and retain qualified personnel to implement, protect and maintain our financial and operating systems or if we fail to upgrade our systems to meet our customers' demands we may experience a disruption in operations and damage to our reputation, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
In addition, as we expand our Fleet, we or our third-party technical managers may have to recruit suitable additional seafarers or shore-based administrative and management personnel. We cannot assure you that we or our third-party technical managers will be able to continue to hire suitable employees as we expand our Fleet.
We need to maintain our relationships with local shipping agents.
Our drybulk carrier and tanker businesses are dependent upon our relationships with local shipping agents operating in the ports where our customers ship and load their products. We believe our local shipping agent relationships will remain critical to our success in the future and the loss of one or more of which could materially and negatively impact our ability to retain and service our customers. We cannot be certain that we will be able to maintain and expand our existing local shipping agent relationships or enter into new local shipping agent relationships, or that new or renewed local shipping agent relationships will be available on commercially reasonable terms. If we are unable to maintain and expand our existing local shipping agent relationships, renew existing local shipping agent relationships, or enter into new local shipping agent relationships, we may lose customers or cause delays in the ports in which we operate, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Prolonged disruption or slowdown in the loading and unloading of our vessels could affect our ability to operate our vessels in a timely manner and may result in a loss of revenue.
We rely on third parties for the loading and unloading process of our vessels at ports. A disruption in loading and unloading logistics could disrupt our ability to operate our vessels in a timely manner. Significant disruptions or slowdowns could result in a loss of revenue which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
If we acquire and operate secondhand vessels, we could be exposed to increased operating costs which could adversely affect our earnings and, as our Fleet ages, the risks associated with older vessels could adversely affect our ability to obtain profitable charters.
Although none of the vessels in our Fleet are secondhand vessels, we may acquire and operate secondhand vessels in the future. While we expect that we would typically inspect secondhand vessels prior to acquisition, this does not provide us with the same knowledge about their condition that we would have had if these vessels had been built for and operated exclusively by us and therefore we cannot assure you that the quality of any secondhand vessels that we buy will be acceptable. Generally, purchasers of secondhand vessels do not receive the benefit of warranties from the builders for the secondhand vessels that they acquire. We cannot assure you that, as our secondhand vessels age, market conditions will justify expenditures or enable us to operate our secondhand vessels profitably during the remainder of their useful lives.
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Technological innovation could reduce our charter hire income and the value of our vessels.
The charter hire rates and the value and operational life of a vessel are determined by a number of factors including the vessel's efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to carry a variety of cargoes, enter harbors, utilize related docking facilities and pass through canals and straits. The length of a vessel's physical life is related to its original design and construction, its maintenance and the impact of the stress of operations. If new drybulk carriers or tankers are built that are more efficient or more flexible or have longer physical lives than our vessels, competition from these more technologically advanced vessels could adversely affect the amount of charter hire payments we receive for our vessels once their initial charters expire and the resale value of our vessels could significantly decrease. As a result, our business, financial condition, cash flows and results of operations could be materially adversely affected.
Newbuilding projects are subject to risks that could cause delays, cost overruns or cancellation of our newbuilding contracts.
We may enter into or acquire newbuilding contracts for drybulk carriers or tankers in the future. Construction projects are subject to risks of delay or cost overruns inherent in any large construction project from numerous factors, including shortages of equipment, materials or skilled labor, unscheduled delays in the delivery of ordered materials and equipment or shipyard construction, failure of equipment to meet quality and/or performance standards, financial or operating difficulties experienced by equipment vendors or the shipyard, unanticipated actual or purported change orders, inability to obtain required permits or approvals, unanticipated cost increases between order and delivery, design or engineering changes and work stoppages and other labor disputes, adverse weather conditions or any other events of force majeure. Significant cost overruns or delays could have a material adverse effect on our business, financial condition, cash flows and results of operations. Additionally, failure to complete a project on time may result in the delay of revenue from that vessel.
We may contract with a trading house or a shipyard for the construction of a newbuilding. In the event the seller or the shipyard does not perform under its contract and we are unable to enforce the refund guarantee with a third-party bank for any reason, or we have not obtained such a guarantee, we may lose all or part of our investment, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We currently bank with a limited number of financial institutions, which subjects us to credit risk.
We currently bank with a limited number of financial institutions. An event of default by any of these financial institutions could have a material adverse effect on our business, financial condition, cash flows and results of operations. In addition, our financial institutions are subject to internal and regulatory compliance protocols, which may delay access to our accounts. Such a delay could impact our ability to consummate transactions and operate our business, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Risks Relating to Our Ordinary Shares
There may not be a liquid market for the Grindrod Shipping ordinary shares.
There is currently no public market for the Grindrod Shipping ordinary shares. It is expected that the Grindrod Shipping ordinary shares will be listed on the NASDAQ in the United States and the JSE in South Africa after the Spin-Off is effected. There can be no assurance as to the liquidity of any markets that may develop for the Grindrod Shipping ordinary shares or the price at which the Grindrod Shipping ordinary shares may trade. The liquidity and the market for the Grindrod Shipping ordinary shares may be affected by a number of factors including variations in exchange and interest rates, the deterioration and volatility of the markets for similar securities, and/or any changes in Grindrod Shipping's liquidity, financial condition, creditworthiness, results and profitability and future prospects. In addition, because our initial shareholder base upon listing will consist primarily of South African residents who are expected to initially trade their ordinary shares on the JSE and because all Grindrod Shipping ordinary shares will initially be registered on the South African branch share register, the liquidity of the ordinary shares on the NASDAQ may be adversely impacted. As a result, the initial trading prices of the Grindrod Shipping ordinary shares may not be indicative of future trading prices. Furthermore, ordinary shares owned by our "affiliates," as that term is defined in Rule 144 under the Securities Act, will be subject to certain restrictions on transfer
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under the U.S. securities laws. Affiliates will only be permitted to sell their shares pursuant to a valid exemption from the registration requirements of the Securities Act or pursuant to an effective registration statement, which may impact the liquidity of the ordinary shares. In addition, trading volumes of Grindrod Shipping ordinary shares may be significantly less liquid than trading volumes of Parent's ordinary shares before the Spin-Off.
The Grindrod Shipping ordinary shares will be traded on more than one stock exchange and this may result in price variations between the markets.
The Grindrod Shipping ordinary shares are expected to be listed on each of NASDAQ and the JSE. Trading in the Grindrod Shipping ordinary shares therefore will take place in different currencies (U.S. dollars on the NASDAQ and South African Rand on the JSE), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and South Africa). The trading prices of the Grindrod Shipping ordinary shares on these two markets may differ as a result of these, or other, factors. Any decrease in the price of Grindrod Shipping's ordinary shares on either of these markets could cause a decrease in the trading prices of Grindrod Shipping's ordinary shares on the other market.
If securities or industry analysts do not publish research or reports about Grindrod Shipping's business, or publish negative reports about its business, Grindrod Shipping's ordinary share price and trading volume could decline.
There is no current analyst coverage of Grindrod Shipping. The trading market for Grindrod Shipping ordinary shares depends, in part, upon the research and reports that securities or industry analysts publish about Grindrod Shipping or its businesses. If securities or industry analysts do not cover Grindrod Shipping, it could lose visibility in the financial markets, which could cause its share price or trading volume to decline.
Grindrod Shipping may not have sufficient distributable profits to pay dividends or otherwise distribute cash or assets to shareholders.
Under Singapore law and Grindrod Shipping's constitution, dividends, whether in cash or in specie, must be paid out of Grindrod Shipping's profits available for distribution. Grindrod Shipping has no immediate plans to pay a cash dividend. See "Item 8. Financial InformationDividend Policy and Dividend Distributions". As a holding company, Grindrod Shipping will earn distributable profits when it receives dividends and since Grindrod Shipping is a new company that has not received any dividends, it currently does not have distributable profits from which dividends may be declared. The availability of distributable profits is assessed on the basis of Grindrod Shipping's standalone unconsolidated accounts, which are based upon IFRS. There is no assurance that Grindrod Shipping will not incur losses, that it will become profitable, or that it will have sufficient distributable income that might be distributed to its shareholders as a dividend or other distribution in the foreseeable future. Therefore, Grindrod Shipping will be unable to pay dividends to its shareholders unless and until it has generated sufficient distributable reserves. Accordingly, it may not be legally permissible for Grindrod Shipping to pay dividends to its shareholders.
Notwithstanding that sufficient profits may be available for distribution, there are other conditions which may limit Grindrod Shipping's ability to pay dividends. Grindrod Shipping's board of directors may, without the approval of the shareholders under Singapore law, declare interim dividends during a fiscal year and any final dividends declared by Grindrod Shipping's board of directors after the close of a fiscal year must be approved by shareholders at a general meeting. As such, any determination to pay dividends will be at the discretion of Grindrod Shipping's board of directors, which may exercise its discretion to retain Grindrod Shipping's future earnings for use in the development of Grindrod Shipping's business, in reducing Grindrod Shipping's indebtedness and for general corporate purposes. As a result, it is possible that only an appreciation of the price of our ordinary shares, if any, will provide a return to investors in our ordinary shares for the foreseeable future. Such potential appreciation is uncertain and unpredictable.
In addition, under Singapore law, it is possible to effect a capital reduction exercise to return cash and/or assets to shareholders by way of shareholder approval if Grindrod Shipping meets the relevant solvency requirements, which will be attested to by Grindrod Shipping's board of directors. The completion of the capital reduction exercise will depend on whether Grindrod Shipping's directors can execute a solvency statement, as well as whether there are any creditor objections raised. A reduction of capital is also possible by way of a shareholder approval if approved by an order of the court.
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Any dividend payments on the Grindrod Shipping ordinary shares would be declared in U.S. dollars, and any shareholder whose principal currency is not the U.S. dollar would be subject to risks of exchange rate fluctuations.
The Grindrod Shipping ordinary shares are, and any cash dividends or other distributions to be declared in respect of them, if any, will be denominated in U.S. dollars. Shareholders whose principal currency is not the U.S. dollar will be exposed to foreign currency exchange rate risk. Any depreciation of the U.S. dollar in relation to such foreign currency will reduce the value of such shareholders' ordinary shares and any appreciation of the U.S. dollar will increase the value in foreign currency terms. In addition, Grindrod Shipping will not offer its shareholders the option to elect to receive dividends, if any, in any other currency. Consequently, shareholders may be required to arrange their own foreign currency exchange, either through a brokerage house or otherwise, which could incur additional commissions or expenses.
Grindrod Shipping is a Singapore company, and because the rights of shareholders under Singapore law differ from those under U.S. law, you may have difficulty in protecting your shareholder rights or enforcing any judgment obtained in the United States against Grindrod Shipping or its affiliates.
Grindrod Shipping's corporate affairs are governed by its constitution and by the applicable laws governing corporations incorporated in Singapore. The rights of Grindrod Shipping shareholders and the responsibilities of members of its board of directors under Singapore law are different from those applicable to a corporation incorporated in the United States and, therefore, Grindrod Shipping shareholders may have more difficulty protecting their interests in connection with actions by the management or members of the board of directors than they would as shareholders of a corporation incorporated in the United States.
All of Grindrod Shipping's directors and senior management reside outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon Grindrod Shipping or any of these persons or to enforce in the United States any judgment obtained in the U.S. courts against Grindrod Shipping or any of these persons, including judgments based upon the civil liability provisions of the U.S. federal securities laws or the laws of any state or territory of the United States.
There is no treaty between the United States and Singapore providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters and a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the federal securities laws, would, therefore, not be automatically enforceable in Singapore. It is not clear whether a Singapore court may impose civil liability on Grindrod Shipping or Grindrod Shipping's directors and officers in a suit brought in the Singapore courts against Grindrod Shipping or such persons with respect to a violation solely of the federal securities laws of the United States.
In addition, only registered shareholders reflected in the register of members are recognized under Singapore law as shareholders of a company. As a result, only registered shareholders have legal standing to institute shareholder actions or otherwise seek to enforce their rights as shareholders. Holders of dematerialised interests in Grindrod Shipping's shares will be required to be registered shareholders as reflected in Grindrod Shipping's register of members in order to institute or enforce any legal proceedings or claims as shareholders against Grindrod Shipping, its directors or its officers in the Singapore courts. Holders of dematerialised interests in the ordinary shares may become registered shareholders by exchanging their dematerialised interests in our ordinary shares for certificated shares and being registered in our register of members. The administrative process of becoming a registered holder could result in delays prejudicial to any legal proceedings or enforcement action. Consequently, it may be difficult for investors to enforce against Grindrod Shipping, its directors or its officers in Singapore judgments obtained in the United States which are predicated upon the civil liability provisions of the federal securities laws of the United States.
Grindrod Shipping is subject to the laws of Singapore, which differ in certain material respects from the laws of the United States.
As a company incorporated under the laws of the Republic of Singapore, Grindrod Shipping is required to comply with the laws of Singapore, certain of which are capable of extraterritorial application, as well as Grindrod Shipping's constitution. In particular, Grindrod Shipping is required to comply with certain provisions of the Securities and Futures Act, Chapter 289 of Singapore, or the Singapore Securities and Futures Act, which prohibit certain forms of market conduct and information disclosures, and impose criminal and civil penalties on corporations, directors and officers in respect of any breach of such provisions. Grindrod Shipping is also required to comply with the Singapore Code on Take-Overs and
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Mergers, or the Singapore Code, which specifies, among other things, certain circumstances in which a general offer is to be made upon a change in effective control, and further specifies the manner and price at which voluntary and mandatory general offers are to be made.
The laws of Singapore and of the United States differ in certain significant respects. The rights of Grindrod Shipping's shareholders and the obligations of its directors and officers under Singapore law are different from those applicable to a company incorporated in the United States in material respects, and Grindrod Shipping's shareholders may have more difficulty and less clarity in protecting their interests in connection with actions taken by Grindrod Shipping's management, directors or controlling shareholders than would otherwise apply to a company incorporated in the United States. See "Item 10. Additional InformationComparison of Shareholder Rights" for a discussion of differences between Singapore and U.S. corporation law.
In addition, the application of Singapore law, in particular, the Companies Act, Chapter 50 of Singapore, or the Singapore Companies Act, may in certain circumstances impose more restrictions on Grindrod Shipping and its shareholders, directors and officers than would otherwise be applicable to a company incorporated in the United States. For example, the Singapore Companies Act requires directors to act with a reasonable degree of diligence and, in certain circumstances, imposes criminal liability for specified contraventions of particular statutory requirements or prohibitions. In addition, pursuant to the provisions of the Singapore Companies Act, shareholders holding 10% or more of the total number of paid-up shares carrying the right of voting in general meetings may require the convening of an extraordinary general meeting of shareholders by the directors. If the directors fail to comply with such request within 21 days of the receipt thereof, shareholders holding more than 50% of the voting rights represented by the original requisitioning shareholders may proceed to convene such meeting, and Grindrod Shipping will be liable for the reasonable expenses incurred by such requisitioning shareholders. Grindrod Shipping is also required by the Singapore Companies Act to deduct corresponding amounts from fees or other remuneration payable by Grindrod Shipping to such non-complying directors.
Anti-takeover provisions under the Singapore Securities and Futures Act and the Singapore Code on Take-overs and Mergers may delay, deter or prevent a future takeover or change of control of Grindrod Shipping, which could adversely affect the price of our ordinary shares.
The Singapore Code, issued pursuant to Section 321 of the Singapore Securities and Futures Act, regulates the acquisition of ordinary shares of, inter alia , listed public companies and contains certain provisions that may delay, deter or prevent a future takeover or change of control of Grindrod Shipping. Any person acquiring an interest, either on his own or together with parties acting in concert with him or her, in 30% or more of the voting shares in Grindrod Shipping must, except with the prior consent of the Singapore Securities Industry Council, or the SIC, extend a takeover offer for the remaining voting shares in Grindrod Shipping in accordance with the provisions of the Singapore Code. Likewise, any person holding between 30% and 50% of the voting shares in Grindrod Shipping, either on his own or together with parties acting in concert with him or her, must, except with the prior consent of the SIC, make a takeover offer in accordance with the provisions of the Singapore Code if that person together with parties acting in concert with him or her or acquires additional voting shares in excess of one percent of the total number of voting shares in any six-month period. Therefore, any investor seeking to acquire a significant stake in Grindrod Shipping may be deterred from doing so if, as a result, such investor would be required to conduct a takeover offer for all of Grindrod Shipping's voting shares.
Under the Singapore Code, an offeror must treat all shareholders of the same class in an offeree company equally. A fundamental requirement is that shareholders in the company subject to the takeover offer must be given sufficient information, advice and time to consider and decide on the offer.
These provisions contained in the Singapore Code may discourage or prevent transactions that involve an actual or threatened change of control of Grindrod Shipping, and may impede or delay a takeover of Grindrod Shipping by a third party. This may adversely affect the market price of Grindrod Shipping ordinary shares and impede the ability of Grindrod Shipping's shareholders to realize any benefits from a potential change of effective control of Grindrod Shipping.
Under Singapore law, shareholder approval is required to allow us to issue new shares which could impact our ability to raise capital or consummate acquisitions. Any issuance of new shares would dilute the percentage ownership of existing shareholders and could adversely impact the market price of the ordinary shares.
Under Singapore law, Grindrod Shipping may only issue new shares with the prior approval of its shareholders. Prior to the listing, Grindrod Shipping's shareholders will provide approval until the
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conclusion of our first annual general meeting, to issue new shares (i) up to 25% of the number of ordinary shares outstanding immediately after the Spin-Off to potentially purchase, directly or indirectly, the vessels currently owned by our IVS Bulk Pte. Ltd. joint venture, or similar vessels if those vessels are not available for sale, and (ii) up to 20% of the number of ordinary shares outstanding immediately after the Spin-Off to purchase other vessels, which could dilute the percentage ownership of existing shareholders and negatively impact the price of the ordinary shares. Any issuance of additional shares for any other purpose or in future years will require the approval of shareholders. Because new issuances of ordinary shares are subject to shareholder approval, or in some circumstances, other regulatory approvals, if a sufficient number of shares have not been approved for issuance in any given year, we may be delayed in raising capital through equity offerings or delayed or prevented from consummating an acquisition using our ordinary shares. Assuming shareholders have approved the issuance of new shares, we may seek to raise capital in the future, including to fund acquisitions, future investments and other growth opportunities. We may, for these and other purposes, such as in connection with share incentive and share option plans (such as our forfeitable share plan, for which we have obtained shareholder approval to issue shares provided that the aggregate number of ordinary shares that may be granted and not yet vested under the forfeitable share plan at any one time shall not exceed 5% of the number of shares in issue (excluding treasury shares) as determined in reference to the day preceding the award), issue additional ordinary shares or securities convertible into ordinary shares. Any additional issuances of new shares could dilute the percentage ownership of our existing shareholders and could also adversely impact the market price of Grindrod Shipping's ordinary shares. In addition, under the provisions of the Singapore Companies Act and Grindrod Shipping's constitution, the board of directors may, with the applicable shareholder approval, issue new shares on terms and conditions and with the rights (including preferential voting rights) and restrictions as they may determine and may contain terms adverse to the ordinary shares.
The Jumpstart Our Business Startups Act of 2012, or JOBS Act, will allow Grindrod Shipping to postpone the date by which it must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information provided in Grindrod Shipping's reports filed with the SEC, which could undermine investor confidence in Grindrod Shipping and adversely affect the market price of Grindrod Shipping's ordinary shares.
For so long as Grindrod Shipping remains an "emerging growth company" as defined in the JOBS Act, it intends to take advantage of certain exemptions from various requirements that are applicable to public companies that are not emerging growth companies including:
Grindrod Shipping intends to take advantage of these exemptions until it is no longer an "emerging growth company". Grindrod Shipping will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of its first sale of equity securities pursuant to an effective registration statement under the Securities Act, (b) in which it has total annual gross revenue of at least $1.07 billion, or (c) in which it is deemed to be a large accelerated filer, which means the market value of Grindrod Shipping ordinary shares that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which it issued more than $1.0 billion in non-convertible debt during the prior three-year period.
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Grindrod Shipping cannot predict if investors will find its ordinary shares less attractive because it may rely on these exemptions. If some investors find Grindrod Shipping ordinary shares less attractive as a result, there may be a less active trading market for the Grindrod Shipping ordinary shares, and the market prices may be more volatile and may decline.
As a "foreign private issuer" Grindrod Shipping is permitted, and intends, to follow certain home country corporate governance practices instead of otherwise applicable SEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.
Grindrod Shipping's status as a foreign private issuer also exempts it from compliance with certain SEC laws and regulations and certain regulations of the NASDAQ, including the proxy rules, the short-swing profits recapture rules of Section 16 of the Exchange Act of 1934, as amended, or the Exchange Act, certain rules relating to disclosure regarding executive compensation, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. In addition, we will not be required under the Exchange Act to file current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we will generally be exempt from filing quarterly reports with the SEC. For as long as Grindrod Shipping is a foreign private issuer it intends to file its annual financial statements on Form 20-F and furnish quarterly financial statements on Form 6-K to the SEC for so long as it is subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act. However, the information Grindrod Shipping files or furnishes is not the same as the information that is required in annual and quarterly reports on Form 10-K or Form 10-Q for U.S. domestic issuers. Furthermore, as a foreign private issuer, Grindrod Shipping will also not be subject to the requirements of Regulation Fair Disclosure, or Regulation FD, promulgated under the Exchange Act, which restricts the selective disclosure of material information.
These exemptions and leniencies will reduce the frequency and scope of information and protections to which you are entitled as an investor.
Grindrod Shipping may lose its foreign private issuer status, which would then require it to comply with the Exchange Act's domestic reporting regime and cause Grindrod Shipping to incur additional legal, accounting and other expenses.
Grindrod Shipping is required to determine its status as a foreign private issuer on an annual basis at the end of its second fiscal quarter. In order to maintain its current status as a foreign private issuer, either (1) a majority of Grindrod Shipping ordinary shares must be either directly or indirectly owned of record by non-residents of the United States or (2) (a) a majority of Grindrod Shipping's executive officers or directors must not be U.S. citizens or residents, (b) more than 50 percent of Grindrod Shipping's assets cannot be located in the United States and (c) Grindrod Shipping's business must be administered principally outside the United States. If Grindrod Shipping loses this status, it would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. Grindrod Shipping may also be required to make changes in its corporate governance practices in accordance with various SEC rules and the NASDAQ listing standards. Further, Grindrod Shipping would be required to comply with U.S. GAAP, as opposed to IFRS, in the preparation and issuance of its financial statements for historical and current periods. The regulatory and compliance costs to Grindrod Shipping under U.S. securities laws if it is required to comply with the reporting requirements applicable to a U.S. domestic issuer may be higher than the cost it would incur as a foreign private issuer. As a result, Grindrod Shipping expects that a loss of foreign private issuer status would increase its legal and financial compliance costs.
If Grindrod Shipping fails to establish and maintain proper internal controls, its ability to produce accurate financial statements or comply with applicable regulations could be impaired.
Section 404(a) of the Sarbanes-Oxley Act requires that, beginning with Grindrod Shipping's annual report for the fiscal year ending December 31, 2019, Grindrod Shipping's management assess and report annually on the effectiveness of its internal controls over financial reporting and identify any material weaknesses in its internal controls over financial reporting. Although Section 404(b) of the Sarbanes-Oxley Act requires Grindrod Shipping's independent registered public accounting firm to issue an annual report that addresses the effectiveness of our internal controls over financial reporting, Grindrod Shipping has opted to rely on the exemptions provided to it by virtue of being an "emerging growth company", and
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consequently we will not be required to comply with SEC rules that implement Section 404(b) of the Sarbanes-Oxley Act until we are no longer an "emerging growth company".
As of the date of this filing, Grindrod Shipping is implementing stand-alone controls and procedures to maintain appropriate segregation of duties in its manual and computer based business processes that it believes are appropriate for a company of its size and extent of business transactions. However, Grindrod Shipping has not completed an assessment to determine whether these controls and procedures would be considered effective for purposes of Section 404(a) and there is no guaranty that there will not be a pervasive impact over the preparation of the financial statements going forward.
In order to maintain and improve the effectiveness of its disclosure controls and procedures and internal controls over financial reporting, Grindrod Shipping will need to expend significant resources and provide significant management oversight. Grindrod Shipping expects to commence the process of reviewing and improving its internal controls over financial reporting for compliance with Section 404(a) of the Sarbanes-Oxley Act. Grindrod Shipping is improving its internal controls and accounting policies and procedures, including hiring new accounting personnel and engaging external temporary resources. Implementing any appropriate changes to internal controls may require specific compliance training of Grindrod Shipping's directors and employees, entail substantial costs in order to modify its existing accounting systems, take a significant period of time to complete and divert management's attention from other business concerns. These changes may not, however, be effective in maintaining the adequacy of Grindrod Shipping's internal controls.
If either Grindrod Shipping is unable to conclude that it has effective internal controls over financial reporting or, at the appropriate time, Grindrod Shipping's independent auditors are unwilling or unable to provide it with an unqualified report on the effectiveness of its internal controls over financial reporting as required by Section 404(b) of the Sarbanes-Oxley Act, investors may lose confidence in Grindrod Shipping's operating results, the price of the Grindrod Shipping ordinary shares could decline and Grindrod Shipping may be subject to litigation or regulatory enforcement actions.
Grindrod Shipping will incur significant increased costs as a result of operating as a company whose ordinary shares are publicly traded in the United States, and its management will be required to devote substantial time to new compliance initiatives.
As a company whose ordinary shares will be publicly traded in the United States, Grindrod Shipping will incur significant legal, accounting, insurance and other expenses that it has not previously incurred. In addition, the Sarbanes-Oxley Act, Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules implemented by the SEC, have imposed various requirements on public companies including requiring establishment and maintenance of effective disclosure and internal controls. Grindrod Shipping's management and other personnel will need to devote a substantial amount of time to these compliance initiatives, and Grindrod Shipping will need to add additional personnel and build its internal compliance infrastructure. Moreover, these rules and regulations will increase Grindrod Shipping's legal and financial compliance costs and will make some activities more time-consuming and costly. These laws and regulations could also make it more difficult and expensive for Grindrod Shipping to attract and retain qualified persons to serve on the board of directors, board committees or as senior management. Furthermore, if Grindrod Shipping is unable to satisfy its obligations as a public company in the United States, it could be subject to delisting of the ordinary shares, fines, sanctions and other regulatory action and potentially civil litigation.
Risks Related to the Spin-Off
The Spin-Off may not achieve some or all of the anticipated benefits.
Grindrod Shipping may not realize some or all of the anticipated strategic, financial, operational or other benefits from the Spin-Off. The Spin-Off is expected to provide the following benefits, among others:
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Grindrod Shipping may not achieve these and other anticipated benefits for a variety of reasons, including, among others:
As independent publicly traded companies, Parent and Grindrod Shipping will be smaller than the combined companies pre-separation and Grindrod Shipping will be less diversified than Parent's business. As a result, each company may be more vulnerable to changing market conditions, which could materially and adversely affect their respective business, financial condition, cash flows and results of operations.
Parent's historical performance may not be representative of Grindrod Shipping's performance as a separate company.
Grindrod Shipping's combined financial statements have been prepared on a stand-alone basis and are derived from combining the financial statements of Parent's shipping business subsidiaries, GSPL and GSSA, that Grindrod Shipping will acquire immediately prior to the Spin-Off, and their respective underlying accounting records. In addition, Grindrod Shipping's combined financial statements include OACL and Unicorn Bunker businesses which will not be transferred to us in the Spin-Off. Accordingly, the Grindrod Shipping combined financial statements do not necessarily reflect what Grindrod Shipping's financial condition, results of operations and cash flows would have been had it been a separate, stand-alone entity during the periods presented. Parent did not account for Grindrod Shipping, and Grindrod Shipping was not operated, as a single, stand-alone entity for the periods presented.
Additionally, in preparing the unaudited pro forma combined financial information, Parent and Grindrod Shipping based the pro forma adjustments on available information and assumptions that they believe are reasonable and factually supportable; however, these assumptions may prove not to be accurate. Also, Grindrod Shipping's unaudited pro forma combined financial information may not give effect to various ongoing additional costs Grindrod Shipping may incur in connection with being an independent public company. Accordingly, the Grindrod Shipping unaudited pro forma combined financial information does not necessarily reflect what Grindrod Shipping's financial condition and results of operations would have been as an independent public company and is not necessarily indicative of its future financial condition or future results of operations. Please refer to "Item 5. Operating and Financial Review and Prospects" and "Item 18. Financial StatementsUnaudited Pro Forma Condensed Financial Information" and "Item 18. Financial StatementsHistorical Combined Financial Statements" and the notes to those statements included elsewhere in this registration statement.
While we have some ability to seek a claim against Parent for certain liabilities relating to the Spin-Off or otherwise attributable to Parent's businesses, available remedies may be limited.
Although Grindrod Shipping may be able to seek a claim against Parent in connection with the Spin-Off or Parent's operation of GSPL and GSSA prior to the Spin-Off, Parent is not obligated to indemnify Grindrod Shipping for any claims made against us that are properly attributable to Parent and is entitled to assert certain defenses to such a claim by agreement and applicable law. As such, there can be no assurance that such a claim would succeed. Any liabilities relating to such claims may be significant and could negatively impact Grindrod Shipping's business. Even if Grindrod Shipping ultimately succeeds in recovering from Parent any amounts for which Grindrod Shipping is held liable, it may be temporarily required to bear these losses itself. Each of these risks could negatively affect Grindrod Shipping's business, financial condition, cash flows and results of operations. See "Item 10. Additional InformationMaterial ContractsContracts Relating to the Spin-Off".
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The combined post-separation value of Parent and Grindrod Shipping ordinary shares may not equal or exceed the pre-separation value of Parent ordinary shares.
As a result of the Spin-Off, Parent expects the trading price of Parent ordinary shares on the JSE immediately following the Spin-Off to be lower than the "regular-way" trading price of such ordinary shares immediately prior to the Spin-Off because the trading price will no longer reflect the value of Parent's existing shipping business being transferred to us. There can be no assurance that the aggregate market value of the Parent ordinary shares on the JSE and the Grindrod Shipping ordinary shares following the Spin-Off will be higher than or the same as the market value of Parent ordinary shares would have been if the separation did not occur.
After the Spin-Off, certain of Grindrod Shipping's executive officers and directors may have actual or potential conflicts of interest because of their current or former positions in Parent or their ownership of Parent equity.
Certain of the persons who will be Grindrod Shipping's executive officers and directors will be former directors, officers or employees of Parent and thus have professional relationships with Parent's executive officers and directors. We also expect that two members of our board of directors and our Alternate Director will continue to be members of Parent's board of directors after the Spin-Off. In addition, certain of our executive officers and directors have a financial interest in Parent as a result of their beneficial ownership of Parent's equity. These relationships and financial interests may create, or may create the appearance of, conflicts of interest when these directors and executive officers face decisions that could have different implications for Parent than for Grindrod Shipping.
The one-time and ongoing costs of the Spin-Off may be greater than expected.
There are risks and uncertainties relating to the execution of the Spin-Off, including the timing and certainty of the satisfaction or waivers of the conditions to the Spin-Off. In addition, Grindrod Shipping will incur costs in connection with the transition to being a stand-alone public company that relate primarily to accounting, tax, legal and other professional costs; modifications to its credit agreements relating to the release of certain Parent guarantees; compensation costs, such as vesting of certain Parent incentive awards upon completion of the Spin-Off; cost of our new employee share scheme; recruiting and relocation costs associated with hiring senior management personnel; and costs to separate information systems. These costs, whether incurred before or after the Spin-Off, may be greater than anticipated and could have a material adverse effect on Grindrod Shipping's business, financial condition, cash flows and results of operations.
As Grindrod Shipping builds its stand-alone information technology infrastructure and transitions its data to its own systems, it could incur substantial additional costs and experience business interruptions.
After the Spin-Off, Grindrod Shipping will continue to install and implement its stand-alone information technology infrastructure to support its critical business functions, including accounting and reporting, inventory control and distribution. Grindrod Shipping may incur interruptions in business operations if it cannot transition effectively from Parent's existing transactional and operational systems and data centers. Grindrod Shipping may not be successful in implementing new systems and transitioning data, and it may incur substantially higher costs for implementation than currently anticipated. Operational interruptions that result from the implementation of these new systems and replacement of Parent's information technology services, or our failure to implement the new systems and replace Parent's services successfully or on the anticipated timetable currently contemplated for such transition, could significantly increase the anticipated costs associated with the transition, disrupt Grindrod Shipping's business and could have a material adverse effect on its business, financial condition, cash flows and results of operations. In addition, if Grindrod Shipping is unable to replicate or transition certain systems, its ability to comply with regulatory requirements could be impaired.
Tax Risks
We may have to pay tax on U.S. source income, which would reduce our earnings.
Under the Internal Revenue Code of 1986, as amended, or the Code, 50% of the gross income derived by a non-U.S. corporation from, or in connection with, the use (or hiring or leasing for use) of a vessel, or the performance of services directly related to the use of a vessel that is attributable to transportation that either begins or ends, but that does not both begin and end, in the United States is characterized as U.S. source international transportation income. U.S. source international transportation income generally is
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subject to a 4% U.S. federal income tax without allowance for deduction or, if such U.S. source international transportation income is effectively connected with the conduct of a trade or business in the United States, U.S. federal corporate income tax (imposed at up to a 21% rate from January 1, 2018) as well as a branch profits tax (presently imposed at a 30% rate on effectively connected earnings), unless the non-U.S. corporation qualifies for the statutory exemption from tax under Section 883 of the Code, or the Section 883 Exemption. The Section 883 Exemption applies separately to us and each of our subsidiaries that is treated as a corporation for U.S. federal income tax purposes and earns U.S. source international transportation income (which we refer to below as our "applicable subsidiaries").
It is uncertain whether we will qualify for the Section 883 Exemption for any taxable year. If we qualify for the Section 883 Exemption for a taxable year, then we expect that each of our applicable subsidiaries that is more than 50%-owned (by value) by us for at least half of the number of days in such taxable year would also qualify for the Section 883 Exemption for such taxable year. We believe that we will qualify for the Section 883 Exemption if (i) our ordinary shares satisfy certain listing and trading volume requirements and (ii) less than 50% of our ordinary shares are owned, actually or constructively under specified share attribution rules, on more than half the number of days in the relevant taxable year, by persons who each own 5% or more of our ordinary shares, or 5% shareholders. However, we expect that one or more 5% shareholders may own 50% or more of our ordinary shares for more than half of the number of days during our current taxable year and/or future taxable years. In this case, we would not be eligible for the Section 883 Exemption unless we can establish that a sufficient proportion of such 5% shareholders are "qualified shareholders" for purposes of the Section 883 Exemption so as to preclude other persons who are 5% shareholders from owning 50% or more of our ordinary shares for more than half the days during the relevant taxable year. We would be required to satisfy certain substantiation requirements regarding the identity of any 5% shareholders that are "qualified shareholders", and these substantiation requirements are onerous and there is no assurance that we would be able to satisfy them. In particular, we would be required to obtain certifications of "qualified shareholder" status from any 5% shareholders that we rely upon for this purpose, which our 5% shareholders may not be willing or able to provide. Given the factual nature of the issues involved and the practical uncertainties, we can give no assurances as to our or our applicable subsidiaries' qualification for the exemption from tax under Section 883 of the Code for any taxable year. Furthermore, our board of directors could determine that it is in our best interests to take an action that would result in our and our applicable subsidiaries not being able to qualify for the exemption from tax under Section 883 of the Code in the future. Even if we qualify for the Section 883 Exemption for a taxable year, our applicable subsidiaries that are not more than 50%-owned (by value) by us for at least half of the number of days in such taxable year may not qualify for the Section 883 Exemption. There can be no assurance that we or any of our applicable subsidiaries will qualify for the Section 883 Exemption for any taxable year.
If we or our subsidiaries were not entitled to the Section 883 Exemption for any taxable year, we and our subsidiaries generally would be subject to a 4% U.S. federal income tax with respect to our and our subsidiaries' gross U.S. source international transportation income or, if such U.S. source international transportation income were effectively connected with the conduct of a trade or business in the United States, U.S. federal corporate income tax as well as a branch profits tax for any such taxable year or years. Our and our subsidiaries' failure to qualify for the Section 883 Exemption could have a negative effect on our business and would result in decreased earnings available for distribution to our shareholders. Please see the discussion under "Item 10. Additional InformationTaxationMaterial U.S. Federal Income Tax ConsiderationsTaxation of Operating Income".
U.S. tax authorities could treat us as a "passive foreign investment company," which could have adverse U.S. federal income tax consequences to U.S. shareholders.
In general, a non-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a "passive foreign investment company," or a PFIC, for U.S. federal income tax purposes, for any taxable year, if, taking into account certain look-through rules, at least 75% of its gross income for such taxable year consists of certain types of "passive income," or at least 50% of the average value of the entity's assets during such taxable year produce or are held for the production of those types of "passive income". For purposes of these tests, "passive income" generally includes dividends, interest, capital gains and rents derived other than in the active conduct of rental business. For purposes of these tests, income earned from the performance of services would not constitute "passive income". By contrast, rental income generally would constitute "passive income" unless it were treated as derived in the active conduct of a trade or business under applicable rules.
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U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal 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, as well as additional U.S. federal income tax filing obligations.
Based on our current and projected income, assets and methods of operation, we believe that we should not be treated as a PFIC with respect to our taxable year following the completion of the Spin-Off, (as described in "Item 9. The Offer and ListingOffer and Listing DetailsMechanics of the Spin-Off") and we expect that we should not become a PFIC for the foreseeable future. In this regard, we expect that substantially all of the vessels in our Fleet will be engaged in time or voyage chartering activities and we intend to treat our income from those activities as non-passive income, and the vessels engaged in those activities as non-passive assets, for PFIC purposes.
There is a significant amount of legal authority consisting of the Code, legislative history, and U.S. Internal Revenue Service, or IRS, pronouncements and administrative rulings supporting our position that the income derived from time charters and voyage charters constitutes services income (rather than rental income) for other tax purposes. There is, however, no direct legal authority under the PFIC rules addressing whether income from time chartering activities is services income or rental income. Moreover, it should be noted that there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, no assurance can be given that the IRS or a court of law will accept our position and there is a risk that the IRS or a court of law could determine that we are a PFIC. In addition, no assurance can be given as to our current and future PFIC status, because such status requires an annual factual determination based upon the composition of our income and assets for the entire taxable year. In particular, because the total value of our assets for purposes of the asset test described above will generally be calculated using the market price of our ordinary shares, our PFIC status may depend in large part on the market price of our ordinary shares. Accordingly, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. In addition, the composition of our income and assets will be affected by how, and how quickly, we use the cash generated by our business operations and any net proceeds that we receive from any future financing or capital transactions. The PFIC determination also depends on the application of complex U.S. federal income tax rules concerning the classification of our assets and income for this purpose, and these rules are uncertain in some respects. Further, the PFIC determination is made annually and our circumstances or the nature of our operations may change. Accordingly, there can be no assurance that we will not be classified as a PFIC for the current taxable year or any future taxable year, and no ruling from the IRS or opinion of counsel has been issued or has been or will be sought with respect to our potential status as a PFIC.
If the IRS were to determine that we are a PFIC for any taxable year in which a U.S. shareholder owned our ordinary shares, the U.S. shareholder generally would be subject to special tax rules resulting in increased tax liability with respect to any "excess distribution" the U.S. shareholder receives on, and any gain the U.S. shareholder realizes from a sale or other disposition (including a pledge) of, our ordinary shares, unless a "mark-to-market" election is available and a U.S. shareholder makes such election with respect to the ordinary shares. In addition, if we were treated as a PFIC for any taxable year in which a U.S. shareholder owned our ordinary shares, the U.S. shareholder would be required to file IRS Form 8621 with the U.S. shareholder's U.S. federal income tax return for each year to report the U.S. shareholder's ownership of such ordinary shares. Please see the discussion under "Item 10. Additional InformationTaxationMaterial U.S. Federal Income Tax ConsiderationsU.S. Federal Income Taxation of U.S. HoldersPFIC Status and Significant Tax Consequences".
We may be subject to taxes, which may reduce our cash available for distribution to our shareholders.
We, our subsidiaries and our joint ventures may be subject to tax in the jurisdictions in which we are organized or operate, reducing the amount of cash available for distribution. In computing our tax obligation in these jurisdictions, we are required to take various tax accounting and reporting positions on matters that are not entirely free from doubt and for which we have not received rulings from the governing authorities. We cannot assure you that upon review of these positions the applicable authorities will agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on us or our subsidiaries, further reducing the cash available for distribution. In addition, changes in our operations or ownership could result in additional tax being imposed on us or our subsidiaries in jurisdictions in which operations are conducted.
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Our wholly owned subsidiary, GSPL, is incorporated under the laws of Singapore and has been accepted under the Singapore Approved International Shipping Enterprise Scheme, or the Singapore AIS Scheme, pursuant to which it has the benefit of various tax exemptions in Singapore. In particular, qualifying income, including income from the operation of foreign-flagged vessels plying in international waters, would be tax exempt in Singapore. Other benefits under the Singapore AIS Scheme include the automatic withholding tax exemption on qualifying payments made in respect of qualifying loans entered into on or before May 31, 2021 to finance the purchase or construction of Singapore-flagged and foreign-flagged vessels, subject to conditions. The Singapore AIS Scheme is awarded for an initial period of 10 years, subject to an interim review of compliance after five years, and may be extended at the end of the term. GSPL's initial Singapore AIS Scheme expired in 2014 and has been renewed through 2024 subject to compliance with specified conditions. There is no assurance that for any subsequent renewal we will be able to meet the qualifying conditions for the Singapore AIS Scheme at the time of renewal, that the Maritime and Port Authority of Singapore will grant us such approval, or that the Singapore AIS Scheme will continue to be available under Singapore laws. In the event that our award of the Singapore AIS Scheme is not renewed, we will no longer enjoy the tax exemptions described above, and unless we are able to utilize other similar tax exemption initiatives in the future, whether in Singapore or otherwise, our income may be subject to Singapore corporate income tax. As such, our business, financial condition, results of operations and prospects may be materially and adversely affected if our acceptance under the Singapore AIS Scheme is revoked, suspended, not renewed or otherwise terminated.
Grindrod Shipping shareholders may be subject to Singapore taxes.
Singapore tax law may differ from the tax laws of other jurisdictions, including the United States. Gains from the sale of Grindrod Shipping ordinary shares by a person not tax resident in Singapore may be taxable in Singapore if such gains are considered as being part of the profits of any business carried on in Singapore. For additional information, see "Item 10. Additional InformationTaxationSingapore Tax Considerations" in this registration statement. You should consult your tax advisors concerning the overall tax consequences of acquiring, owning or selling the Grindrod Shipping ordinary shares.
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ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Grindrod Shipping is the holding company which will acquire the international drybulk and tanker shipping group of Parent, whose origins date back to the formation of a shipping and related business in 1910 by Captain John Edward Grindrod. Grindrod Shipping was incorporated as a private company, Grindrod Shipping Holdings Pte. Ltd., in Singapore on November 2, 2017 under the Singapore Companies Act. On or prior to the Closing Date, Grindrod Shipping Holdings Pte. Ltd. will convert into Grindrod Shipping Holdings Ltd., a public company incorporated in accordance with the laws of Singapore.
Parent has been involved in various sectors of the shipping and transport industry for more than 100 years. The drybulk business in its current form under the IVS brand dates back to 1976 and was acquired by Parent in 1999. The modern day tanker business under the Unicorn brand dates back to 1973 when Parent acquired a tanker of approximately 20,000 dwt.
On the Closing Date pursuant to Parent board and shareholder authorization, Parent will make a distribution in specie consisting of the Convertible Notes to be distributed on the Closing Date pro rata to all of Parent's ordinary shareholders. Parent's ordinary shareholders will receive one Convertible Note for every 40 shares of Parent's ordinary shares. The Convertible Notes will immediately and automatically convert into ordinary shares in Grindrod Shipping following the distribution of the Convertible Notes to Parent's ordinary shareholders. Each Convertible Note will convert into one ordinary share of Grindrod Shipping with shareholders of Grindrod Shipping holding Grindrod Shipping ordinary shares in the same proportion as they hold their Parent ordinary shares immediately following the consummation of the Spin-Off. For more information on the Spin-Off and the treatment of fractional interests, see "Item 9. The Offer and ListingOffer and Listing DetailsMechanics of the Spin-Off".
Our principal executive offices are located at #03-01 Southpoint, 200 Cantonment Road, Singapore, 089763 and our telephone number at that location is +65 6323 0048.
From time to time, we have sold vessels in the ordinary course. For a discussion of our principal capital expenditures, see "Item 5. Operating and Financial Review and ProspectsLiquidity and Capital Resources".
B. Business Overview
We are an international shipping company that owns, charters -in and operates a fleet of drybulk carriers and tankers. We own some of our vessels directly and some of our vessels in joint venture arrangements.
We operate two businesses primarily in: the drybulk carriers business, which is further divided into handysize, supramax, and other operating segments; and the tankers business, which is further divided into medium range tankers, small tankers, and other operating segments. Activities that do not relate to these business segments are accumulated in an "unallocated" segment. Our business also includes a container business held through OACL and a bunker business held through Unicorn Bunker, both of which were sold in the first quarter of 2018. See "Item 5. Operating and Financial Review and ProspectsThe Spin-Off".
In the drybulk business we are primarily focused on the handysize and supramax segments. We have 20 handysize drybulk carriers and 13 supramax drybulk carriers in our Fleet with sizes ranging from 28,240 dwt to 61,420 dwt. Our drybulk carriers transport a broad range of major and minor bulk and breakbulk commodities, including ores, coal, grains, forestry products, steel products and fertilizers, along worldwide shipping routes, and are currently employed in pools of similarly sized vessels or in the spot market.
In the tanker business we are focused on the medium range tanker segment and also operate in the small tanker segment. We have 11 medium range tankers and four small tankers in our Fleet with sizes ranging from 16,480 dwt to 51,570 dwt. Our tankers carry petroleum products, which include both clean products, such as petrol, diesel, jet fuel and naptha, and dirty products, such as heavy fuel oil. Our tankers do not carry crude oil. Our tankers are also classed to carry low hazard chemical products, which include liquid bulk vegetable oils. Our tankers are currently employed in pools of similarly sized vessels, commercially managed by one of our joint venture partners or third parties, and under various other arrangements, including charter-out, bareboat charter, under COA or in the spot market.
As of the date of this registration statement, we operate our Fleet of 48 vessels consisting of 25 owned drybulk carriers (including 15 drybulk carriers that we own through joint ventures), eight long-term chartered-in drybulk carriers, 12 owned tankers (including six tankers that we own through joint ventures) and three long-term chartered-in tankers (see the below Fleet table for details). We regard vessels owned
44
by the joint ventures in which we participate as owned vessels in our Fleet. As of the date of this registration statement, our Fleet has a total drybulk carrying capacity of approximately 1.4 million dwt and a total liquid bulk carrying capacity of approximately 580,300 dwt.
We regard chartered-in vessels as part of our Fleet if the period of the charter that we initially commit to is 12 months or more. Once we have included such chartered-in vessels in our Fleet, we will continue to regard them as part of our Fleet until the end of their chartered-in period, including any period that the charter has been extended under an option, even if at a given time the remaining period of their charter may be less than 12 months. Additionally, certain of our chartered-in vessels have purchase options.
In addition to our Fleet, we will from time to time charter-in additional vessels for initial committed periods of less than 12 months. We may do this entirely for our own profit or loss, or we may do this in respect of pools that we commercially manage in which event the profit or loss associated with the vessel will be for the account of the pool. From time to time we have, on average, chartered between 10 to 25 vessels on a short-term basis to take advantage of opportunities in the market and to help service our cargo contracts alongside our Fleet.
We have partnered with various global partners to operate a portion of our drybulk carriers through three joint ventures and a portion of our tankers through two joint ventures. We also have a majority interest in a joint venture that has drybulk freight contracts. For more information on the vessels held through joint ventures and a description of the key terms of certain of these joint ventures, see the Fleet table and "Our Joint Ventures" below.
We have previously and will in future from time to time contract for the construction of newbuilding vessels. As of the date of this registration statement, we have no newbuilding vessels under construction. We may also acquire secondhand vessels or newbuilding resales.
From time to time, we may buy and sell vessels when we consider market conditions make it appropriate to do so and if our tonnage requirements permit. We consider that our trading of vessels involves both the acquisition of vessels at times when we perceive prices to be weak and the sale of vessels when values rise. In determining when to acquire vessels we take into account our liquidity position. our expectation of fundamental developments in the drybulk and tanker shipping sectors, the level of liquidity in the secondhand and charter markets, the cash flow earned by the vessel in relation to its value, the vessel's condition and technical specifications with particular regard to fuel consumption, expected remaining useful life, the credit quality of the charterer and duration and terms of charter contracts for vessels acquired with charters attached, as well as the overall diversification of our Fleet and customers.
We operate two drybulk commercial pools for which we earn pool management fees from third-party vessel owners and some of our joint venture partners. We do not operate any tanker commercial pools. We also provide commercial management for our drybulk carrier and one of our tanker joint ventures. We also technically manage the majority of the vessels that we own directly or through joint ventures.
In addition, we operate a service in the drybulk sector where we ship bulk cargo in parcel sizes that may be significantly less than the full carrying capacity of a vessel, or even less than the carrying capacity of an individual hold on a vessel. Where we load more than one parcel of bulk cargo in a hold we will separate the parcels using steel plates and other dunnage materials. Wherever it makes commercial sense to do so, we use vessels from our Fleet to carry this type of cargo. We also will source vessels off the spot market to carry the cargo. We have operated this service for more than 40 years, with a consistent customer base for most or all of this time.
Our Competitive Strengths
We believe that we possess a number of competitive strengths, including:
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expectation of continued access to bank financing, has strongly positioned us to take advantage of further growth opportunities. See "Item 3. Key InformationSelected Financial Data".
Business strategies
Our primary objectives are to profitably grow our business and to maintain and enhance our position as a successful owner and operator of drybulk carrier and tanker vessels. The key elements of our strategy are:
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Our Fleet
The following tables set forth certain summary information regarding our Fleet as of the date of this registration statement:
Drybulk Carriers
Vessel
|
Built |
Country of
Build |
dwt |
Type of
Ownership |
Type of Employment | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Handysize |
|||||||||||
IVS Merlion |
2013 | China | 32,070 | Owned | IVS Handysize Pool | ||||||
IVS Raffles |
2013 | China | 32,050 | Owned | IVS Handysize Pool | ||||||
IVS Ibis (1) |
2012 | Japan | 28,240 | Owned | IVS Handysize Pool | ||||||
IVS Kinglet |
2011 | Japan | 33,130 | Owned | IVS Handysize Pool | ||||||
IVS Magpie (1) |
2011 | Japan | 28,240 | Owned | IVS Handysize Pool | ||||||
IVS Orchard |
2011 | China | 32,530 | Owned | IVS Handysize Pool | ||||||
IVS Knot |
2010 | Japan | 33,140 | Owned | IVS Handysize Pool | ||||||
IVS Sentosa |
2010 | China | 32,700 | Owned | IVS Handysize Pool | ||||||
IVS Triview (2) |
2009 | Japan | 32,280 | Owned | IVS Handysize Pool | ||||||
IVS Shikra |
2008 | Japan | 29,660 | Chartered-in (expires 2021) (3) | IVS Handysize Pool | ||||||
IVS Kingbird |
2007 | Japan | 32,560 | Owned | IVS Handysize Pool | ||||||
IVS Kawana |
2005 | Japan | 32,640 | Owned | IVS Handysize Pool | ||||||
IVS Kanda |
2004 | Japan | 32,620 | Owned | IVS Handysize Pool | ||||||
IVS Nightjar |
2004 | Japan | 32,320 | Owned | IVS Handysize Pool | ||||||
HandysizeEco |
|
|
|
|
|
||||||
IVS Tembe (4) |
2016 | Japan | 37,740 | Owned | Commercially managed by us alongside the IVS Handysize Pool | ||||||
IVS Sunbird (4) |
2015 | Japan | 33,400 | Owned | IVS Handysize Pool | ||||||
IVS Thanda (4) |
2015 | Japan | 37,720 | Owned | Commercially managed by us alongside the IVS Handysize Pool | ||||||
IVS Kestrel (4) |
2014 | Japan | 32,770 | Owned | IVS Handysize Pool |
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Vessel
|
Built |
Country of
Build |
dwt |
Type of
Ownership |
Type of Employment | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
IVS Phinda (4) |
2014 | Japan | 37,720 | Owned | Commercially managed by us alongside the IVS Handysize Pool | ||||||
IVS Sparrowhawk (4) |
2014 | Japan | 33,420 | Owned | IVS Handysize Pool | ||||||
Supramax |
|
|
|
|
|
||||||
IVS Beachwood |
2011 | Japan | 61,420 | Chartered-in (expires 2020) (3) | IVS Supramax Pool | ||||||
SupramaxEco |
|||||||||||
IVS Swinley Forest (4) |
2017 | Japan | 60,490 | Owned | IVS Supramax Pool | ||||||
IVS Gleneagles (4) |
2016 | Japan | 58,070 | Owned | IVS Supramax Pool | ||||||
IVS Hayakita |
2016 | Japan | 60,400 | Chartered-in (expires 2026) (3) | IVS Supramax Pool | ||||||
IVS North Berwick (4) |
2016 | Japan | 60,480 | Owned | IVS Supramax Pool | ||||||
IVS Windsor |
2016 | Japan | 60,280 | Chartered-in (expires 2026) (3) | IVS Supramax Pool | ||||||
IVS Augusta |
2015 | Philippines (5) | 57,800 | Chartered-in (expires 2022) (3) | IVS Supramax Pool | ||||||
IVS Bosch Hoek (4) |
2015 | Japan | 60,270 | Owned | IVS Supramax Pool | ||||||
IVS Hirono (4) |
2015 | Japan | 60,280 | Owned | IVS Supramax Pool | ||||||
IVS Pinehurst |
2015 | Philippines (5) | 57,810 | Chartered-in (expires 2022) (3) | IVS Supramax Pool | ||||||
IVS Wentworth (4) |
2015 | Japan | 58,090 | Owned | IVS Supramax Pool | ||||||
IVS Crimson Creek |
2014 | Japan | 57,950 | Chartered-in (expires 2021) (3) | IVS Supramax Pool | ||||||
IVS Naruo |
2014 | Japan | 60,030 | Chartered-in (expires 2025) (3) | IVS Supramax Pool |
Tankers
Vessel Name
|
Built |
Country of
Build |
dwt |
IMO
Designation |
Type of
Ownership |
Type of Employment | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Small Product Tankers |
|||||||||||||
Umgeni |
2011 |
China |
16,480 |
II, III |
Owned |
Brostrom Tanker Pool |
|||||||
Kowie |
2010 |
China |
16,890 |
II, III |
Owned |
Spot Market and COA |
|||||||
Breede |
2009 |
China |
16,900 |
II, III |
Owned |
Spot Market and COA |
|||||||
Berg ( 6 ) |
2008 |
China |
16,900 |
II, III |
Owned |
Time Charter (expires 2018) |
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Vessel Name
|
Built |
Country of
Build |
dwt |
IMO
Designation |
Type of
Ownership |
Type of Employment | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Medium Range Tankers |
|
|
|
|
|
||||||||
Matuku |
2016 |
South Korea |
50,140 |
II, III |
Owned |
Bareboat charter (expires 2020 with a two year option) |
|||||||
Lavela ( 6 ) |
2010 |
South Korea |
40,100 |
III |
Owned |
Handy Tanker Pool |
|||||||
Rhino |
2010 |
South Korea |
39,710 |
II, III |
Owned |
Handy Tanker Pool |
|||||||
Inyala |
2008 |
South Korea |
40,040 |
III |
Owned |
Handy Tanker Pool |
|||||||
Coral Stars |
2004 |
South Korea |
40,000 |
III |
Chartered-in (expires 2018) (3) |
COA |
|||||||
Medium Range TankersEco |
|
|
|
|
|
|
|||||||
Doric Breeze |
2013 |
South Korea |
51,570 |
II, III |
Chartered-in (expires 2020) (3) |
Commercially managed by Vitol in the spot market and/or time chartered (7) |
|||||||
Doric Pioneer |
2013 |
South Korea |
51,570 |
II, III |
Chartered-in (expires 2020) (3) |
Commercially managed by Vitol in the spot market and/or time chartered (7) |
|||||||
Leopard Moon (8) |
2013 |
South Korea |
50,000 |
III |
Owned |
Commercially managed by Vitol in the spot market and/or time chartered (7) |
|||||||
Leopard Sea (8) |
2013 |
South Korea |
50,000 |
III |
Owned |
Commercially managed by Vitol in the spot market and/or time chartered (7) |
|||||||
Leopard Star (8) |
2013 |
South Korea |
50,000 |
III |
Owned |
Commercially managed by Vitol in the spot market and/or time chartered (7) |
|||||||
Leopard Sun (8) |
2013 |
South Korea |
50,000 |
III |
Owned |
Commercially managed by Vitol in the spot market and/or time chartered (7) |
49
Employment of Our Fleet
We aim to manage our business in a manner that achieves a balance between maximizing revenue opportunities and protecting against declines in revenue. We operate our vessels in commercial pools, in the spot market, on long- and short-term time charters and on occasion on bareboat charters. In addition to employing our vessels in these ways, we use FFAs and enter into COAs to manage our revenue risk and employment risk. Where we carry cargo under COAs, we may utilize our Fleet to do so or we may utilize vessels that we short term charter-in that are not part of our Fleet. We currently employ our vessels primarily in the spot market or spot market-oriented pools and we do not have a significant amount of fixed revenue cover. The term "fixed revenue cover" as used in this registration statement refers to the percentage of operating days in a period in which our vessels are fixed pursuant to vessel employment agreements into which the group has already entered.
Commercial Pools
To increase vessel utilization and thereby revenues, we participate in commercial pools with similar modern well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial managers and operators who have close working relationships with customers and brokers, while technical management is performed by each vessel owner or procured from third parties. The managers of the pools negotiate voyage charters and COAs and time charters of various lengths, usually less than 12 months, with customers. The size and scope of these pools enable them to enhance vessel utilization rates for pool vessels by securing backhaul voyages and COAs, thus generating higher effective TCE revenue than otherwise might be obtainable for vessels operating independently in the spot market, while providing a higher level of service offerings to customers.
A pool aggregates the revenues and agreed expenses, which are usually voyage related expenses, of all of the vessels in the pool and distributes the net earnings calculated on (i) the number of pool points for the vessel, and (ii) the number of days the vessel was available to earn revenue for the pool in a distribution period. Usually a single pool manager is responsible for both the administrative and commercial management of the participating vessels, including marketing the pool, negotiating charters, including voyage charters, short duration time charters and longer term COAs, conducting pool operations, including the distribution of pool cash earnings, and managing bunker purchases, port charges and administrative services for the vessels. For these services the pool manager charges a fee, which may be a flat rate per day per vessel in the pool, or a fixed percentage rate applied typically to the gross revenues earned by the pool, or a combination of both. The pool participants remain responsible for all other costs including the financing, insurance, manning and technical management of their owned vessels or payment of charter hire to the owners of chartered-in vessels they have entered into the pool.
In 2013, we established two drybulk commercial management pools in the handysize and supramax sectors that have each demonstrated an ability to outperform, on average, relative to their industry benchmarks since their inception.
Our IVS Handysize Pool includes all of the handysize vessels in our Fleet, including those held through joint ventures, except for the three approximately 37,000 dwt handysize vessels which are commercially managed as a group by the same in-house team that manages the IVS Handysize Pool. There are five other vessels owned by other vessel owners in the IVS Handysize Pool. This pool includes vessels of between approximately 28,000 dwt and 34,000 dwt, and two vessels of 37,400 dwt owned by other vessel owners, and currently trades primarily in the spot market. As pool managers we have the ability to contract pool vessels out on time charters for up to 12 months. The net earnings allocated to vessels in the IVS Handysize Pool are distributed on the basis of (i) the number of pool points for the vessel, which are based on vessel attributes such as cargo carrying capacity, fuel consumption and construction characteristics, and (ii) the number of days the vessel was available to earn revenue for the pool in a distribution period. While all of the vessels in the IVS Handysize Pool are generally similar in terms of pool point allocations, the number of days a vessel is available to earn revenue varies on the basis of when a vessel enters or exits the pool or upon the occurrence of other events such as drydocking or repairs. In light of the foregoing, this results in all vessels in the IVS Handysize Pool receiving net earnings distributions that generally reflect actual availability for use in the pool.
Our IVS Supramax Pool includes all of the supramax vessels in our Fleet, including those held through a joint venture. There are no vessels owned by independent third parties in this pool. This pool includes
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vessels of between approximately 57,800 dwt and 61,400 dwt and currently trades in a combination of COAs and the spot market. As pool managers, we have the ability to contract pool vessels out on time charters for up to 12 months. The net earnings allocated to the vessels in the IVS Supramax Pool are distributed on the basis of (i) the number of pool points for the vessel, which are based on vessel attributes such as cargo carrying capacity, fuel consumption, and construction characteristics, and (ii) the number of days the vessel was available to earn revenue for the pool in a distribution period. While all of the vessels in the IVS Supramax Pool are generally similar in terms of pool point allocations, the number of days a vessel is available to earn revenue for the pool varies on the basis of when a vessel enters or exits the pool or upon the occurrence of other events such as drydocking or repairs. In light of the foregoing, this results in all vessels in the IVS Supramax Pool receiving net earnings distributions that generally reflect actual availability for use in the pool.
We own two medium range tankers of approximately 40,000 dwt that are entered into the Handy Tanker Pool operated by Maersk. Additionally, the approximately 40,100 dwt medium range tanker that we own in a joint venture with Engen is employed in this pool. There are 58 other vessels in this pool owned by other vessel owners. This pool includes vessels of between approximately 30,000 dwt and 40,100 dwt and currently operates primarily in the spot market. The net earnings allocated to vessels in the Handy Tanker Pool are distributed on the basis of (i) the number of pool points for the vessel, which are based on vessel attributes such as cargo carrying capacity, IMO class, age engine load settings and operational flexibility factors, such as the ability to enter various harbors and ports or pass through canals and straits, and (ii) the number of days the vessel was available to earn revenue for the pool in a distribution period. While all of the vessels in the Handy Tanker Pool are generally similar in terms of pool point allocations, the number of days a vessel is available to earn revenue for the pool varies on the basis of when a vessel enters or exits the pool, or upon the occurrence of other events such as drydocking or repairs or the vessel no longer meeting the qualifying criteria to participate in the pool. In light of the foregoing, this results in all vessels in the Handy Tanker Pool receiving net earnings distributions that generally reflect actual availability for use in the pool.
We own one 16,480 dwt small product tanker which is entered into the Brostrom Tanker Pool operated by Maersk. There are 23 other vessels in this pool owned by other vessel owners. This pool includes vessels of between approximately 15,000 dwt and 20,000 dwt and currently operates primarily in the spot market. The net earnings allocated to vessels in the Brostrom Tanker Pool are distributed on the basis of (i) the number of pool points for the vessel, which are based on vessel attributes such as cargo carrying capacity, age and operational flexibility factors, such as the ability to enter various harbors and ports or pass through canals and straits, and (ii) the number of days the vessel is available to earn revenue for the pool in a distribution period. While all of the vessels in the Brostrom Tanker Pool are generally similar in terms of pool point allocations, the number of days a vessel is available to earn revenue for the pool varies on the basis of when such vessels enter or exit the pool or upon the occurrence of other events such as drydocking or repairs or the vessel no longer meeting the qualifying criteria to participate in the pool. In light of the foregoing, this results in all vessels in the Brostrom Tanker Pool receiving net earnings distributions that generally reflect actual availability for use in the pool.
Spot Market
When we refer to a vessel operating in the spot market, we mean that we do not have long-term contracted employment for that vessel. The vessel's commercial manager or the pool manager, as applicable, seeks employment for these vessels on a day-to-day basis. The spot market includes voyage charters. A voyage charter is generally a contract to carry a specific cargo from a load port to a discharge port for an agreed freight per ton of cargo or a specified total amount. Under voyage charters, we pay specific voyage expenses such as port, canal and bunker costs. The spot market also includes time charters of a short duration. Shipping rates are volatile and also fluctuate on a seasonal and year-to-year basis, and operating in the spot market exposes us to this volatility more than if we had long-term fixed contracted revenue.
In addition, we may enter long-term charters or COAs where the rate we charge varies according to fluctuations in the shipping market. Although these types of contracts run over a longer period, the charter rates may be reset at the start of each voyage or on a monthly or quarterly or other interval. A number of industry participants produce daily assessments of the spot market rates and indices are produced to reflect the changes in the spot market over time based on these assessments. Accordingly, these contracts are generally referred to as "index-linked" contracts. Like spot market contracts, index-linked contracts are also exposed to the volatility in the shipping markets. The Baltic Exchange is the primary producer of these indices.
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Market fluctuations derive from imbalances in the availability of cargoes for shipment and the number of vessels available at any given time to transport these cargoes. Vessels operating in the spot market generate revenue that is less predictable than those under longer term time charters or those serving fixed rate COAs, but operating in the spot market may enable us to capture increased profit margins during periods of improvements in charter rates. As the costs of our Fleet are typically of a long-term, fixed nature, downturns in the spot markets and in the drybulk or tanker industries generally would result in a reduction in profit margins.
Our three approximately 37,700 dwt handysize vessels are currently primarily employed in the spot market and the vessels in the IVS Handysize Pool as well as our tankers employed in pools operated by Maersk, are currently also employed currently in the spot market. The vessels in the IVS Supramax Pool currently trade in a combination of COAs and the spot market.
Commercial Management
We charter-in two medium range tankers of approximately 52,000 dwt, and own four medium range tankers of 50,000 dwt through a joint venture with Vitol. These medium range tankers are commercially managed by Mansel. Mansel, an affiliate of Vitol, procures shipping for oil cargoes traded by Vitol. These vessels are currently operated in the spot market and on Vitol traded cargoes.
We commercially manage two approximately 16,900 tankers, which primarily trade around the southern African coast, fulfilling obligations we have under COAs, as well as the spot cargo market.
As noted above, our three approximately 37,700 dwt handysize vessels are commercially managed as a group by the same in-house team that manages the IVS Handysize Pool and currently operate primarily in the spot market.
Time Charters
Time charters provide a fixed and stable cash flow for a known period of time. Time charters also mitigate in part the volatility and seasonality of the spot market business. We employ vessels under longer term time charter contracts as part of our overall management of our revenues and risks. We may also enter into time charter contracts with profit sharing agreements, which enable us to benefit when the spot market rates increase.
One of our 16,900 dwt tankers, owned through our joint venture with Engen, is on time charter to Engen until June 2018.
Bareboat Charter
One of our medium range tanker vessels is bareboat chartered out until 2021.
Our Joint Ventures
The following descriptions are only a summary of the material provisions of our material joint venture agreements and are qualified in their entirety by reference to the copies of the joint venture agreements and amendments thereto, which are filed as exhibits to this registration statement.
IVS Bulk Pte. Ltd.
We own an approximately 33.5% interest in IVS Bulk Pte. Ltd., or IVS Bulk, a joint venture with Sanktaty European Investments III S.à.r.l and Regiment Capital Ltd. IVS Bulk owns 12 of our drybulk carriers, consisting of six handysize vessels and six supramax vessels. We serve as the commercial and technical manager for these vessels and have employed the handysize vessels in our IVS Handysize Pool and have employed the supramax vessels in our IVS Supramax Pool, for which we are paid fees by IVS Bulk.
In addition to our equity interest in IVS Bulk, we have made a $25.6 million loan to IVS Bulk, which bears interest at 15.0% per year, is repayable upon 30 days' written demand or otherwise will mature on December 31, 2018. As of January 31, 2018, $12.7 remained outstanding under this loan. While it is likely we will be repaid under this loan, we may require IVS Bulk to sell the IVS Gleneagles in order to repay any amounts due to us. Under the IVS Bulk joint venture agreement, profits are paid to the shareholders pro rata, subject to certain priority provisions set forth in the joint venture agreement.
The IVS Bulk joint venture terminates on December 31, 2018. Upon termination, we have a right of first refusal to purchase the vessels owned by IVS Bulk at an independently determined market value. If we do
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not purchase the vessels, our joint venture partners will have the right to purchase the vessels at the same price offered to us. If the vessels are not sold to us or our joint venture partners, the vessels will be sold in the open market. The proceeds from any vessel sales will be applied to any outstanding third party liabilities, then to repay any excess contributions by the shareholders, and thereafter as dividends, subject to certain restrictions.
We may enter into discussions after the Spin-Off with our joint venture partners to explore the possibility of purchasing the vessels owned by IVS Bulk in exchange for equity in Grindrod Shipping and/or other cash consideration. Prior to the listing, Grindrod Shipping's shareholders will provide approval until the conclusion of our first annual general meeting, to issue new shares up to 25% of the number of ordinary shares outstanding immediately after the Spin-Off to the extent we were to issue equity for the purchase of these (or similar) vessels. See "Item 3. Risk FactorsRisks Relating to Our Ordinary SharesUnder Singapore law, shareholder approval is required to allow us to issue new shares which could impact our ability to raise capital or consummate acquisitions. Any issuance of new shares would dilute the percentage ownership of existing shareholders and could adversely impact the market price of the ordinary shares." There can be no assurances that such discussions will take place or that we will be able to acquire the vessels on favorable terms, if at all.
Leopard Tankers Pte. Ltd.
We own a 50% interest in Leopard Tankers Pte. Ltd., or Leopard Tankers, a joint venture with Vitol. Leopard Tankers owns four 50,000 dwt tankers, which are commercially managed by Mansel, an affiliate of Vitol, which receives a management fee. The shareholders agreement specifies that the vessels owned by Leopard Tankers are intended to be employed in the spot market or time chartered to Mansel. There are currently no vessels time chartered to Mansel.
In addition to our equity interest in Leopard Tankers, we have made a $22.1 million loan to Leopard Tankers, which bears interest at 2.0% per year and will mature on January 1, 2020. As of January 31, 2018 $22.4 million remained outstanding under this loan. Vitol has also made a $22.1 million loan to Leopard Tankers on the same terms. In addition, under the Leopard Tankers joint venture agreement, we and Vitol are obligated to fund on an equal basis certain funding shortfalls. In addition, we and Vitol have each guaranteed to the financiers of the Leopard Tankers credit facility up to 50% of the scheduled interest and principal payments of the $138.5 million Leopard Tankers credit facility, excluding any balloon payment at maturity. We have also provided an undertaking to those financiers to ensure a minimum working capital balance of $250,000 for each of the vessels owned by Leopard Tankers, but in no event are we required to provide more than 50% of such working capital shortfalls. See "Item 5. Operating and Financial Review and ProspectsOff Balance Sheet Arrangements" for additional information on this loan and our guarantee. Under the Leopard Tankers joint venture agreement, profits are paid to the parties on a pro rata basis.
The Leopard Tankers joint venture may be terminated by either party at any time. Accordingly, upon termination, we may agree with our joint venture partner that each of us and Vitol would acquire two vessels and each of us or Vitol could also purchase one or two of the vessels that would otherwise have been acquired by the other party if such party declines to do so. If neither party acquires the vessels or the parties do not reach an agreement to acquire the vessels from the other party, the unsold vessels will be offered for sale in the open market and the proceeds would be used to settle any third party claims and thereafter distributed to the joint venture partners in accordance with the joint venture agreement.
Management of Our Business
General management
Overall responsibility for the oversight of the management of our company rests with our board of directors. We do all of the financial and administrative management of our business ourselves, contracting in human resource, financial, legal, tax and other specialist advice from reputable, arm's length service providers when required. We have entered into a transitional services agreement with Parent in connection with the Spin-Off, under which Parent will continue to provide to us, among other things, internal audit, corporate secretarial services, information technology and such other financial and management services through varying times in 2019, depending on the service, a related licensing agreement in respect of the use of certain intellectual property of Parent for a term as to be determined and a property lease agreement subject to termination on short-term notice.
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Commercial management
Decisions about how to commercially employ our Fleet, and general commercial and strategic decisions relating to the conduct of our business, including participation in joint ventures, are made by our own management and employees, under guidance and authority from our board of directors in accordance with our governance framework.
Technical Management
We technically manage in-house the majority of our vessels that we own directly or through joint ventures. We employ a team of 30 experienced and qualified managers in Singapore and Durban. This team includes seven master mariners and 10 Class 1 marine engineers who perform superintendent and technical management functions for the in-house managed vessels. Our technical management team is responsible for the technical operation and upkeep of these vessels, including procurement, crewing, maintenance, repairs and dry dockings, maintaining required vetting approvals and relevant inspections, and ensuring that our vessels under in-house management comply with the requirements of classification societies, as well as relevant government, flag state, environmental and other regulations.
A majority of the crews we employ are sourced from third-party crewing providers with whom we contract directly for the supply of crews to the vessels we manage in-house. Our technical team also operates the Grindrod Shipping Training Academy located in Durban from where we source some of our crewing requirements.
In addition, our in-house technical team also oversee the third-party technical managers who we have contracted to carry out technical management functions for the balance of our Fleet. Currently, we use two outside technical management providers, Sandigan Ship Services Inc., or Sandigan, and LSC Ship Management, or LSC. We contract with Sandigan for commercial and relationship reasons, as well as to provide us an ability to benchmark our in-house technical management team on drybulk carriers. LSC technically manages the vessels owned by our joint venture with Vitol.
Under the current technical management agreements with Sandigan and LSC, the third-party technical managers are responsible for the technical operation and upkeep of our vessels, including crewing, if specified, maintenance, repairs and dry dockings, maintaining required vetting approvals and relevant inspections, and to ensure our vessels under their management comply with the requirements of classification societies, as well as relevant government, flag state, environmental and other regulations and each vessel subsidiary pays the actual cost associated with the technical management and an annual management fee for the relevant vessel.
Each management agreement with the third-party technical managers is cancelable by us or the third-party technical manager for any reason at any time upon 60 days' prior written notice to the other. Upon termination we are generally required to cover actual crew support cost and severance cost and pay a management fee for an additional three months. We may be required to obtain the consent of any applicable charterer and from some of our lenders before we appoint a new manager, however, such consent may not be unreasonably withheld.
Separately, we have one tanker chartered out on bareboat charter, under the terms of which the charterers are obliged to conduct the technical management of the vessel which they do through third-party managers ASP Ship Management Singapore Pte. Ltd.
Our Customers
We believe that developing strong relationships with the end users of our services allows us to better satisfy their needs with appropriate vessels and solutions. A prospective customer's financial condition, creditworthiness, and reliability track record are important factors in negotiating our vessels' employment. Our customers with whom we contract as commercial managers of our own, our joint venture partners' and third parties' drybulk carriers and tankers include international commodity trading houses, mining companies, industrial manufacturing companies, major oil companies, traders of grains, steel and forestry products.
For the years ended December 31, 2017, 2016 and 2015, respectively, no customers accounted for 10% or more of our revenues, one customer accounted for 10% or more of our revenues in the amount of approximately $40.9 million and two customers accounted for 10% or more of our revenues in the amounts of approximately $55.9 million and $44.1 million, respectively. For the year ended December 31, 2017, no customers accounted for 10% or more of our drybulk business revenues. For the years ended
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December 31, 2016 and 2015, one customer accounted for 10% or more of our drybulk business revenues in the amounts of approximately $40.9 million and $44.1 million, respectively. For the years ended December 31, 2017 and 2016, four customers accounted for 10% or more of tanker business revenues in the amounts of approximately $17.8 million, $15.7 million, $10.9 million and $8.9 million, respectively, in 2017, and $33.2 million, $12.3 million, $9.9 million and $9.1 million, respectively, in 2016. For the year ended December 31, 2015, two customers accounted for 10% or more of tanker business revenues in the amounts of approximately $55.9 million and $13.2 million, respectively. Each of the foregoing has been calculated excluding revenues attributable to the OACL and Union Bunker businesses which were sold in the first quarter of 2018.
Seasonality
We operate our drybulk carriers and tankers in markets that have historically exhibited seasonal variations in demand and, as a result, in charter hire rates. This seasonality may result in volatility in our operating results to the extent that we enter into new charter agreements or renew existing agreements during a time when charter rates are weaker or we operate our vessels on the spot market or under time charters, which may result in quarter-to-quarter volatility in our operating results.
The drybulk sector is typically stronger in the fall and winter months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere. The celebration of Chinese New Year in the first quarter of each year, also results in lower volumes of seaborne trade into China during this period.
The tanker sector is typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere but can be weaker in the summer months as a result of lower oil consumption in the northern hemisphere and refinery maintenance that is typically conducted in the summer months. The oil price volatility resulting from these factors has historically led to increased oil trading activities in the winter months.
In addition, unpredictable weather patterns tend to disrupt vessel routing and scheduling as well as the supplies of certain commodities.
Competition
Our vessels are employed in a highly competitive market that is capital intensive and highly fragmented. The competition in the market is based primarily on supply and demand and we compete for charters and COAs on the basis of price, vessel location, size, age, condition and country of build for our vessels, our and our third-party commercial managers' reputations, and, particularly in the tanker sector, additional requirements of the charterers.
We compete primarily with other independent and state-owned drybulk and tanker vessel-owners. Our competitors may have more resources than us and may operate vessels that are newer, and therefore more attractive to charterers, than our vessels. Ownership and control of drybulk carriers and tankers is highly fragmented and is divided among a large number of players including publicly listed and privately owned shipping companies, major oil companies, mining companies, commodity trading houses, private equity and other investment funds and state-controlled owners. In the tanker market a part of the trade is captive especially to major and national oil company fleets. Ownership and control in the drybulk sector is rather more fragmented than in the case of the tanker sector. Due in part to the highly fragmented markets in which we operate, competitors with greater resources than us could enter the drybulk or tanker shipping industries and operate larger fleets through consolidations or acquisitions and may be able to offer lower charter rates and higher quality vessels than we are able to offer. See, "Item 3. Risk FactorsRisks Related to Our IndustryWe operate in the highly competitive international shipping industry and we may not be able to compete for charters and COAs with new entrants or established companies with greater resources, and, as a result, we may be unable to employ our vessels profitably."
Environmental and Other Regulations
Government regulation significantly affects the ownership and operation of our vessels. We are subject to international conventions and treaties and national, state and local laws and regulations relating to safety and health and environmental protection in force in the countries in which our vessels may operate or are registered. These regulations include requirements relating to the storage, handling, emission, transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to natural resources. Compliance with such laws, regulations and
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other requirements may entail significant expense, including vessel modifications and implementation of specific operating procedures. While all of our vessels are subject to environmental and other regulations and all of our vessels carry bunker fuel, we believe there is generally a greater risk of environmental concerns in the tanker sector, which makes up a smaller portion of our Fleet.
A variety of government, quasi-governmental and private organizations subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (applicable national authorities such as the United States Coast Guard, or USCG, harbor master or equivalent), classification societies, flag state administrations (countries of registry), charterers, and terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or result in the operation of one or more of our vessels being temporarily suspended or lead to the invalidation or reduction of our insurance coverage.
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 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 United States and international regulations. We believe that the operation of our vessels are in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations. However, because such laws and regulations are frequently changed and may impose increasingly stricter requirements, we cannot predict the future cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident that results in significant oil pollution, release of hazardous substances, loss of life, or otherwise causes significant adverse environmental impact, such as the 2010 BP plc Deepwater Horizon oil spill in the Gulf of Mexico, could result in additional legislation or regulations that could negatively affect our profitability.
International Maritime Organization
The International Maritime Organization, the United Nations agency for maritime safety and the prevention of pollution by vessels, or the IMO, has adopted MARPOL. MARPOL entered into force on October 2, 1983. It has been adopted by over 150 nations, including many of the jurisdictions in which our vessels will operate.
MARPOL is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annex II relates to noxious liquid substances carried in bulk; Annex III relates to harmful substances carried in packaged form; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI relates to air emissions.
In 2012, the IMO's Marine Environment Protection Committee, or MEPC, adopted by resolution amendments to the international code for the construction and equipment of vessels carrying dangerous chemicals in bulk, or the IBC Code. The provisions of the IBC Code are mandatory under MARPOL and SOLAS. These amendments, which entered into force in June 2014, pertain to revised international certificates of fitness for the carriage of dangerous chemicals in bulk and identifying new products that fall under the IBC Code. As of January 1, 2016, amendments to Annex I, the IBC Code, require that all chemical tankers must be fitted with approved stability instruments capable of verifying compliance with both intact and damage stability.
The MARPOL Annex I Condition Assessment Scheme, or CAS, sets out a framework of inspection and verification of the structural condition of certain oil tankers. In 2013, the MEPC adopted by resolution amendments to the CAS. These amendments, which became effective on October 1, 2014, complement inspections of bulk carriers and tankers set forth in the 2011 International Code on the Enhanced Programme of Inspections during Surveys of Bulk Carriers and Oil Tankers, or ESP Code, and enhance the programs of inspections for certain tankers.
Air Emissions
In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution. Effective May 2005, Annex VI set limits on nitrogen oxide emissions from vessels whose diesel engines were constructed (or underwent major conversions) on or after January 1, 2000. It also prohibits "deliberate emissions" of
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"ozone depleting substances," defined to include certain halons and chlorofluorocarbons. "Deliberate emissions" are not limited to times when the vessel is at sea; they can, for example, include discharges occurring in the course of the vessel's repair and maintenance. Emissions of "volatile organic compounds" from certain vessels, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls, PCBs) are also prohibited. 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 of sulfur emissions known as ECAs.
MEPC adopted amendments to Annex VI on October 10, 2008, which entered into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board vessels. As of January 1, 2012, the amended Annex VI required that fuel oil contain no more than 3.50% sulfur (from the previous cap of 4.50%). On October 27, 2016, at its 70th session, MEPC 70, MEPC announced its decision concerning the implementation of regulations mandating a reduction in sulfur emissions from the current 3.5% to 0.5% as of the beginning of 2020 rather than pushing the deadline back to 2025. By 2020 vessels will now have to either reduce sulfur from emissions through the installation and use of emission scrubbers or buy fuel with lower sulfur content. Consequently, complying with MEPC 70 could result in a significant capital expenditure or a significant increase in the cost of bunkers. The Company is currently reviewing alternatives to comply with MEPC 70 when it enters into force, but anticipates that it will comply with MEPC 70 by purchasing fuel with lower sulfur content.
Sulfur content standards are even stricter within certain ECAs. As of January 1, 2015, vessels operating within an ECA may not use fuel with sulfur content in excess of 0.10%. Amended Annex VI established procedures for designating new ECAs. The Baltic and North Seas, certain coastal areas of North America and the United States Caribbean Sea are all within designated ECAs. In addition, certain ports in China are subject to domestic Chinese ECAs. Ocean-going vessels in these areas are subject to stringent emission controls, which may cause us to incur additional costs. If other ECAs are approved by the IMO or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the U.S. Environmental Protection Agency, or the EPA, or the states or other national jurisdictions where we operate, compliance with these regulations could entail significant capital expenditures, operational changes, or otherwise increase the costs of our operations. For example, the amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation. The EPA promulgated equivalent (and in some senses stricter) emissions standards in late 2009. At MEPC 70 and MEPC 71, MEPC approved and adopted the North Sea and Baltic Sea as ECAs for nitrogen oxides, effective January 1, 2021. It is expected that these areas will be formally designated after the draft amendments are presented at MEPC's next session.
As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for vessels. Under these measures, by 2025, all new vessels built will be 30% more energy efficient than those built in 2014. This included the requirement that all new vessels utilize the Energy Efficiency Design Index, or EEDI, and all vessels develop and implement Ship Energy Efficiency Management Plans, or SEEMPs. We are in the process of implementing energy savings measures for our vessels, this will require financial expenditures, but ultimately result in lower fuel costs.
We believe that all our vessels are compliant in all material respects with these regulations that are currently in force. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems and could adversely affect our business, financial condition, cash flows and results of operations.
Ballast Water Management
The IMO adopted the BWM Convention, in February 2004. The BWM Convention's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits. All vessels will also have to carry a ballast water record book and an International Ballast Water Management Certificate. The BWM Convention enters into force 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 world's merchant shipping. On September 8, 2016, this threshold was met (with 52 contracting parties making up 35.14%). Thus, the BWM Convention entered into force on September 8, 2017. However, at MEPC 71, MEPC decided that, while new vessels constructed after September 8, 2017 must comply on delivery with the BWM Convention, implementation of the BWM Convention would be delayed for existing vessels (constructed prior to September 8, 2017) for
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a further two years. For such existing vessels, installation of ballast water management systems, or BWMS must take place at the first renewal survey following September 8, 2017 (the date the BWM Convention entered into force). At MEPC 70, MEPC adopted updated "guidelines for approval of ballast water managements systems (G8)". G8 updates previous guidelines concerning procedures to approve BWMS. Once mid-ocean ballast exchange or ballast water treatment requirements become mandatory, the cost of compliance could increase for ocean carriers and the costs of ballast water treatments may be material. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The United States for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements. We believe the costs of such compliance may be material over time, however, it is difficult to predict the overall impact of such a requirement on our operations.
Safety Management System Requirements
The IMO has also adopted SOLAS and the LL Convention, which impose a variety of standards that regulate the design and operational features of vessels. The IMO periodically revises the SOLAS and LL Convention standards. Amendments to SOLAS relating to safe manning of vessels that were adopted in May 2012 entered in force on January 1, 2014. The Convention on Limitation of Liability for Maritime Claims, LLMC, was recently amended and the amendments went into effect on June 8, 2015. The amendments alter the limits of liability for loss of life or personal injury claims and property claims against vessel owners. We believe that all our vessels are in substantial compliance with SOLAS and LL Convention standards.
Our operations are also subject to environmental standards and requirements under Chapter IX of SOLAS set forth in the ISM Code. The ISM Code requires the owner of a vessel, or any person who has taken responsibility for operation of a vessel, to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. We rely upon the safety management system that we or our technical managers have developed for compliance with the ISM Code. The failure of a vessel owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.
The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel's management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate under the ISM Code unless its manager has been awarded a document of compliance, issued by classification societies under the authority of each flag state. We and/or our third-party technical manager have documents of compliance and safety management certificates for all of our vessels for which the certificates are required by the IMO. The document of compliance and safety management certificate are renewed every five years, but the document of compliance is subject to audit verification annually and the safety management certificate at least every 2.5 years.
The flag state, as defined by the United Nations Convention on Law of the Sea, has overall responsibility for implementing and enforcing a broad range of international maritime regulations with respect to all vessels granted the right to fly its flag. The "Shipping Industry Flag State Performance Table" published annually by the International Chamber of Shipping evaluates and reports on flag states based on factors such as ratification, implementation, and enforcement of principal international maritime treaties and regulations, supervision of statutory vessel surveys, and participation at IMO and International Labour Organization, or ILO, meetings. All of our owned vessels are currently flagged in Singapore except one medium range tanker and one small tanker that are flagged in the Isle of Man and one medium range tanker under a bareboat charter out that is flagged in New Zealand. Singapore flagged vessels have historically received a good assessment in the shipping industry. We recognize the importance of a credible flag state and do not intend to use flags of convenience or flag states with poor performance indicators. Noncompliance with the ISM Code or other IMO regulations may subject the vessel owner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The USCG and European Union authorities have indicated that vessels not in compliance with the ISM Code by the applicable deadlines will be prohibited from trading in U.S. and European Union ports, respectively. Each of our vessels are ISM Code certified. However, there can be no assurance that such certificate will be maintained.
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Noncompliance with the ISM Code and other IMO regulations may subject the vessel owner or bareboat charterer to increased liability, may lead to decreases in, or invalidation of, available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports.
Pollution Control and Liability Requirements
The IMO has negotiated international conventions that impose liability for oil pollution in international waters and the territorial waters of the signatory to such conventions. Many countries have ratified and follow the liability plan adopted by the IMO and set out in the CLC. Under this convention, and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel's registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain exceptions. The 1992 Protocol changed certain limits on liability, expressed using the International Monetary Fund currency unit of Special Drawing Rights. The limits on liability have since been amended so that the compensation limits on liability were raised. The right to limit liability is forfeited under the CLC where the spill is caused by the vessel owner's actual fault and under the 1992 Protocol where the spill is caused by the vessel owner's intentional or reckless act or omission where the vessel owner knew pollution damage would probably result. The CLC requires vessels covered by it to maintain insurance covering the liability of the owner in a sum equivalent to an owner's liability for a single incident. We believe that our protection and indemnity insurance will cover the liability under the plan adopted by the IMO.
The IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, to impose strict liability on vessel owners for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of vessels over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in vessel's bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.
IMO regulations also require owners and operators of vessels to adopt shipboard oil pollution emergency plans and/or shipboard marine pollution emergency plans for noxious liquid substances in accordance with the guidelines developed by the IMO.
The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations may have on our operations.
The U.S. Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation and Liability Act
The U.S. Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all "owners and operators" whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States' territorial sea and its 200 nautical mile exclusive economic zone. The United States has also enacted Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil except in limited circumstances, whether on land or at sea. OPA and CERCLA both define "owner and operator" in the case of a vessel as any person owning, operating or chartering by demise, the vessel. OPA applies to oil tankers, as well as non-tanker vessels that carry fuel oil, or bunkers, to power such vessels. CERCLA also applies to our operations.
Under OPA, vessel owners and operators are "responsible parties" and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels. OPA defines these other damages broadly to include:
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OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective December 21, 2015, the USCG adjusted the limits of OPA liability for non-tank vessels, edible oil tank vessels, and any oil spill response vessels, to the greater of $1,100 per gross ton or $939,800 (subject to periodic adjustment for inflation). These limits of liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party's gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident where the responsible party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.
CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damage for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.
OPA and CERCLA both require owners and operators of vessels to establish and maintain with the USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We comply in all material respects with the USCG's financial responsibility regulations by providing a certificate of responsibility evidencing sufficient self-insurance.
We currently maintain pollution liability coverage insurance in the amount of $1.0 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage it could have an adverse effect on our business and results of operations.
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA. 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 comply in all material respects with all existing applicable state regulations in the ports where our vessels call.
The 2010 Deepwater Horizon oil spill in the Gulf of Mexico may also result in additional legislative or regulatory initiatives, including the raising of liability caps under OPA or more stringent operational requirements. We cannot predict what additional requirements, if any, may be enacted and what effect, if any, such requirements may have on our operations.
Other Environmental Initiatives
The CWA prohibits the discharge of oil or other substances in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages
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and complements the remedies available under OPA and CERCLA. In addition, many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law.
The EPA regulates the discharge of ballast water and other substances in U.S. waters under the CWA. EPA regulations require vessels 79 feet in length or longer (other than commercial fishing and recreational vessels) to comply with a Vessel General Permit, or VGP, that authorizes ballast water discharges and other discharges incidental to the operation of vessels. For a new vessel delivered to an owner or operator after September 19, 2009 to be covered by the VGP, the owner must submit a Notice of Intent, or NOI, at least 30 days before the vessel operates in U.S. waters. The VGP imposes technology and water-quality based effluent limits for certain types of discharges and establishes specific inspection, monitoring, record keeping and reporting requirements to ensure the effluent limits are met. The EPA renewed and revised the VGP, effective December 19, 2013. The VGP now contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in U.S. waters and more stringent requirements for exhaust gas scrubbers and requires the use of environmentally acceptable lubricants.
The USCG, regulations adopted under the U.S. National Invasive Species Act, or NISA, also impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering or operating in U.S. waters. As of June 21, 2012, the USCG adopted revised ballast water management regulations that established standards for allowable concentrations of living organisms in ballast water discharged from vessels in U.S. waters. The USCG must approve any technology before it is placed on a vessel, but to date has approved only a handful of technologies necessary for vessels to meet the foregoing standards.
Notwithstanding the foregoing, as of January 1, 2014, vessels are technically subject to the phasing-in of these standards. As a result, the USCG in the past provided waivers to vessels which could not install the then unapproved ballast water treatment technology, but has begun to deny requests for waivers in light of its recent approval of a handful of technologies. The EPA, on the other hand, has taken a different approach to enforcing ballast discharge standards under the VGP. On December 27, 2013, the EPA issued an enforcement response policy in connection with the new VGP in which the EPA indicated that it would take into account the reasons why vessels do not have the requisite technology installed, but will not grant any waivers.
It should also be noted that in October 2015, the Second Circuit Court of Appeals issued a ruling that directed the EPA to redraft the sections of the 2013 VGP that address ballast water. However, the Second Circuit stated that 2013 VGP will remains in effect until the EPA issues a new VGP.
Compliance with the EPA and the USCG regulations could require the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S. waters. While we believe that our vessels have been or will be fitted with systems that will comply with the standards, those systems may not be approved. If they are not approved it could have an adverse material impact on our business, financial condition, and results of operations depending on the available ballast water treatment systems and the extent to which existing vessels must be modified to accommodate such systems. In addition, certain states have enacted more stringent discharge standards as conditions to their required certification of the VGP. It presently remains unclear how the ballast water requirements set forth by the EPA, the USCG, and IMO BWM Convention, some of which are in effect and some which are pending, will co-exist.
The U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990, or the CAA, requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels will be subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. Our vessels that operate in such port areas with restricted cargoes are equipped with vapor recovery systems that satisfy these requirements. 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. As indicated above, our vessels operating in covered port areas are equipped with vapor recovery systems that satisfy these existing requirements.
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European Union Regulations
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. Member States were required to enact laws or regulations to comply with the directive by the end of 2010. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims. The directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply to warships or where human safety or that of the vessel is in danger.
The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk vessels, as determined by type, age, flag, and the number of times the vessel has been detained. The European Union also adopted and then extended a ban on substandard vessels and enacted a minimum ban period and a definitive ban for repeated offenses. The regulation also provided the European Union with greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply.
Greenhouse Gas Regulations
Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions. The 2015 United Nations Convention on Climate Change Conference in Paris resulted in the Paris Agreement, which entered into force on November 4, 2016. The Paris Agreement does not directly limit greenhouse gas emissions from vessels. As of January 1, 2013, vessels were required to comply with new MEPC mandatory requirements to address greenhouse gas emissions from vessels. In addition, MEPC 70 approved a "roadmap" for developing an IMO strategy by 2018 on reduction of greenhouse gas emissions from vessels. For 2020, the European Union made a unilateral commitment to reduce overall greenhouse gas emissions from its member states by 20% of 1990 levels. The European Union also committed to reduce its emissions by 20% under the Kyoto Protocol's second period, from 2013 to 2020. In April 2015, a regulation was adopted requiring that large vessels (over 5,000 gross tons) calling at European Union ports from January 2018 collect and publish data on carbon dioxide emissions and other information.
In the United States, the EPA has issued a finding that greenhouse gases endanger the public health and safety, has adopted regulations to limit greenhouse gas emissions from certain mobile sources and has proposed regulations to limit greenhouse gas emissions from large stationary sources. Although the mobile source emissions regulations do not apply to greenhouse gas emissions from vessels, the EPA has received petitions from the California Attorney General and environmental groups to regulate greenhouse gas emissions from ocean-going vessels. Furthermore, in the United States individual states can also enact environmental regulations. For example, California has introduced caps for greenhouse gas emission and, at the end of 2016, signaled it might take additional actions regarding climate change.
Any passage of climate control legislation or other regulatory initiatives by the IMO, European Union, the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol or Paris Agreement, that restrict emissions of greenhouse gases could require us to make significant financial expenditures which we cannot predict with certainty at this time. Even in the absence of climate control legislation, our business may be indirectly affected to the extent that climate change may result in sea level changes or more intense weather events.
International Labour Organization
The International Labour Organization, or ILO, is a specialized agency of the UN with headquarters in Geneva, Switzerland. The ILO has adopted the Maritime Labor Convention 2006, or MLC 2006. A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance will be required to ensure compliance with the MLC 2006 for all vessels above 500 gross tons in international trade. The MLC 2006 came into force on August 20, 2013. Amendments to MLC were adopted in 2014 and 2016. We are in compliance with MLC 2006.
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Vessel Security Regulations
Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, MTSA came into effect. To implement certain portions of the MTSA, in July 2003, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. The regulations also impose requirements on certain ports and facilities, some of which are regulated by the EPA.
Similarly, in December 2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. The new Chapter XI-2 became effective in July 2004 and imposes various detailed security obligations on vessels and port authorities, and mandates compliance with the ISPS Code. The ISPS Code is designed to enhance the security of ports and vessels against terrorism. After July 1, 2004, to trade internationally, a vessel must attain an International Ship Security Certificate, or ISSC, from a recognized security organization approved by the vessel's flag state. The following are among the various requirements, some of which are found in SOLAS:
Any vessel operating without a valid certificate may be detained at port until it obtains an ISSC, or it may be expelled from port, or refused entry at port.
The USCG 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, or ISSC, that attests to the vessel's compliance with SOLAS security requirements and the ISPS Code. We or our third-party technical managers, as applicable, implement the various security measures addressed by MTSA, SOLAS and the ISPS Code, and our Fleet complies in all material respects with applicable security requirements.
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 of the classification society and complies with applicable rules and regulations of the vessel's country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.
The classification society also undertakes on 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 and/or to the regulations of the country concerned.
For maintenance of the class certification, regular and extraordinary surveys of hull, machinery, including the electrical plant, and any special equipment classed are required to be performed as follows:
Annual Surveys. For seagoing vessels, annual surveys are conducted for the hull and the machinery, including the electrical plant and where applicable for special equipment classed, at intervals of 12 months from the date of commencement of the class period indicated in the certificate.
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Intermediate Surveys. Extended annual surveys are referred to as intermediate surveys and typically are conducted two and one-half years after commissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second or third annual survey.
Class Renewal Surveys. Class renewal surveys, also known as special surveys, are carried out for the vessel's hull, machinery, including the electrical plant, and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the special survey the vessel is drydocked and is thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey. Substantial amounts of money may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a vessel owner has the option of arranging with the classification society for the vessel's hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle. Upon a vessel owner's request, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuous class renewal.
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. Vessels under five years of age can waive drydocking in order to increase available days and decrease capital expenditures, provided the vessel is inspected underwater.
Most of our vessels are drydocked every 30 to 36 months for inspection of the underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a "recommendation" which must be rectified by the vessel owner within prescribed time limits.
Most 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, or the IACS. In 2012, the IACS issued draft harmonized Common Structural Rules, that align with the IMO goals standards, and were adopted in winter 2013. All our vessels are certified as being "in class" by the American Bureau of Shipping, (ABS), Det Norske Veritas, or DNV, Bureua Veritas, or BV, and Class NK, or NK. All new and secondhand vessels that we acquire must be certified prior to their delivery under our standard purchase contracts and memoranda of agreement. If the vessel is not certified on the date of closing, we generally have no obligation to take delivery of the vessel except in circumstances where the damage is easily remedied, in which case we will take delivery of the vessel and have a claim for damages.
Oil Company Tanker Vetting Process
Traditionally there have been relatively few charterers in the oil transportation business and that part of the industry has been undergoing consolidation. The oil majors, together with a few smaller companies, represent a significant percentage of the production, trading and, especially, seaborne transportation of crude oil and refined petroleum products worldwide. Concerns about the environment have led oil majors to develop and implement a strict due diligence process, known as vetting, when selecting vessels and considering their managers. Vetting has evolved into a sophisticated and comprehensive assessment of both the vessel and the vessel technical manager. While numerous factors are considered and evaluated prior to a commercial decision, the oil majors, through their association, Oil Companies International Marine Forum, or OCIMF, have developed two basic assessment tools: the Ship Inspection Report program, or SIRE, and the Tanker Management & Self-Assessment program, or TMSA. The former is a physical vessel inspection based upon a thorough vessel inspection questionnaire and performed by accredited OCIMF inspectors, resulting in a report being logged on SIRE, while the latter is a recent addition to the risk assessment tools used by the oil majors. Based upon commercial risk, there are three levels of assessment used by oil majors:
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The depth and complexity of each of these levels of assessment varies. Each charter agreement for our vessels requires that the applicable vessel have a valid SIRE report (less than six months old) in the OCIMF website as recommended by OCIMF. In addition, under the terms of the charter agreements, the charterers require that our vessels and their technical managers be vetted and approved to transport crude oil or refined petroleum products (as applicable). The technical manager, whether us or our appointed third-party manager, is responsible for obtaining and maintaining the vetting approvals required to successfully charter our vessels.
Risk of Loss and Liability Insurance
The operation of any drybulk carrier or tanker includes risks such as mechanical and structural failure, hull damage, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, piracy, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental incidents, and the liabilities arising from owning and operating vessels in international trade. OPA, 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 incidents in the United States, has made liability insurance more expensive for vessel owners and operators trading in the United States market.
We maintain hull and machinery insurance, war risks insurance, protection and indemnity cover, and freight, demurrage and defense cover for our Fleet in amounts that we believe to be prudent to cover day-to-day risks in our operations. We do not maintain cover for loss of hire or earnings arising out of insured peril events other than limited loss coverage relating to defined war risk events. However, we may not be able to achieve or maintain this level of coverage throughout a vessel's useful life. In addition, while we believe that the insurance coverage that we have obtained 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.
Hull & Machinery and War Risks Insurance
We maintain marine hull and machinery and war risks insurance, which will include the risk of actual or constructive total loss, for all of our owned vessels. Each of our vessels is covered up to at least fair market value with deductibles ranging between $75,000 to $112,500 per vessel per incident. We also maintain increased value coverage for most of our vessels. Under this increased value coverage, in the event of total loss of a vessel, we will be able to recover the sum insured under the increased value policy in addition to the sum insured under the hull and machinery policy. Increased value insurance also covers excess liabilities which are not recoverable under our hull and machinery policy by reason of under insurance.
Protection and Indemnity Insurance
Protection and indemnity insurance is provided by mutual protection and indemnity associations, or P&I Associations, which insure liabilities to third parties in connection with our shipping activities. This includes third-party liability and other related expenses resulting from the injury or death of crew, passengers and other third parties, the loss or damage to cargo, 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. Our P&I coverage will be subject to and in accordance with the rules of the P&I Association in which the vessel is entered. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or clubs. Except for pollution and passenger and crew claims, our coverage is unlimited but restricted to amounts as determined by law including laws pertaining to limitation of liability. Cover for pollution claims are limited to $1.0 billion and cover for passenger and crew claims are restricted to $3.0 billion.
Our protection and indemnity insurance coverage for pollution will be $1.0 billion per vessel per incident. The thirteen P&I Associations that comprise the International Group insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. Each P&I Association has capped its exposure to this pooling agreement at a floating rate that is generally valued at approximately $6.5 billion. As a member of a P&I Association which is a member of the International Group, we are subject to calls payable to the associations based on the group's claim records as well as the claim records of all other members of the individual associations and members of the pool of P&I Associations comprising the International Group.
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Not all risks are insured and not all risks are insurable. The principal insurable risks which nonetheless remain uninsured across our Fleet are "loss of hire" and "strikes," except in cases of loss of hire due to war risk event. Specifically, we do not insure these risks because the costs are regarded as disproportionate. These insurances provide, subject to a deductible, a limited indemnity for hire that would not be receivable by the vessel owner for reasons set forth in the policy. Should a vessel on time charter, where the vessel earns fixed hire day by day, suffer a serious mechanical breakdown, the daily hire will no longer be payable by the charterer for the period of off-hire. Under some circumstances, an event of force majeure may also permit the charterer to terminate the time charter or suspend payment of charter hire. The purpose of the loss of hire insurance is to secure the loss of hire during such periods. In the case of strikes insurance, if a vessel is being paid a fixed sum to perform a voyage and the vessel becomes strike bound at a loading or discharging port, the insurance covers the loss of earnings during such periods.
Permits and Authorizations
We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to our vessels. The kinds of permits, licenses and certificates required depend upon several factors, including the commodity transported, the waters in which the vessel operates, the nationality of the vessel's crew and the age of a vessel. We believe that we have obtained all permits, licenses and certificates currently required to permit our vessels to operate our business as currently conducted. Additional laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of us doing business.
Emerging Growth Company
We are an emerging growth company, as defined in the JOBS Act. As such, we are eligible to, and intend to, take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, the provisions of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting; and any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor's report on the financial statements. We currently prepare our combined financial statements in accordance with IFRS as issued by the IASB, which do not have separate provisions for publicly traded and private companies. However, in the event we convert to U.S. GAAP in the future while we are still an emerging growth company, we may be able to take advantage of the benefits of Section 107 of the JOBS Act, which provides that an emerging growth company can take advantage of the extended transition period provided in the Securities Act, for complying with new or revised accounting standards. We intend to take advantage of these exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of our first sale of equity securities pursuant to an effective registration statement under the Securities Act, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that are held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. See "Item 3. Key InformationRisk FactorsThe Jumpstart Our Business Startups Act of 2012, or JOBS Act, will allow Grindrod Shipping to postpone the date by which it must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information provided in Grindrod Shipping's reports filed with the SEC, which could undermine investor confidence in Grindrod Shipping and adversely affect the market price of Grindrod Shipping's ordinary shares".
Foreign Private Issuer
We are a "foreign private issuer" as defined by the rules under pursuant to Rule 405 under the Securities Act. Our status as a foreign private issuer exempts us from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ, including the proxy rules, the short-swing profits recapture rules of Section 16 of the Exchange Act, and certain governance requirements, such as independent director oversight of the nomination of directors and executive compensation. In addition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies registered under the Exchange Act and we will generally be exempt from filing quarterly reports with the SEC. Furthermore, we will also not be subject to
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the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act, which restricts the selective disclosure of material information.
We may take advantage of these exemptions for foreign private issuers until such time as we are no longer a foreign private issuer. We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by United States residents and any of the following three circumstances applies: (1) the majority of our executive officers or directors are United States citizens or residents; (2) more than 50% of our assets are located in the United States; or (3) our business is administered principally in the United States. See "Item 3. Key InformationRisk FactorsGrindrod Shipping may lose its foreign private issuer status, which would then require it to comply with the Exchange Act's domestic reporting regime and cause Grindrod Shipping to incur additional legal, accounting and other expenses."
Legal Proceedings
We may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business that may be brought against us, that could have a material effect on our business, financial position, results of operations, cash flows or liquidity. From time to time we may face claims which fall outside the scope of our insurance coverage. In respect of such claims, we purchase FD&D insurance, which is discretionary coverage for the costs of defending or prosecuting such claims (for example, claims of a purely contractual nature, or collection of freight and demurrage). Those claims, even if covered by insurance and/or lacking merit, could result in the expenditure of significant financial and managerial resources.
We currently are involved in a dispute with Her Majesty's Revenue & Customs service of the United Kingdom, or HMRC, regarding a tax of 28% on a balancing charge against one of our subsidiaries. This tax relates to the purchase of the Torea vessel in December 2010 (which we subsequently sold in October 2017) following the vessel coming out of the U.K. tonnage tax regime earlier in the period. An adverse resolution of this dispute could result in an additional tax liability to us of approximately $5.1 million plus interest on late paid tax. While defenses are available to us, a liability amount of $2.4 million has been recorded in our combined financial statements. The HMRC has issued a Closure Notice indicating that this tax is payable, which we have appealed. Should the outcome be negative, we will appeal to the Tax Tribunal in London. No date has been set for the review of the current appeal and it is not currently possible to predict when the dispute will be finalized.
C. Organizational Structure
Grindrod Shipping is a company incorporated under the laws of the Republic of Singapore. We directly own two subsidiaries through which business operations are conducted and staff are employed, one is a Singapore company and the other is a South African company. Each of our wholly owned vessels is held through separate, wholly owned subsidiaries of our Singapore subsidiary, each of which is incorporated predominantly in Singapore, with one incorporated in the Marshall Islands. Please see Exhibit 8.1 to this registration statement for a list of our current subsidiaries.
D. Property, Plants and Equipment
We do not own any material real property. We lease office space in several countries where we have staff or operations. Our largest offices are in Singapore, South Africa and the United Kingdom. Our main material assets consist of our vessels which are owned through several partly and wholly owned subsidiaries. See "Organizational Structure" above.
For a description of our Fleet, see "History and Development of the Company" and "Business OverviewOur Fleet" above.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following management's discussion and analysis and results of operations and financial condition together with our combined financial statements, including the notes, and the other financial information appearing elsewhere in this registration statement. Certain information contained in this discussion and analysis and elsewhere in this registration statement includes forward-looking statements that involve risks and uncertainties. See "Forward-looking Statements" and "Item 3. Key InformationRisk Factors" for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this registration statement.
Overview
We are an international shipping company that owns, charters-in and operates a fleet of drybulk carriers and tankers. We own some of our vessels directly and some of our vessels in joint venture arrangements. We operate two businesses primarily in: the drybulk carriers business, which is further divided into handysize, supramax, and other operating segments; and the tankers business, which is further divided into medium range tankers, small tankers, and other operating segments. Activities that do not relate to these business segments are accumulated in an "unallocated" segment. Our historical business also includes a container business which we held through Ocean Africa Container Lines division, or OACL, and a bunker business which we held through Unicorn Bunker Services (Pty) Ltd, or Unicorn Bunker, both of which were separated from Grindrod Shipping in the first quarter of 2018. See "The Spin-Off" below.
Our handysize and supramax operating fleet consists of 25 owned drybulk carriers (including 15 drybulk carriers that we own through joint ventures) and eight long-term chartered-in drybulk carriers. We have 20 handysize drybulk carriers and 13 supramax drybulk carriers in our operating fleet with sizes ranging from 28,240 dwt to 61,420 dwt. Our drybulk carriers transport a broad range of major and minor bulk and breakbulk commodities, including ores, coal, grains, forestry products, steel products and fertilizers, along worldwide shipping routes, and are currently employed in pools of similarly sized vessels or in the spot market.
Our tanker operating fleet consists of 12 owned tankers (including six tankers that we own through joint ventures) and three long-term chartered-in tankers. We have 11 medium range tankers and four small tankers in our operating fleet with sizes ranging from 16,480 dwt to 51,570 dwt. Our tankers carry petroleum products, which include both clean products, such as petrol, diesel, jet fuel and naptha, and dirty products, such as heavy fuel oil. Our tankers do not carry crude oil. Our tankers are also classed to carry low hazard chemical products, which include liquid bulk vegetable oils. Our tankers are currently employed in pools of similarly sized vessels, commercially managed by one of our joint venture partners or third parties, and under various other arrangements, including charter-out, bareboat charter, under contracts of COAs or in the spot market.
Recent Developments
As discussed above, effective as of January 1, 2018, we disposed of OACL and Unicorn Bunker to another Parent subsidiary for $20.9 million and $15.5 million, respectively. These businesses will not be part of our results of operations for periods following the disposal on January 1, 2018. See "Item 18. Financial StatementsUnaudited Pro Forma Financial Information".
Components of Our Operating Results
Revenues. Revenues include vessel revenue, ship sales, and other revenue. Vessel revenues consist of charter hire revenue and freight revenue. Charter hire revenues primarily relate to time charter contracts and freight revenues primarily relate to voyage charter contracts and pool distributions (which consist of distributions to us of net earnings relating to our vessels in pools operated by third parties). Ship sales include ship sales as well as the sale of bunkers and other consumables relating to ships sold. Other revenue includes management fees and other revenue.
We generate revenues by charging customers for their use of our vessels or for the transportation by us of their drybulk and liquid bulk cargoes. Historically, these services generally have been provided by operating our vessels in commercial pools, in the spot market, and on time charters. We also manage our charter rate risk and employment risk by using forward freight arrangements and entering into COAs.
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The table below illustrates in general the primary distinctions among these different employment arrangements.
|
Commercial Pool | Spot Market | Time Charters | |||
---|---|---|---|---|---|---|
Typical contract length |
Varies | Varies | Varies | |||
Charter hire rate basis (1) |
Varies | Varies | Daily | |||
Voyage expenses |
Pool pays | We or customer pays | Customer pays | |||
Vessel operating costs for owned vessels |
We pay | We pay | We pay | |||
Charter hire expense for vessels chartered-in by us |
We pay | We pay | We pay | |||
Off-hire (2) |
Pool does not pay | Customer does not pay | Customer does not pay |
We also generate revenues by acting as commercial manager for vessels owned by our joint ventures or by third parties, and as technical manager for vessels owned by our joint ventures. The commercial management services we provide are in respect of our management and operation of our drybulk handysize pool, or the IVS Handysize Pool, and our drybulk supramax pool, or the IVS Supramax Pool, and the commercial management of three large drybulk handysize vessels we own through a joint venture that, due to their size, do not trade in the IVS Handysize Pool. Commercial management fees are charged per vessel as a fixed daily fee plus a fixed percentage of the TCE revenue achieved by the managed vessel. Technical management fees are charged at an agreed fixed amount per year or part thereof to cover our time and expertise.
Cost of sales. Cost of sales includes charter hire expenses, which primarily relate to time charter contracts; voyage expenses which represent the direct costs associated with operating a vessel between loading and discharge at the applicable ports and include pool distributions (which consist of net earnings payable to third-party and joint venture owners of vessels in the pools we manage), fuel expenses, port expenses, other expenses and freight forward agreements; depreciation and amortization; vessel operating costs, which consist of crew expenses, repairs and maintenance, insurance, and other costs associated with the technical management of the Fleet; cost of ship sales, which consist of cost of sales on sale of ships classified as inventories and cost of sales on sale of bunkers and other consumables; ships classified as lease rentals (relating to charter hire revenue for the OACL business (as defined below)); and other expenses, which consist of container expenses, freight expenses, cargo handling, provision for onerous contracts, and other logistic purchases.
Other operating income. Other operating income consists of dividend income and foreign exchange gain.
Administrative expenses. Administrative expenses comprise general corporate overhead expenses, including personnel costs, property costs, audit fees, legal and professional fees, and other general administrative expenses. Personnel costs include, among other things, salaries and short- and long-term incentives, pension costs, fringe benefits, travel costs and health insurance. Administrative expenses may increase in connection with becoming a publicly reporting, listed entity, as a result of, among other things, increased audit, legal and professional fees and listing and exchange related costs. In addition, personnel costs may increase for a number of reasons, including in connection with relocation of certain management personnel to our Singapore office in connection with the Spin-Off.
Other operating expenses. Other operating expenses consist of impairment loss on assets, foreign exchange loss, loss on disposal of investment in subsidiaries and other operating expenses.
Share of losses of joint ventures. Share of losses of joint ventures relates to operating profits or losses attributable to our joint ventures. Our joint ventures are accounted for on an equity basis.
Interest income. Interest income primarily relates to interest on loans to joint ventures; bank interests; and other interests.
Interest expense. Interest expense primarily relates to interest on ship loans, interest on loans from related companies and interest on bank loans.
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Factors Affecting Our Results of Operations and Financial Condition
The principal factors which affect our results of operations and financial condition include:
The Spin-Off
Our combined financial statements have been prepared on a stand-alone basis and are derived from combining the financial statements of Parent's wholly-owned shipping business subsidiaries, Grindrod Shipping Pte. Ltd., or GSPL, and Grindrod Shipping (South Africa) Pty Ltd, or GSSA, which we will acquire immediately prior to the Spin-Off.
In addition, the combined financial statements include components of Parent's shipping business which will not be transferred to us in the Spin-Off. In the first quarter of 2018, we sold two of GSSA's businesses, OACL and Unicorn Bunker, to another Parent subsidiary and such businesses will not be part of our results of operations for periods following the disposal on January 1, 2018, however, the proceeds from these sales will remain with us following the Spin-Off.
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The OACL and Unicorn Bunker businesses have been identified as niche South African operations involving assets that are either landlocked within the ports of Durban and Cape Town, or entirely land based, being terminal and warehouse operations all of which are subject to specific South African Regulations, local competition and governmental initiatives which management believes will be difficult to manage from an international holding company and will detract from the core drybulk carriers and tanker businesses that are operated on a global scale.
Accordingly, our historical results of operations may not be indicative of our future results of operations or financial condition as a separate, stand-alone public company.
Non-GAAP Financial Measures
The financial information included in this registration statement includes certain "non-GAAP financial measures" as such term is defined in SEC regulations governing the use of non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's operating performance, financial position or cash flows that excludes or includes amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance with IFRS. For example, non-GAAP financial measures may exclude the impact of certain unique and/or non-operating items such as acquisitions, divestitures, restructuring charges, large write-offs or items outside of management's control. Management believes that the following non-GAAP financial measures described below provide investors and analysts useful insight into our financial position and operating performance.
TCE Revenue. TCE revenue is defined as vessel revenues less voyage expenses. Such TCE revenue, divided by the number of our operating days during the period, is TCE per day. Vessel revenues and voyage expenses as reported for our operating segments include a proportionate share of vessel revenues and voyage expenses attributable to our joint ventures based on our proportionate ownership of the joint ventures. The number of operating days used to calculate TCE revenue per day also includes the proportionate share of our joint ventures' operating days and also includes charter-in days. TCE per day is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters have to cover voyage costs and are generally not expressed in per-day amounts while charter hire rates for vessels on time charters do not cover voyage costs and generally are expressed in per day amounts.
Below is a reconciliation from TCE revenue to revenue.
|
2017 | 2016 | 2015 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
US$ | US$ | US$ | |||||||||||||||||||||||||
|
Revenue |
Voyage
Expenses |
TCE
Revenue |
Revenue |
Voyage
Expenses |
TCE
Revenue |
Revenue |
Voyage
Expenses |
TCE
Revenue |
|||||||||||||||||||
Vessel revenue |
||||||||||||||||||||||||||||
Handysize |
118,262 | 59,004 | 59,258 | 97,239 | (53,362 | ) | 43,877 | 100,775 | (43,186 | ) | 57,589 | |||||||||||||||||
Supramax |
156,517 | 76,497 | 80,020 | 116,171 | (56,009 | ) | 60,162 | 145,927 | (66,386 | ) | 79,541 | |||||||||||||||||
Medium range tankers |
42,561 | 7,555 | 35,006 | 48,672 | (5,019 | ) | 43,653 | 70,380 | (3,100 | ) | 67,280 | |||||||||||||||||
Small tankers |
22,740 | 3,725 | 19,015 | 22,561 | (3,454 | ) | 19,107 | 26,498 | (2,832 | ) | 23,666 | |||||||||||||||||
Other drybulk carriers |
56,644 | 76,643 | 94,218 | |||||||||||||||||||||||||
Other tankers |
14,186 | 15,721 | 13,365 | |||||||||||||||||||||||||
Ship sale revenue |
17,727 | 12,275 | 13,210 | |||||||||||||||||||||||||
Other revenue |
5,826 | 5,134 | 3,519 | |||||||||||||||||||||||||
Adjustments* |
(24,941 | ) | (22,884 | ) | (33,453 | ) | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue |
409,522 | 371,532 | 434,439 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Vessel operating cost per day. Vessel operating costs per day represents vessel operating costs divided by the number of calendar days for owned vessels during the period. The vessel operating costs and the number of calendar days used to calculate vessel operating costs per day includes the proportionate share of our joint ventures' vessel operating costs and operating days and excludes charter-in days.
Critical Accounting Policies
Our combined financial statements and accompanying notes are prepared in accordance with IFRS. In many instances, the application of such principles requires management to make estimates or to apply subjective principles to particular facts and circumstances. A change in the estimates or a variance in the
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application, or interpretation of IFRS could yield a materially different accounting result. A summary of our critical accounting estimates where we believe that had we made different estimations, judgments or interpretations from the ones we made, would have yielded the most significant differences in our combined financial statements, can be found in the notes to the combined financial statements. See Note 2 to the combined financial statements for a summary of all of our significant accounting policies.
Vessels and depreciation
Owned vessels are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost comprises acquisition cost and costs directly related to the acquisition up until the time when the asset is ready for use, including interest expense incurred to finance the vessel during that period. The market average useful life of a vessel is estimated to range from 25 to 30 years at which point it would usually be scrapped. Our strategy is to maintain a young fleet compared to the market average. For accounting purposes, we estimate useful life as 15 years from date of delivery for new vessels. Vessels are depreciated on a straight-line basis to an estimated residual value over their useful life of 15 years.
An increase in the useful life of the vessel or in its residual value would have the effect of decreasing the annual depreciation charge and, in the case of an increased useful life, extending it into later periods. A decrease in the useful life of the vessel or in its residual value would have the effect of increasing the annual depreciation charge.
The carrying value of our vessels will not necessarily represent the fair market value of such vessels or the amount we could obtain if we were to sell any of our vessels.
Pursuant to our bank credit facilities, prior to drawdown of loans under the credit facilities we submit to the lenders open-market, individual, charter-free valuations of the vessels collateralizing the relevant facility. Thereafter, we will regularly submit to the lenders valuations of our vessels done on the same basis in order to evidence our compliance with the collateral maintenance covenants under our bank credit facilities. Such a valuation is based on the value of the vessel assuming we continue to operate the vessel until it reaches 15 years in age and then sold after that date (rather than classifying the vessel as inventories) and therefore such valuation is not necessarily the same as the amount any vessel may bring upon sale, which may be more or less, and should not be relied upon as such. We also obtain such valuations each quarter on all 100% owned vessels, joint venture owned vessels and all chartered-in vessels where there is a purchase option in our Fleet. These valuations as well as the valuations for the purposes of the bank credit facilities, are performed by an independent valuator not connected with the group, who has appropriate qualifications and relevant experience in the valuation of the vessels in the relevant sectors. We have received valuations on all 100% owned vessels, joint venture owned vessels and all chartered-in vessels where we have purchase options in our Fleet as of June 30, 2017. If we were to compare those valuations to the carrying value of our vessels as of June 30, 2017, that carrying value would exceed their valuations by an aggregate of $66 million, ranging on individual vessels from $1.5 million to $5.8 million. The valuations of our vessels can vary depending on the shipyards where they were built and the dates of delivery.
Impairment of Assets
At the end of each reporting period, and on a continuous basis, if indicators of impairment are present, the carrying amount of tangible and intangible assets is assessed to determine whether there is any indication that those assets may have suffered an impairment loss. We also assess the carrying value of our assets when we make a decision to divest of the asset for any reason, including the age of our vessels, if a joint venture that owns vessels comes to an end in accordance with its terms or if it no longer fits into our strategic planning. The recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. For estimating the recoverable amount of an asset we may also use the market comparable approach that reflects recent transaction prices for similar assets, with similar age and specifications. We use the market comparable approach where we have decided to divest of an asset. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is estimated. Value in use is a key method for estimating the recoverable amount where we have not determined to divest of the asset, and is estimated taking into account discounted future cash flows, forecast market conditions and the expected lives of the assets. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, its carrying amount is reduced to the higher of its recoverable amount and zero. Where there is an impairment loss relating to a cash-generating unit, the impairment loss is first allocated to reduce the carrying amount of goodwill, if any, and then to the other assets of the cash-generating unit.
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Subsequent to the recognition of an impairment loss, the depreciation or amortization charge for the asset is adjusted to allocate its remaining carrying value, less any residual value, over its remaining useful life.
Impairment losses on tangible assets are recognized in profit or loss. If the estimate of the recoverable value of an asset (following an impairment loss) subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount but limited to the carrying amount that would have been determined had no impairment loss been recognized in prior years. A reversal of an impairment loss is recognized in profit or loss.
Impairment losses recognized on goodwill and other intangible assets are not subsequently reversed if the value of the goodwill subsequently increases. The attributable amount of goodwill is included in the calculation of profit or loss on disposal when the related business is sold.
Vessels
In developing a value in use calculation for a vessel, we make assumptions and estimates about vessels' future performance, with the most significant assumptions relating to (i) charter rates on vessels which are based on management's estimate of the average charter rates over the remaining life of the vessel to 15 years, (ii) off-hire days, which are based on historical off-hire statistics for our fleet, (iii) operating costs, based on current levels escalated over time based on long term trends, (iv) drydocking frequency, duration and cost, (v) estimated useful life which is assessed as a total of 15 years from construction and (vi) estimated sale value of that vessel when the vessel reaches 15 years. We apply the U.S. dollar inflation rate to vessel operating costs (not including depreciation). The future cash flows are discounted to their present value using the current fiscal year's discount rate to reflect the time value of money.
Although we believe that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective. There can be no assurance as to how long term charter rates and vessel values will remain at their current levels, whether they will improve by any significant degree, or whether they will achieve the forecast charter rates estimated in the value in use calculations. Charter rates may remain at depressed levels for some time, which could adversely affect our revenue and profitability, and future assessments of vessel impairment.
The recoverable amounts of vessels that will be classified as inventories are determined based on fair value less cost of disposal, with fair value determined based on the market comparable approach that reflects recent transaction prices for similar vessels, with similar age and specifications. In valuing the vessels, the appraisers take into consideration the prevailing market conditions and make adjustments for differences where necessary before arriving at the most appropriate value for the vessels.
Management monitors developments in the market charter rates in order to assess the appropriateness of the charter rates that are utilized in the impairment analyses.
As at December 31, 2017, a change to the following estimate used in management's assessment would result in the recoverable amount of each vessel being below the carrying amount of the vessel (on the basis that each of the other key assumptions remain unchanged):
Drybulk Carriers:
Tankers:
Based on the key assumptions and taking into account the sensitivity analysis above, management determined that the estimated recoverable amount of the vessels (excluding ships classified as inventories held for sale) are appropriate. Accordingly, no further allowance impairment loss is required except for the impairment loss of $16.5 million recognized during the year ended December 31, 2017, $12.6 million recognized during the year ended December 31, 2016 and $67.8 million recognized during the year ended December 31, 2015. The impairment was largely due to the depressed charter rates and vessel values as a result of an oversupply of vessel capacity.
On December 31, 2017, we impaired the vessels to the extent of $16.5 million because we determined certain vessels no longer fit into our strategic planning. Management intends to divest or sell these vessels and use the funds to modernize the Fleet.
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Non-Vessel
Goodwill and intangible assets with indefinite useful lives or which are not available for use, and the cash-generating units to which these assets have been allocated, are tested for impairment at the end of each reporting period and on a continuous basis, even if there is no indication of impairment. For the purpose of impairment testing, goodwill is allocated to each of the cash-generating units expected to benefit from the synergies of the combination at inception of the combination.
On December 31, 2017, we impaired the goodwill and intangible assets that arose on the acquisition of the remaining equity of one of our former joint ventures in 2014. Goodwill was impaired on December 31, 2017 by $8.5 million and the intangible assets were impaired by $3.6 million. Management took the decision to impair the value based on the fact that the profits declined from those earned in previous years and the business model has changed thereby effecting the division.
In addition, a number of vessels that were required to be impaired on December 31, 2017 were held in joint ventures which resulted in the impairment loss on ships of $43.2 million for these joint ventures which was correspondingly recorded by us as share of losses in joint ventures for $12.9 million. These vessels held by our joint ventures were impaired because they no longer fit into our strategic planning and/or the joint ventures that own vessels are coming to an end in accordance with their terms. Management intends to seek to sell these vessels and use the funds to modernize the fleet.
Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated rebates, commissions and other similar allowances.
Charter hire revenue is recognized on a daily accrual basis. Freight revenue is recognized on completion of the voyage and for uncompleted voyages at year-end on the percentage of completion basis. Results of uncompleted voyages are included based on the estimated voyage result and the voyage time elapsed. Anticipated losses for contracts arising on uncompleted voyages are provided in full.
Sales of ships, bunkers and consumables are recognized when all the following conditions are satisfied:
Management fee income is recognized on accrual basis over the period of services rendered.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income from investments is recognized when the shareholders' rights to receive payment have been established.
Provision for Onerous Contracts
An onerous contract is considered to exist where we have a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under such contract. Present obligations arising under onerous contracts are recognized and measured as a provision. Full provision is made for the present obligations of the unavoidable future losses of fulfilling the terms of onerous vessel charter contracts or COAs to which we are committed. See Note 20 to the combined financial statements for further details.
Results of Operations
Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016
Certain financial data on a combined basis and for our primary segments was as follows for the years ended December 31, 2017 and 2016. This information was derived from our combined financial statements for the respective periods.
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Combined Results of Operations
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
(In thousands of U.S. dollars)
|
2017 | 2016 | |||||
Revenue |
$ | 409,522 | $ | 371,532 | |||
Cost of sales |
(387,408 | ) | (365,735 | ) | |||
| | | | | | | |
Gross profit |
22,114 | 5,797 | |||||
Other operating income |
4,696 | 5,687 | |||||
Administrative expense |
(32,868 | ) | (30,140 | ) | |||
Other operating expenses |
(39,198 | ) | (18,093 | ) | |||
Share of losses of joint ventures |
(12,946 | ) | (3,472 | ) | |||
Interest income |
7,164 | 5,260 | |||||
Interest expense |
(6,548 | ) | (4,899 | ) | |||
| | | | | | | |
Loss before taxation |
(57,586 | ) | (39,860 | ) | |||
Income tax expense |
(3,226 | ) | (3,849 | ) | |||
| | | | | | | |
Loss for the year |
$ | (60,812 | ) | $ | (43,709 | ) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Segment Results of Operations (1)
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
(in thousands of U.S. dollars)
|
2017 | 2016 | |||||
Drybulk Carriers Business |
|||||||
Handysize Segment |
|||||||
Revenues |
$ | 126,731 | $ | 98,909 | |||
Cost of Sales |
$ | (123,963 | ) | $ | (109,384 | ) | |
Supramax Segment |
|||||||
Revenues |
$ | 157,428 | $ | 117,076 | |||
Cost of Sales |
$ | (155,907 | ) | $ | (118,513 | ) | |
Tankers Business |
|||||||
Medium Range Tankers Segment |
|||||||
Revenues |
$ | 53,307 | $ | 60,090 | |||
Cost of Sales |
$ | (56,532 | ) | $ | (58,628 | ) | |
Small Tankers Segment |
|||||||
Revenues |
$ | 22,740 | $ | 22,561 | |||
Cost of Sales |
$ | (18,549) | $ | (18,833 | ) |
Set forth below are selected historical and statistical data of our operating fleet for the years ended December 31, 2017 and 2016 that we believe may be useful in better understanding our operating fleet's financial position and results of operations.
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Drybulk Carriers Business
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2017 | 2016 | |||||
Handysize Segment |
|||||||
Calendar days (1) |
7,942 | 7,616 | |||||
Available days (2) |
7,840 | 7,559 | |||||
Operating days (3) |
7,720 | 7,460 | |||||
Fleet utilization (4) |
98.5 | % | 98.7 | % | |||
Vessels operating at period end (5) |
21.2 | 20.4 | |||||
Handysize Segment Average Daily Results |
|||||||
TCE per day (6) |
$ | 7,675 | $ | 5,881 | |||
Vessel operating costs per day (7) |
$ | 5,034 | $ | 5,091 | |||
Supramax Segment |
|||||||
Calendar days (1) |
7,702 | 7,700 | |||||
Available days (2) |
7,702 | 7,700 | |||||
Operating days (3) |
7,584 | 7,654 | |||||
Fleet utilization (4) |
98.5 | % | 99.4 | % | |||
Vessels operating at period end (5) |
20.8 | 20.9 | |||||
Supramax Segment Average Daily Results |
|||||||
TCE per day (6) |
10,551 | $ | 7,861 | ||||
Vessel operating costs per day (7) |
$ | 4,519 | $ | 4,433 | |||
Tankers Business |
|||||||
Medium Range Tankers Segment |
|||||||
Calendar days (1) |
3,055 | 3,140 | |||||
Available days (2) |
2,999 | 3,140 | |||||
Operating days (3) |
2,994 | 3,140 | |||||
Fleet utilization (4) |
100 | % | 100 | % | |||
Vessels operating at period end (5) |
7.5 | 9 | |||||
Medium Range Tankers Segment Average Daily Results |
|||||||
TCE per day (6) |
$ | 11,691 | $ | 13,902 | |||
Vessel operating costs per day (7) |
$ | 6,869 | $ | 7,053 | |||
Small Tankers Segment |
|||||||
Calendar days (1) |
1,469 | 1,657 | |||||
Available days (2) |
1,461 | 1,603 | |||||
Operating days (3) |
1,461 | 1,572 | |||||
Fleet utilization (4) |
99 | % | 98.1 | % | |||
Vessels operating at period end (5) |
3.5 | 5 | |||||
Small Tankers Segment Average Daily Results |
|||||||
TCE per day (6) |
$ | 13,014 | $ | 12,154 | |||
Vessel operating costs per day (7) |
$ | 7,427 | $ | 7,479 |
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Revenues. Revenues increased by $38.0 million, or approximately 10.2%, from $371.5 million for the year ended December 31, 2016 to $409.5 million for the year ended December 31, 2017. The largest component of revenues is vessel revenue. Vessel revenues increased by $31.9 million, or approximately 9.0%, from 354.1 million for the year ended December 31, 2016 to $386.0 million for the year ended December 31, 2017, respectively. This increase was primarily due to the improved drybulk spot market charter rates which was slightly offset by a decrease in the drybulk charter rates. Vessel revenues were $45.9 million and $46.0 million for the OACL business in the years ended December 31, 2017 and 2016, respectively.
Drybulk Business Revenues and Vessel Revenues
In the drybulk business, our handysize total revenues and supramax total revenues increased by $27.8 million and $40.3 million, respectively, or approximately 28.1% and 34.5%, respectively, from $98.9 million and $117.1, respectively, for the year ended December 31, 2016 to $126.7 million and $157.4 million, respectively, for the year ended December 31, 2017. These increases were primarily due to increased spot market charter rates and a sale of a vessel (IVS Kite). There were no sales of vessels in the drybulk business in 2016.
Our handysize vessel revenues and supramax vessel revenues increased by $21.1 million and $40.3 million, respectively, or approximately 21.7% and 34.7%, respectively, from $97.2 million and $116.2 million, respectively, for the year ended December 31, 2016 to $118.3 million and $156.5 million, respectively, for the year ended December 31, 2017. This increase was primarily due to increased spot market charter rates.
Tankers Business Revenues and Vessel Revenues
In the tankers business, our medium range tankers total revenues decreased and small tankers total revenues remained relatively flat by $6.8 million and at $0.1 million, respectively, or approximately 11.3% and 0.1%, respectively, from $60.1 million and $22.6 million, respectively, for the year ended December 31, 2016 to $53.3 million and $22.7 million, respectively, for the year ended December 31, 2017. The decrease in the medium range tankers revenues was primarily due to a decrease in medium range tanker spot market charter rates.
Our medium range tankers vessel revenues decreased and small tankers vessel revenues remained relatively flat by $6.1 million and at $0.1 million, respectively, or approximately 12.5% and 0.01%, respectively, from $48.7 million and $22.6 million, respectively for the year ended December 31, 2016 to $42.6 million and $22.7 million, respectively, for the year ended December 31, 2017. The decrease in the medium range tankers was primarily due to a market related decrease in medium range tanker spot market charter rates.
Drybulk Business TCE Revenue
Handysize TCE per day increased by $1,794 per day, or approximately 30.5%, from $5,881 per day for the year ended December 31, 2016 to $7,675 per day for the year ended December 31, 2017. This increase was due to an increase in handysize spot market charter rates.
Supramax TCE per day increased by $2,690 per day, or approximately 34.2%, from $7,861 per day for the year ended December 31, 2016 to $10,551 per day for the year ended December 31, 2017. This increase was due to an increase in supramax spot market charter rates.
Tankers Business TCE Revenue
Medium range tankers TCE per day decreased by $2,211 per day, or approximately 15.9%, from $13,902 per day for the year ended December 31, 2016 to $11,691 per day for the year ended December 31, 2017. This decrease was due to a market related decrease in medium range tanker spot market charter rates.
Small tankers TCE per day increased by $860 per day, or approximately 7.1%, from $12,154 per day for the year ended December 31, 2016 to $13,014 per day for the year ended December 31, 2017. This increase was due to COAs and time charters that were set at higher rates while the market was still rising in the previous year.
Cost of sales. Cost of sales increased by $21.7 million, or approximately 5.9%, from $365.7 million for the year ended December 31, 2016 to $387.4 million for the year ended December 31, 2017. The largest component of cost of sales is voyage expenses, which increased by $26.2 million from $140.7 million for the
77
year ended December 31, 2016 and $166.9 million for the year ended December 31, 2017. The second largest component of cost of sales are charter hire expense, which increased from $121.1 million for the year ended December 31, 2016 to $127.7 million for the year ended December 31, 2017. This increase is due to the increase in drybulk spot market charter rates for short-term chartered-in vessels which was slightly offset by a decrease in tanker spot market charter rates.
Drybulk Business Cost of Sales
In the drybulk business, our handysize segment and supramax segment cost of sales increased by $14.6 million and $37.4 million, respectively, or approximately 13.3% and 31.6%, from $109.4 million and $118.5 million, respectively, for the year ended December 31, 2016 to $124.0 million and $155.9 million, respectively, for the year ended December 31, 2017. These increases were primarily due to the increase in drybulk spot market charter rates.
Our handysize voyage expenses and supramax segment voyage expenses increased by $5.6 million and $20.5 million, respectively, or approximately 10.5% and 36.6%, from $53.4 million and $56 million, respectively, for the year ended December 31, 2016 to $59.0 million and $76.5 million, respectively, for the year ended December 31, 2017. These increases were primarily due to increased pool distribution costs as a result of increased net earnings of the pool relating to the increase in drybulk spot market charter rates.
Our handysize vessel operating costs and supramax vessel operating costs remained relatively flat from $27.0 million and 2.5% million for the year ended December 31, 2016, respectively, to $26.5 million and $3.3 million for the year ended December 31, 2017, respectively.
Drybulk Business Vessel Operating Costs Per Day
Handysize vessel operating costs per day remained relatively flat with a slight decrease of $57 from $5,091 per day for the year ended December 31, 2016 and $5,034 per day for the year ended December 31, 2017.
Supramax vessel operating costs per day remained relatively flat with a slight increase of $86 from $4,433 per day for the year ended December 31, 2016 to $4,519 per day for the year ended December 31, 2017.
Tankers Business Cost of Sales
In the tankers business, our medium range tankers and small tankers cost of sales decreased by $2.1 million and $0.3 million, respectively, or approximately 3.5% and 1.6%, respectively, from $58.6 million and $18.8 million, respectively, for the year ended December 31, 2016 to $56.5 million and $18.5 million, respectively, for the year ended December 31, 2017. This decrease was primarily due to a decrease in the number of medium range and small tanker vessels operating in 2017.
Our medium range tankers voyage expenses and small tankers voyage expenses increased by $2.6 million and $0.3 million, respectively, or approximately 52% and 8.8%, respectively, from $5.0 million and $3.4 million, respectively, for the year ended December 31, 2016 to $7.6 million and $3.7 million, respectively, for the year ended December 31, 2017. These increases were primarily due to increased fuel costs and costs relating to fulfilling COA contracts.
Our medium range tankers operating costs and small tankers operating costs decreased from $13.8 million and $9.6 million, respectively, for the year ended December 31, 2016 to $13.3 million and $9.5 million, respectively, for the year ended December 31, 2017. These decreases were primarily due to a decrease in the number of tanker vessels operating in 2017.
Tankers Business Vessel Operating Costs Per Day
Medium range tankers vessel operating costs per day remained relatively flat from $7,053 per day for the year ended December 31, 2016 to $6,869 per day for the year ended December 31, 2017. The decrease is due to one-time expenses in 2016 relating to repairs, as well as refurbishments of lifeboats.
Small tankers vessel operating costs per day remained relatively flat from $7,479 per day for the year ended December 31, 2016 to $7,427 per day for the year ended December 31, 2017.
Gross profit. Gross profit increased by $16.3 million, or 281%, from $5.8 million for the year ended December 31, 2016 to $22.1 million for the year ended December 31, 2017 primarily for the reasons described above.
Other operating income. Other operating income consisted primarily of foreign exchange gain. For the year ended December 31, 2017 we incurred an unrealized foreign exchange gain of $3.6 million primarily as a result of unrealized revaluations of foreign currency bank balances, vendor balances and customer
78
balances at period end as well as realized gains. For the year ended December 31, 2016 we incurred foreign exchange gains of $4.1 million.
Administrative expenses. Administrative expenses increased by $2.8 million, or approximately 9.3%, from $30.1 million for the year ended December 31, 2016 to $32.9 million for the year ended December 31, 2017 primarily as a result of one-time listing expenses relating to the Spin-Off. Administrative expenses also include charges billed to GSPL and GSSA by Parent's subsidiaries that generally relate to the cost of corporate resources provided by Parent.
Other operating expenses. Other operating expenses consisted primarily of foreign exchange loss and impairment loss on ships, impairments on intangibles and goodwill and impairment loss on the net assets of OACL. For the year ended December 31, 2017 we incurred a foreign exchange loss of $4.1 million primarily as a result of unrealized revaluations of foreign bank balances, vendor balances and customer balances at period end as well as realized losses. For the year ended December 31, 2016 we incurred a foreign exchange loss of $4.3. For the year ended December 31, 2017, we recorded an impairment of $28.6 million relating to vessel impairments of $16.5 million on a number of vessels in the fleet and goodwill of $12.1 million where it was determined that the carrying value of the goodwill exceeded the current value in use. In addition, an impairment loss on the net assets of OACL was recognized to the extent of $5.1 million For the year ended December 31, 2016, we recorded an impairment of $12.6 million relating to one drybulk carrier and one tanker vessel that were identified as assets held for sale. The tanker vessel was subsequently sold in October 2017. The sale of the drybulk vessel took place in November 2017.
Interest income. Interest income increased from $5.3 million for the year ended December 31, 2016 to $7.2 million for the year ended December 31, 2017. The increase is due to the shareholder loan to IVS Bulk being effective for the full year in 2017 compared to a partial year in 2016.
Interest expense. Interest expense increased from $4.9 million for the year ended December 31, 2016 to $6.5 million for the year ended December 31, 2017. Interest expense is the payment of interest on debt that principally funds our vessels. This increase is primarily due to the increase in the LIBOR rate on which our interest expense is based, as well as the refinancing of one of our loans at a higher rate. Our bank loans outstanding decreased slightly from $112.5 million as at December 31, 2016 to $108.8 million as at December 31, 2017. The weighted average effective interest rate on our outstanding debt increased from 3.11% in 2016 to 3.83% in 2017.
Share of losses in joint ventures. Share of losses in joint ventures increased from a loss of $3.5 million for the year ended December 31, 2016 to a loss of $12.9 million for the year ended December 31, 2017 primarily due to impairments of the fixed assets held by the joint ventures. Impairments on vessels were recorded by our joint ventures and we correspondingly recorded our proportional share of impairment of $5.9 million and $15.7 million, respectively in 2016 and 2017 as share of losses in joint ventures in the combined financial statements.
Taxation. Taxation for the year ended December 31, 2017 remained stable at $3.8 million for the year ended December 31, 2016 and $3.2 million for the year ended December 31, 2017.
Loss for the year. Our loss for the year ended December 31, 2016 increased from a loss of $43.7 million for the year ended December 31, 2016 to $60.8 million for the year ended December 31, 2017 for the same reasons set forth above.
Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015
Certain financial data on a combined basis and for our primary segments was as follows for the years ended December 31, 2016 and 2015. This information was derived from our combined financial statements for the respective periods.
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Combined Results of Operations
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
(In thousands of U.S. dollars)
|
2016 | 2015 | |||||
Revenue |
$ | 371,532 | $ | 434,439 | |||
Cost of sales |
(365,735 | ) | (407,577 | ) | |||
| | | | | | | |
Gross profit |
5,797 | 26,862 | |||||
Other operating income |
5,687 | 6,142 | |||||
Administrative expense |
(30,140 | ) | (27,670 | ) | |||
Other operating expenses |
(18,093 | ) | (71,829 | ) | |||
Share of losses of joint ventures |
(3,472 | ) | (18,748 | ) | |||
Interest income |
5,260 | 3,101 | |||||
Interest expense |
(4,899 | ) | (4,448 | ) | |||
| | | | | | | |
Loss before taxation |
(39,860 | ) | (86,590 | ) | |||
Income tax expense |
(3,849 | ) | (3,764 | ) | |||
| | | | | | | |
Loss for the year |
$ | (43,709 | ) | $ | (90,354 | ) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Segment Results of Operations (1)
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
(in thousands of U.S. dollars)
|
2016 | 2015 | |||||
Drybulk Carriers Business |
|||||||
Handysize Segment |
|||||||
Revenues |
$ | 98,909 | $ | 101,468 | |||
Cost of Sales |
$ | (109,384 | ) | (113,784 | ) | ||
Supramax Segment |
|
|
|||||
Revenues |
$ | 117,076 | $ | 146,195 | |||
Cost of Sales |
$ | (118,513 | ) | (139,062 | ) | ||
Tankers Business |
|
|
|||||
Medium Range Tankers Segment |
|
|
|||||
Revenues |
$ | 60,090 | $ | 67,967 | |||
Cost of Sales |
$ | (58,628 | ) | (48,374 | ) | ||
Small Tankers Segment |
|
|
|||||
Revenues |
$ | 22,561 | $ | 39,445 | |||
Cost of Sales |
$ | (18,833 | ) | $ | (37,323 | ) |
Set forth below are selected historical and statistical data of our operating fleet for the years ended December 31, 2016 and 2015 that we believe may be useful in better understanding our operating fleet's financial position and results of operations.
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Drybulk Carriers Business
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2016 | 2015 | |||||
Handysize Segment |
|||||||
Calendar days (1) |
7,616 | 7,877 | |||||
Available days (2) |
7,559 | 7,762 | |||||
Operating days (3) |
7,460 | 7,692 | |||||
Fleet utilization (4) |
98.7 | % | 99.1 | % | |||
Vessels operating at period end (5) |
20.4 | 21.1 | |||||
Handysize Segment Average Daily Results |
|
|
|||||
TCE per day (6) |
$ | 5,881 | $ | 7,487 | |||
Vessel operating costs per day (7) |
$ | 5,091 | $ | 5,160 | |||
Supramax Segment |
|
|
|||||
Calendar days (1) |
7,700 | 7,952 | |||||
Available days (2) |
7,700 | 7,952 | |||||
Operating days (3) |
7,654 | 7,774 | |||||
Fleet utilization (4) |
99.4 | % | 97.8 | % | |||
Vessels operating at period end (5) |
20.9 | 21.3 | |||||
Supramax Segment Average Daily Results |
|
|
|||||
TCE per day (6) |
$ | 7,861 | $ | 10,232 | |||
Vessel operating costs per day (7) |
$ | 4,433 | $ | 4,298 | |||
Tankers Business |
|
|
|||||
Medium Range Tankers Segment |
|
|
|||||
Calendar days (1) |
3,140 | 3,288 | |||||
Available days (2) |
3,140 | 3,288 | |||||
Operating days (3) |
3,140 | 3,271 | |||||
Fleet utilization (4) |
100 | % | 99.5 | % | |||
Vessels operating at period end (5) |
9 | 8 | |||||
Medium Range Tankers Segment Average Daily Results |
|
|
|||||
TCE per day (6) |
$ | 13,902 | $ | 20,569 | |||
Vessel operating costs per day (7) |
$ | 7,053 | $ | 7,458 |
Small Tankers Segment |
|||||||
Calendar days (1) |
1,657 | 2,163 | |||||
Available days (2) |
1,603 | 2,136 | |||||
Operating days (3) |
1,572 | 2,096 | |||||
Fleet utilization (4) |
98.1 | % | 98.2 | % | |||
Vessels operating at period end (5) |
5 | 5 | |||||
Small Tankers Segment Average Daily Results |
|
|
|||||
TCE per day (6) |
$ | 12,154 | $ | 11,291 | |||
Vessel operating costs per day (7) |
$ | 7,479 | $ | 7,676 |
81
Revenues. Revenues decreased by $62.9 million, or approximately 14%, from $434.4 million for the year ended December 31, 2015 to $371.5 million for the year ended December 31, 2016. This decrease was primarily due to the continued weakening of the drybulk spot market rate, to the lowest point in the first quarter of 2016, and to the continued weakening in the tanker sector, which were partially offset by slowly improving spot market charter rates in the drybulk sector in the latter half of 2016. The largest component of revenues is vessel revenue. Vessel revenues decreased by $63.6 million, or approximately 15%, from $417.7 million for the years ended December 31, 2015 to $354.1 million for the year ended December 31, 2016, respectively. This decrease was primarily due to the decline in the drybulk charter rates in the beginning of 2016 and in the tanker charter rates toward the end of the same year. Vessel revenues were $46.0 million and $47.7 million for the OACL business in the years ended December 31, 2016 and 2015 respectively.
Drybulk Business Revenues and Vessel Revenues
In the drybulk business, our handysize total revenues and supramax total revenues decreased by $2.6 million and $29.2 million, respectively, or approximately 2% and 20%, respectively, from $101.5 million and $146.2 million, respectively, for the year ended December 31, 2015 to $98.9 million and $117.0 million, respectively, for the year ended December 31, 2016. These decreases were primarily due to the decreases in drybulk spot market charter rates in 2016.
Our handysize vessel revenues and supramax vessel revenues decreased by $3.6 million and $29.7 million, respectively, or approximately 3% and 20%, respectively, from $100.8 million and $145.9 million, respectively, for the year ended December 31, 2015 to $97.2 million and $116.2 million, respectively, for the year ended December 31, 2016. This decrease was primarily due to the continued weakening of the drybulk spot market rate, to the lowest point in the first quarter of 2016, and to the continued weakening in the tanker business, which were partially offset by slowly improving spot market charter rates in the drybulk business in the latter half of 2016.
Tankers Business Revenues and Vessel Revenues
In the tankers business, our medium range tankers total revenues and small tankers total revenues decreased by $7.9 million and $16.8 million, respectively, or approximately 11.6% and 43%, respectively, from $68.0 million and $39.4 million, respectively, for the year ended December 31, 2015 to $60.1 million and $22.6 million, respectively, for the year ended December 31, 2016. These decreases were primarily due to the further weakening in tanker spot market charter rates impacting medium range tankers and to a lesser extent, the impact on the small tankers segment, and in the small tankers segment the sale of a tanker is included in the revenue in 2015. The decrease in medium range tankers was partially caused by a sale of a medium range tanker in 2016 which partially offset the drop in charter rates.
Our medium range tankers vessel revenues and small tankers vessel revenues decreased by $21.7 million and $3.9 million, respectively, or approximately 31% and 15%, respectively, from $70.4 million and $26.5 million, respectively for the year ended December 31, 2015 to $48.7 million and $22.6 million, respectively, for the year ended December 31, 2016. These decreases were primarily due to the further weakness in tanker spot market charter rates.
Drybulk Business TCE Revenue
Handysize TCE per day decreased by $1,606 per day, or approximately 21%, from $7,487 per day for the year ended December 31, 2015 to $5,881 per day for the year ended December 31, 2016. This decrease was due to a decrease in the spot market rates in the first half of 2016.
Supramax TCE per day decreased by $2,371 per day, or approximately 23%, from $10,232 per day for the year ended December 31, 2015 to $7,861 per day for the year ended December 31, 2016. This decrease was due to the further decrease in the spot market rates in the first half of 2016.
82
Tankers Business TCE Revenue
Medium range tankers TCE per day decreased by $6,667 per day or approximately 32%, from $20,569 per day for the year ended December 31, 2015 to $13,902 per day for the year ended December 31, 2016. This decrease was due to further weakness in tanker spot market rates during the second half of 2016.
Small tankers TCE per day increased by $863 per day, or approximately 7.6%, from $11,291 per day for the year ended December 31, 2015 to $12,154 per day for the year ended December 31, 2016. This increase was due to an increase in COAs.
Cost of sales. Cost of sales decreased by $41.9 million, or approximately 10.3%, from $407.6 million for the year ended December 31, 2015 to $365.7 million for the year ended December 31, 2016. The key components of cost of sales are charter hire expenses and voyage expenses. Charter hire expenses decreased from $150.6 million for the year ended December 31, 2015 to $121.1 million for the year ended December 31, 2016. The decrease in charter hire expenses was due to the decrease in the charter hire days and charter rates as a result of the declining spot market charter rates in 2016. Voyage expenses decreased from $145.6 million for the year ended December 31, 2015 to $140.7 million for the year ended December 31, 2016. This decrease is due to the decrease in fuel costs as a result of a drop in the average bunker rates as well as a reduction in the number of vessels we commercially managed. The decrease in fuel costs was partially offset by the increase in pool distribution cost, which was a result of the increased number of vessels entering the IVS Handysize Pool in 2016 and that the IVS Supramax Pool only commenced in the second half of 2015.
Drybulk Business Cost of Sales
In the drybulk business, our handysize segment and supramax segment cost of sales decreased by $4.4 million and $20.6 million, or approximately 3.8% and 14.8%, from $113.8 million and $139.1 million, respectively, for the year ended December 31, 2015 to $109.4 million and $118.5 million, respectively, for the year ended December 31, 2016. These decreases were primarily due to the decrease in drybulk spot market charter rates in 2016.
Our handysize voyage expenses increased and supramax segment voyage expenses decreased by $10.2 million and $10.4 million, respectively, or approximately 23.6% and 15.6%, from $43.2 million and $66.4 million, respectively, for the year ended December 31, 2015 to $53.4 million and $56 million, respectively, for the year ended December 31, 2016. These movements were primarily due to the decrease in the average number of vessels and the decrease in fuel costs.
Our handysize vessel operating costs and supramax vessel operating costs increased by $0.8 million and $2.2 million, respectively, from $26.2 million and $0.3 million, respectively, for the year ended December 31, 2015 to $27.0 million and $2.5 million, respectively, for the year ended December 31, 2016.
Drybulk Business Vessel Operating Costs Per Day
Handysize vessel operating costs per day remained relatively flat at $5,160 per day for the year ended December 31, 2015 and $5,091 per day for the year ended December 31, 2016.
Supramax vessel operating costs per day remained relatively flat at $4,298 per day for the year ended December 31, 2015 and $4,433 per day for the year ended December 31, 2016.
Tankers Business Cost of Sales
In the tankers business, our medium range tankers and small tankers cost of sales increased by $10.3 million and decreased by $18.5 million, respectively, or approximately 21.3% and 50%, respectively, from $48.3 million and $37.3 million, respectively, for the year ended December 31, 2015 to $58.6 million and $18.8 million, respectively, for the year ended December 31, 2016. These movements were primarily due to the sale of a vessel in each of 2015 and 2016.
Our medium range tankers voyage expenses and small tankers voyage expenses increased by $1.9 million and $0.6 million, respectively, or approximately 61% and 21%, respectively, from $3.1 million and $2.8 million, respectively, for the year ended December 31, 2015 to $5.0 million and $3.4 million, respectively, for the year ended December 31, 2016. These decreases were primarily due to lower fuel prices.
Our medium range tankers vessel operating costs and small tankers vessel operating costs decreased by $1.2 million and $1.4 million, respectively, from $15.0 million and $11.0 million, respectively, for the year
83
ended December 31, 2015 to $13.8 million and $9.6 million, respectively, for the year ended December 31, 2016.
Tankers Business Vessel Operating Costs Per Day
Medium range tankers vessel operating costs per day decreased by $405 per day from $7,458 per day for the year ended December 31, 2015 to $7,053 per day for the year ended December 31, 2016. The decrease is due to better positioning of the vessels that has decreased the cost of repairs, crew transport and delivery costs.
Small tankers vessel operating costs per day decreased by $197 per day from $7,676 per day for the year ended December 31, 2015 to $7,479 per day for the year ended December 31, 2016. The decrease is due to better positioning of the vessels that has decreased the cost of repairs, crew transport and delivery costs.
Gross (loss)/profit. Gross profit decreased by $21.0 million, or 78%, from $26.8 million for the year ended December 31, 2015 to $5.8 million for the year ended December 31, 2016 for the reasons set forth above.
Other operating income. Other operating income consisted primarily of foreign exchange gain. For the year ended December 31, 2016 we incurred an unrealized foreign exchange gain of $4.1 million primarily as a result of unrealized revaluations of foreign currency bank balances, vendor balances and customer balances at period end as well as realized gains. For the year ended December 31, 2015 we incurred a foreign exchange gain of $5.0 million primarily as a result of the types of realized and unrealized gains described above.
Administrative expenses. Administrative expenses increased by $2.4 million, or approximately 8.6%, from $27.7 million for the year ended December 31, 2015 to $30.1 million for the year ended December 31, 2016 primarily as a result of increased salary costs, increased rental costs relating to our OACL business, and a lower Parent share scheme cost in 2015. Administrative expenses also include charges billed to GSPL and GSSA by Parent's subsidiaries that generally relate to the cost of corporate resources provided by Parent.
Other operating expenses. Other operating expenses consisted primarily of foreign exchange loss and impairment loss on ships. For the year ended December 31, 2016 we incurred a foreign exchange loss of $4.3 million primarily as a result of unrealized revaluations of foreign bank balances, vendor balances and customer balances at period end as well as realized losses. For the year ended December 31, 2015, we incurred a foreign exchange loss of $2.8 million primarily as a result of realized and unrealized losses described above. For the year ended December 31, 2016, we recorded an impairment of $12.6 million relating to one drybulk carrier and one tanker vessel. The tanker vessel was subsequently sold in October 2017. The sale of the drybulk vessel took place in November 2017. In 2015, we recorded an impairment of $67.8 million relating to the reduction of the carrying value of our vessels. The impairment was largely due to the depressed charter rates and vessel values as a result of an oversupply of vessel capacity.
Interest income. Interest income increased from $3.1 million for the year ended December 31, 2015 to $5.3 million for the year ended December 31, 2016. The reason for the increase is primarily due to additional loans to two of our joint ventures.
Interest expense. Interest expense increased from $4.4 million for the year ended December 31, 2015 to $4.9 million for the year ended December 31, 2016. Interest expense is the payment of interest on debt that principally funds our vessels. This increase is primarily due to an increase in the LIBOR rate from an average of 0.3% in 2015 to an average of 0.7% in 2016, as well as an increase of the average capital amount of debt outstanding due to the drawdown of the available revolving credit facility to the extent of $30.0 million. Our bank loans outstanding increased from $101.7 million as at December 31, 2015 to $112.5 million as at December 31, 2016. The weighted average effective interest rate on our outstanding debt increased from 2.69% in 2015 to 3.11% in 2016.
Share of joint venture companies' loss after taxation. Share of joint venture companies' loss after taxation decreased from a loss of $18.7 million for the year ended December 31, 2015 to a loss of $3.4 million for the year ended December 31, 2016 primarily due to the decline in drybulk charter rates in the beginning of 2016 and of the tanker charter rates toward the end of the same year and for the same reasons set forth above. Impairments for joint venture vessels were included in share of joint venture companies' loss after taxation in 2015 were $23.6 million and no impairment for joint venture vessel was recognized in 2016.
Taxation. Taxation for the year ended December 31, 2016 remained stable at $3.8 million for the year ended December 31, 2015 and $3.8 million for the year ended December 31, 2016.
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Loss for the year. Our loss for the year ended December 31, 2016 decreased from a loss of $90.3 million for the year ended December 31, 2015 to $43.7 million for the year ended December 31, 2016 for the same reasons set forth above.
Liquidity and Capital Resources
Overview
We operate in a capital intensive industry. Our primary short-term liquidity needs relate to working capital needs relating to voyages in progress, corporate overhead, payments of interest, quarterly principal payments under our credit facilities, and any balloon payments on loans coming due in the next 12 months, while our long-term liquidity needs are expected to primarily relate to drydock payments, investment in joint ventures or directly in new and secondhand vessels and final balloon payments relating to our credit facilities.
As of December 31, 2017, we had purchase options to acquire five vessels. Our options to purchase the IVS Shikra and the IVS Beachwood are currently in the exercise period under their respective charter parties, and we have options to purchase the IVS Naruo, one of either the IVS Pinehurst or the IVS Augusta, and the IVS Hayakita that will first enter into the exercise periods under their respective charter parties in December 2019, July 2020, August 2020 and July 2021, respectively. See "Item 4. Information on the CompanyBusiness OverviewOur Fleet". The prices of these purchase options range from approximately $16.7 million to $36.1 million, subject to adjustments, where an option is exercisable on more than one date, based on the remaining time balance of the charter. In each case, such purchase option is subject to certain other adjustments and conditions and will expire at the completion of the applicable time charter.
We expect that we will rely upon external financing sources, including bank and other borrowings, to fund acquisitions and expansion and replacement capital expenditures. We cannot assure you that we will be able to secure adequate financing or obtain additional funds on favorable terms to meet our liquidity needs. We anticipate that our primary sources of funds for our short-term liquidity needs will be cash flows from operations and borrowings which we believe will be sufficient to meet our existing short-term liquidity needs for at least the next 12 months. Generally, our long-term sources of funds will be from cash from operations, long-term borrowings and other debt or equity financings.
Cash Flow Discussion
The following table presents cash flow information for each of the years ended December 31, 2017, 2016 and 2015.
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(in thousands of U.S. dollars)
|
2017 | 2016 | 2015 | |||||||
Cash (used in)/generated from operating activities |
$ | 2,870 | $ | (21,257 | ) | $ | 114,659 | |||
Cash (used in)/generated from investing activities |
(2,062 | ) | (35,705 | ) | (55,601 | ) | ||||
Cash (used in)/generated from financing activities |
(19,334 | ) | 47,738 | (33,269 | ) | |||||
(Decrease)/increase in cash and cash equivalents |
(18,526 | ) | (9,224 | ) | 25,789 | |||||
Cash and cash equivalents, beginning of year |
62,470 | 70,030 | 48,270 | |||||||
Differences in translation |
1,301 | 1,664 | (4,029 | ) | ||||||
| | | | | | | | | | |
Cash and cash equivalents, end of year |
45,245 | $ | 62,470 | $ | 70,030 | |||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Cash (used in)/generated from operating activities. Cash from operating activities changed positively by $24.1 million to an inflow of $2.9 million for the year ended December 31, 2017 as compared to an outflow of $21.3 million for the year ended December 31, 2016. Cash generated from operating activities for the year ended December 31, 2017 was primarily due to lower capital expenditures following the completion of our newbuilding program in the beginning of 2017, higher proceeds from vessel sales in 2017, improved revenues and Parent's $15.0 million equity investment.
Cash from operating activities changed negatively by $135.9 million to an outflow of $21.3 million for the year ended December 31, 2016 as compared to an inflow of $114.7 million for the year ended December 31, 2015. Cash generated from operating activities for the year ended December 31, 2015 was primarily due to the receipt of approximately $26.0 million of refunded prepayments relating to a canceled shipbuilding contract, Parent's capitalization and release from certain intercompany loans of approximately $21.0 million relating to the acquisition of the OACL division, and Parent's intercompany
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loan to us of $18.2 million relating to the acquisition of a vessel. Cash from results of operations in 2015 was also higher than in 2016 due to improved revenues resulting from improving drybulk spot market charter rates. Cash used in operating activities for the year ended December 31, 2016 was primarily due to the payment of approximately $23.0 million for the final installment relating to the delivery of a tanker and movements in working capital in March 2016.
Cash (used in)/generated from investing activities. Cash used in investing activities decreased by $33.7 million to an outflow of $2.1 million for the year ended December 31, 2017 as compared to $35.7 million for the year ended December 31, 2016. Cash used in investing activities for the year ended December 31, 2017 was primarily the result of small purchases of plant and equipment.
Cash used in investing activities decreased by $19.9 million to $35.7 million for the year ended December 31, 2016 as compared to $55.6 million for the year ended December 31, 2015. Cash used in investing activities for the year ended December 31, 2016 and for the year ended December 31, 2015 was primarily the result of investment installments made to IVS Bulk under terms of the IVS Bulk joint venture agreement relating to the twelve vessels built and delivered to the joint venture and repayments of loans to the holding company and related companies.
Cash (used in)/generated from financing activities. Cash used in financing activities increased by $67.1 million to an outflow of $19.3 million for the year ended December 31, 2017, as compared to an inflow of $47.7 million for the year ended December 31, 2016. Cash used in financing activities for the year ended December 31, 2017 was primarily the result of loan repayments (including intercompany loans), share capital issued and dividends paid.
Cash generated from financing activities increased by $81 million to $47.7 million for the year ended December 31, 2016, as compared to $33.3 million used in financing activities for the year ended December 31, 2015. Cash generated from financing activities for the year ended December 31, 2016 was primarily the result of the drawdown of the remaining availability under our revolving credit facility in the amount of $30.0 million and a $37.0 million short-term loan from Parent, $22.3 million of which was repaid in January 2017 and regular quarterly principal and interest payments. Cash used in financing activities for the year ended December 31, 2015 was the result of regular quarterly principal and interest payments under our credit facility which were offset by the $10 million that was drawn on existing revolving credit facilities.
Capital Expenditures
We make capital expenditures from time to time in connection with drydocking activities and maintenance in the ordinary course and in order to comply with environmental and other governmental regulations and in connection with our vessel acquisitions.
We currently have no newbuilding vessels under construction, however, we have entered into newbuilding contracts in the past, and expect that we or our joint ventures will enter in to additional newbuilding contracts in the future. In addition to any acquisitions that we may make in the future, the Leopard Tankers joint venture with Vitol may be terminated at any time by either party. If that agreement is terminated, we may acquire two vessels and each of us or our joint venture partner might also purchase one or two of the vessels that would otherwise have been acquired by the other party if such party declines to do so. As discussed above under "Item 4. Information on the CompanyOur Joint Ventures", we also may enter into discussions after the Spin-Off with our IVS Bulk joint venture partners to explore the possibility of purchasing the vessels owned by IVS Bulk in exchange for Grindrod Shipping equity and/or other cash consideration. In addition, we may also explore purchases of vessels held in other joint ventures in the future.
In addition to acquisitions that we may undertake in future periods, we will incur additional expenditures due to drydockings for our Fleet. The location of the drydock will be decided when the vessel is scheduled to drydock. We estimate our drydocking costs, including capitalized costs incurred during drydocking related to vessels and vessel equipment, and scheduled off-hire days for our Fleet through 2019 (including the proportionate costs for our joint venture vessels) to be:
Year
|
Estimated
Drydocking Cost |
Estimated
Off-hire Days |
|||
---|---|---|---|---|---|
|
(U.S. dollars)
|
|
|||
2018 |
$ | 6.9 million | 132.80 days | ||
2019 |
$ | 4.5 million | 60.76 days |
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Actual costs will vary based on various factors, including where the drydockings are actually performed. We expect to fund these costs with cash from operations. These costs do not include drydock expense items that are reflected in vessel operating costs or costs associated with the installation of ballast water treatment systems.
Actual length of drydocking will vary based on the condition of the vessel, yard schedules and other factors. Higher repairs and maintenance expenses during drydocking for vessels which are over 15 years old typically result in a higher number of off-hire days depending on the condition of the vessel.
For the years ended December 31, 2017, 2016 and 2015, we incurred a total of $6.1 million, $3.8 million and $6.9 million of drydocking costs, respectively, excluding costs incurred during drydocking that were capitalized to vessel assets or vessel equipment.
During 2017, 14 of our vessels (of which seven are held in joint ventures) completed their scheduled drydockings. We estimate that 15 of our vessels (of which eight are held in joint ventures) will be drydocked during 2018.
Description of Indebtedness
Below is a summary of our significant debt obligations.
Loan Agreements
$50.0 Million Senior Secured Credit Facility
On August 26, 2010, GSPL entered into a $50.0 million senior secured term loan facility, as has been amended from time to time, with Standard Chartered Bank relating to four handysize drybulk carriers. The facility originally bore interest at LIBOR plus a margin of 2.95% per annum. On August 31, 2017, the interest rate was increased to LIBOR plus a margin of 3.04% per annum. This facility matures on August 30, 2018. The facility is secured by, among other things, (a) a first priority mortgage on each of four handysize drybulk carriers, each owned by a subsidiary of GSPL, (b) a guarantee from each of the drybulk carrier owning subsidiaries and (c) security over the shares in the GSPL subsidiaries owning the four drybulk carriers. As of December 31, 2017, the outstanding balance on this facility was approximately $12.3 million.
$123.0 Million Senior Secured Credit Facility
On July 7, 2011, GSPL entered into a $123.0 million senior secured term loan and revolving credit facility, as has been amended from time to time, with Credit Agricole Corporate and Investment Bank, Standard Chartered Bank (Singapore Branch), DVB Group Merchant Bank (Asia) Limited and BNP Paribas, Singapore Branch relating to six handysize drybulk carriers and three tankers. The facility is made up of a term loan facility of $73.0 million and a revolving credit facility of $50.0 million. The facility originally bore interest at LIBOR plus a margin of 2.25% per annum. On January 7, 2017, the interest rate was increased to LIBOR plus a margin of 2.50% per annum. This facility matures on July 7, 2018. The facility is currently secured by, among other things, (a) a first priority mortgage on each of the nine vessels, (b) a guarantee from each of the GSPL subsidiaries owning the nine vessels and (c) security over the shares in the GSPL subsidiaries owning the nine vessels. As of December 31, 2017, the outstanding balance on the term loan facility was approximately $9.5 million, the balance of the revolving credit facility is $45.0 million and $5.0 million of the revolving credit facility remained undrawn.
$21.0 Million Senior Secured Credit Facility
On March 30, 2017, three subsidiaries of GSPL entered into a $21.0 million senior secured term loan facility, as has been amended from time to time, with Credit Agricole Corporate and Investment Bank relating to two tankers and one handysize drybulk carrier. The facility bears interest at LIBOR plus a margin of 2.65% per annum and matures on June 30, 2018. The facility is currently secured by, among other things, (a) a first priority mortgage on each of the three vessels, (b) security over the shares in the GSPL subsidiaries owning the three vessels and (c) a guarantee from GSPL. As of December 31, 2017, the outstanding balance on this loan was approximately $19.0 million.
$27.0 Million Senior Secured Credit Facility
On December 9, 2016, a subsidiary of GSPL entered into a $27.0 million senior secured term loan facility, as has been amended from time to time, with DVB Bank SE Singapore Branch relating to one medium range tanker. The facility bears interest at LIBOR plus a margin of 2.45% per annum and matures on
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January 11, 2021, with the option to extend for a further two years. The facility is currently secured by, among other things, (a) a first priority mortgage over the tanker and (b) guarantees from each of GSPL and the Parent. As of December 31, 2017, there was an outstanding balance under this facility of approximately $22.9 million.
To the extent any of these loans mature in the near-term, we expect to refinance these loans with the lenders. In addition, in connection with the Spin-Off, we are in discussions with our lenders to release any guarantees issued by Parent to the extent any such loans are guaranteed by Parent.
Loan Covenants
All of the credit facilities referred to above contain, among other conditions and obligations, financial covenants the most stringent of which require GSPL and its subsidiaries to maintain on a consolidated basis:
Further, each facility contains a provision requiring a minimum value of the collateral for that facility, such that the aggregate fair market value of the vessels securing that facility plus any additional security securing that facility is between 125% and 154% of the relevant debt amount (depending on the relevant facility agreement and the type and age of the vessels securing the loan). If any of these thresholds is not met, we may be required to prepay a portion of the relevant loan or provide additional collateral security to eliminate the shortfall.
Certain of the credit facilities referred to above also contain, among other conditions, restrictive covenants which could or would restrict our ability to:
A violation of any of the financial or restrictive covenants, or various other provisions, contained in the credit facilities described above and under "Off-Balance Sheet Arrangements" below may constitute an event of default under the relevant credit facility, which, unless cured (if permitted, and capable of being cured), or waived or modified by the relevant banks, provides those banks with the right to, among other things (and as the case may be), require the relevant borrowers or other obligors to post additional collateral, enhance their equity and liquidity, increase the interest payable, pay down the relevant indebtedness to a level where compliance with relevant loan covenants are met, sell vessels, reclassify indebtedness as current liabilities, accelerate indebtedness, enforce security on fleet vessels and the other assets securing the credit facilities, and make demand under guarantees, which would impair our ability to continue to conduct our business.
Furthermore, many of the credit facilities contain cross-default provisions. A cross-default provision in one facility means that an event of default under one or more of the other facilities could, subject to any applicable thresholds, result in an event of default occurring under the first facility. Because of the presence of cross-default provisions in the facilities, the refusal of the lenders under any of the credit facilities to grant or extend a waiver could result in certain indebtedness being accelerated, even if the other lenders under the other credit facilities have waived defaults under their respective credit facilities. If any of our secured indebtedness is accelerated in full or in part, it could be difficult in the current financing environment for us to refinance the relevant debt or obtain additional financing in such circumstances and we could lose vessels and other assets securing the credit facilities if the lenders foreclose their security, which would adversely affect our ability to conduct our business.
Moreover, in connection with any waivers of or amendments to the credit facilities that have been obtained, or may be obtained in the future, the banks may impose additional operating and financial
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restrictions or modify the terms of the existing credit facilities. These restrictions may further restrict our ability to, among other things, pay dividends, make capital expenditures or incur additional indebtedness, including through the issuance of guarantees. In addition, the banks may require the payment of additional fees, require prepayment of a portion of the indebtedness owed to them, accelerate the amortization schedule for facility indebtedness and increase the interest rates charged on outstanding indebtedness.
As of December 31, 2017, GSPL, the borrowers and the other GSPL subsidiaries were in compliance with all of the financial and restrictive covenants contained in the credit facilities or have received a waiver, including the joint venture debt described below under "Off-Balance Sheet Arrangements", entered into as of that date.
See Note 18 to our combined financial statements for further details regarding the credit facilities.
Trend Information
Our results of operations depend primarily on the charter hire rates that we are able to realize for our vessels, which depend on demand and supply dynamics characterizing the drybulk and tanker markets at any given time. For other trends affecting our business, please see other discussions under "Factors Affecting our Results of Operations and Financial Condition" above.
Off Balance Sheet Arrangements
On March 31, 2009, one of our joint ventures with Mitsui & Co. entered into a loan facility agreement with a Mitsui related party, Mitsui & Co. Financial Services (Asia) Ltd for a credit facility of approximately $17.1 million, bearing interest at the Tokyo Interbank Offered Rate, or TIBOR, plus a margin of 0.7% per annum. Our joint venture partner provided a guarantee for 100% of the loan amount, and we have provided a guarantee to our joint venture partner for 51% of the outstanding loan amount that the joint venture partner is required to pay under their guarantee. As of December 31, 2017, $13.1 million remained outstanding under such facility.
One of our tanker joint ventures entered into a standard ship management agreement with a third-party ship management company for the management of the joint venture's ships. As part of the arrangement, we have provided a guarantee to the third-party ship management company for performance by our joint venture of its liabilities and responsibilities under the agreement.
As at December 31, 2017, 2016 and 2015, GSPL provided financial support to certain subsidiaries of our joint ventures for $63.2 million, $5.3 million and $4.5 million respectively, to enable them to meet their obligations as and when they come due for at least 12 months from the respective year ends. The increase in support at December 31, 2017 relates to our Leopard Tankers joint venture and represents our proportionate share of funding obligations under the joint venture agreement relating to maturing debt obligations of the joint venture.
In addition, we and Vitol have each guaranteed to the financiers of the Leopard Tankers credit facility up to 50% of the scheduled interest and principal payments of the $138.5 million Leopard Tankers credit facility (excluding any balloon payment at maturity), bearing interest at LIBOR plus a margin of 3.0% per annum. As of December 31, 2017, $77.6 remained outstanding under such facility. We have also provided an undertaking to those financiers to ensure a minimum working capital balance of $250,000 for each of the vessels owned by Leopard Tankers, but in no event are we required to provide more than 50% of such working capital shortfalls.
Charter Hire Obligations
We are committed to make certain charter hire payments to third parties for chartered-in vessels. These arrangements are accounted for as operating leases. Please see "Contractual Obligations and Contingencies" below for these and our other contractual obligations and commitments.
Contractual Obligations and Contingencies
Our contractual obligations and commercial commitments consist primarily of long-term debt and time charter agreements, as described below.
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The following table summarizes our contractual obligations on the balance sheet as of December 31, 2017 (these amounts do not include future interest payments):
|
Payments Due by Period | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Total |
Less Than
1 Year |
13 Years | 35 Years |
More than
5 Years |
|||||||||||
Secured Bank Loans |
$ | 116,705 | $ | 89,573 | $ | 7,011 | $ | 20,121 | $ | | ||||||
Time Charter Agreements |
180,698 | 80,350 | 69,137 | 25,040 | 6,171 | |||||||||||
Office, Residential and Other Leases |
31,316 | 5,991 | 10,793 | 8,753 | 5,779 | |||||||||||
| | | | | | | | | | | | | | | | |
Total contractual obligations |
$ | 328,719 | $ | 175,914 | $ | 86,941 | $ | 53,914 | $ | 11,950 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Recent Accounting Pronouncements
Financial Instruments
IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for de-recognition, and again in November 2015 to include the new requirements for general hedge accounting. In July 2016, another revised version of IFRS 9 was issued primarily to include (1) impairment requirements for financial assets and (2) limited amendments to the classification and measurement requirements by introducing a 'fair value through other comprehensive income', or FVTOCI, measurement category for certain simple debt instruments. The amendments to IFRS 9 will be effective for annual periods beginning on or after January 1, 2018.
Key requirements of IFRS 9
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been overhauled and replaced with the principle of an 'economic relationship'. Retrospective assessment of hedge effectiveness is no longer required. Enhanced disclosure requirements about an entity's risk management activities have also been introduced.
Based on an analysis of our financial assets and financial liabilities as at December 31, 2017 on the basis of the facts and circumstances that exist at that date, we have assessed the impact of IFRS 9 to our consolidated financial statements as follows:
Classification and measurement
All financial assets and liabilities will continue to be measured on the same bases as is currently adopted under IAS 39.
Impairment
Financial assets measured at amortised cost will be subject to the impairment provision of IFRS 9.
We expect to apply the simplified approach to recognize lifetime expected credit losses for its trade receivables as required or permitted by IFRS 9. Accordingly, we expect to recognize lifetime and 12-month expected credit losses for the trade receivables.
We anticipate that the application of the expected credit loss model of IFRS 9 will result in earlier recognition of credit losses for the trade receivable and an increase in the amount of loss allowance recognized but we do not expect that it will have a material impact on our combined financial statements.
Hedge accounting
We do not anticipate that the application of the IFRS 9 hedge accounting requirements will have a material impact on our consolidated financial statements.
Revenue from Contracts with Customers
In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective. The amendments to IFRS 15 will be effective for annual periods beginning on or after January 1, 2018.
The core principal of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a five-step approach to revenue recognition:
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
Under IFRS 15, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e., when 'control' of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.
Further to the above IFRS 15 has been amended to clarify three aspects of the standard (identifying performance obligations, principal versus agent considerations, and licensing) and to provide some transition relief for modified contracts and completed contracts.
We plan to adopt the new standard on the required effective date using the modified retrospective method. Our significant revenue streams are freight revenue and charter hire revenue. The latter includes a lease component which is therefore out of scope of IFRS 15.
We have preliminarily assessed that each voyage under a freight revenue contract has been considered as a performance obligation. The transaction price is agreed with the customer for all types of contracts. The voyage result (revenue and voyage related costs) recognized during the voyage is based on estimates of costs and the duration of the voyage. According to IFRS 15 the revenue should be recognized, when the
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entity satisfies a performance obligation that is when a voyage is carried out, based on a contract with a customer. As such, revenue is recognized over time from the point when there is a transfer of control to the customer (i.e., when the ship is ready for load of cargo until the discharge of cargo at the destination).
Under the existing revenue standard, we recognize freight revenue over time from the loading of cargo to the discharge of cargo, except for freight revenue earned within the pools, which are recognized over time from the discharge of cargo in the previous voyage to the discharge of cargo in the current voyage. As such, the adoption of IFRS 15 will impact uncompleted voyages in the pools at the reporting date. Based on our analysis, we do not expect the effect of the changed revenue recognition to be material.
Apart from the providing more extensive disclosure on our revenue transaction and the timing recognition of the above revenue, we do not anticipate that the application of IFRS 15 will have a significant impact on our financial position and/or financial performance.
Leases
IFRS 16 specifies how an IFRS reporter will recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors will continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17. The changes to IFRS 16 will become effective for annual periods beginning on or after January 1, 2019.
We anticipate that the application of IFRS 16 in the future may have a material impact on amounts reported in respect of our financial assets and financial liabilities as there are a significant number of leases in operation. Assets will increase on the recognition of "right to use" of an underlying asset and liabilities will increase for the obligation to make lease payments. The profit and loss will be affected by an increase in depreciation of the asset and additional interest expenses although lease expenses will reduce. IFRS 16 will become effective for us in 2019 and we will be assessing the financial impact early in 2018. Currently, it is not possible to provide a reasonable estimate of the effect of IFRS 16 until we have completed a detailed review. We do not plan to early adopt IFRS 16.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors
The table below details the names of, and information about, the individuals that are currently serving as, or that we expect to serve as, directors or alternate directors of Grindrod Shipping:
Name
|
Age | Position | Term Expires | |||
---|---|---|---|---|---|---|
Cato Brahde |
63 | Director / Chairman | First Annual General Meeting | |||
Michael Hankinson (1) |
68 | Director | First Annual General Meeting | |||
John Herholdt |
69 | Director | First Annual General Meeting | |||
Quah Ban Huat |
51 | Director | First Annual General Meeting | |||
Stephen Griffiths |
57 | Director | * | |||
Pieter Uys (1) |
55 | Director | First Annual General Meeting | |||
Martyn Wade |
58 | Director | * | |||
Alternate Directors: |
||||||
Andrew Waller (1)(2) |
55 | Alternate Director | First Annual General Meeting |
Cato Brahde has served as member of our board of directors since November 2, 2017, and was appointed as Chairman on November 28, 2017. Mr. Brahde was a director of Parent from 2013 to 2016. He currently acts as Chief Investment Officer for Tufton Oceanic's equity investment funds. He joined Tufton Oceanic in 1989 where he was responsible for private and public shipping equity investments, among which he managed a fleet of 30 standby support vessels for the offshore oil and gas industry in the North Sea. Mr. Brahde previously worked as a naval architect and project manager with Brown and Root, a subsidiary of US oil services group Halliburton, from 1978 to 1989. During 1977 and 1978 he served in the Royal Norwegian Navy. Mr. Brahde qualified as a naval architect at the University of Newcastle upon Tyne, gained a Master of Science in Business Administration degree from Boston University and holds a diploma in Company Direction.
Michael Hankinson will serve as a member of our board of directors beginning on the Listing Date. Mr. Hankinson has served as a director of Parent since 2009, Executive Chairman from June 2017 to date and prior to that as its Non-Executive Chairman since 2014. Mr. Hankinson has also been the non-executive Chairman of The Spar Group Limited since 2004. In 1997, Mr. Hankinson was appointed its Chief Executive at Dunlop Limited, a tire and rubber manufacturer listed on the Johannesburg Stock Exchange, and held this position until 2006. In 1976, Mr. Hankinson joined Romatex Limited as Financial Manager and in 1994 was appointed as Chief Executive Officer. Mr. Hankinson has also held numerous non-executive positions on various boards related to the textile, tyre and sugar industries as well at Transnet Limited. Mr. Hankinson qualified as a Chartered Accountant (South Africa) in 1976 after completing his articles at Deloitte and Touche.
John Herholdt has served as a member of our board of directors since November 6, 2017. Between 2012 and 2015, Mr Herholdt consulted the Maitland Group. From 1987 to 2012 Mr Herholdt served as a London based senior partner of the Maitland Group with offices in Europe, South Africa, North America and elsewhere. He also served as a Director on the boards of several of its subsidiaries. The London office of Shepstone and Wylie was established by Mr Herholdt in 1985 and in 1987 merged the Shepstone and Wylie operation with that of Maitlands, then the offshore arm of the South African law firm Webber Wentzel. He remained associated with Shepstone and Wylie until 2012. In 1984, Mr Herholdt joined the South African law firm Shepstone and Wylie as a senior partner in the maritime department, acting primarily for vessel owners and P&I Clubs. In 1979, Mr Herholdt was appointed a Director of Leo Raphaely and Sons, an international commodity trading firm. From 1972 to 1979, Mr Herholdt was a partner of the law firm Goodrickes and specialised in maritime and commodities law. His responsibilities included all maritime and commodity issues, as well as, legal, commercial, and tax matters. Mr Herholdt
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obtained his Bachelor of Arts in Law Degree in 1969 and his Bachelor of Laws degree in 1971, and was admitted as an attorney of the Supreme Court of South Africa in 1972.
Quah Ban Huat has served as a member of our board of directors since November 2, 2017. He is a consultant at KPMG Corporate Finance and a senior advisor to the Chairman of Sunjoy Group. Mr. Quah specializes in mergers & acquisitions, structuring and financing. In addition, he is also a director of AP Oil International Limited, Samudera Shipping Line Ltd, Deutsche Boerse Asia Holding Pte. Ltd., Eurex Clearing Asia Pte. Ltd., Eurex Exchange Asia Pte. Ltd. and Primeur Holdings Pte. Ltd. and its subsidiary. Prior to that, Mr. Quah served as a director on the boards of mDR Ltd from 2014 to 2017 and Croesus Asset Management Pte. Ltd. From 2012 to 2017 he held various key finance positions including Regional Business Area Controller at Deutsche Bank for its Asia Pacific Money Markets and Treasury operations, Group Finance Director at the IMC Group, Chief Financial Officer at City Gas Pte. Ltd. and Rickmers Trust Management Pte. Ltd. Mr. Quah qualified as an accountant with the Institute of Chartered Accountants of England and Wales and the Association of Certified Chartered Accountants. He completed his articles with Benjamin Taylor & Co and was a manager at the banking division of Coopers and Lybrand prior to joining Deutsche Bank in London.
Stephen Griffiths has served as a member of our board of directors and as our Chief Financial Officer since November 7, 2017, and has also served as Chief Financial Officer of Parent's shipping business since April, 2009. Mr. Griffiths joined Grindrod Limited in 2004 as Group Financial Manager. Previously, Mr. Griffiths joined the Reunert Group in 1989 and was appointed Financial Director of a Reunert Group subsidiary in 1995. Mr. Griffiths qualified as a Chartered Accountant (South Africa) in 1985 and completed his articles at Hudson, Langham, Morrison and Co.
Pieter Uys will serve as a member of our board of directors beginning on the Listing Date. Mr. Uys has been a director of Parent's board of directors since August 2013. Mr. Uys is currently a director of Mediclinic, Dark Fibre Africa, Seacom, Parent, Invenfin, Grindrod Bank and Kagiso Tiso Holdings. Since 2013, Mr. Uys has served as an investment executive for Remgro. From 2008 to 2012 Mr. Uys was Chief Executive Officer of the Vodacom Group. Prior to that, Mr. Uys served as Managing Director of Vodacom South Africa since 2001, and as Vodacom Group Chief Operating Officer since 2004. From 1993 to 2001, Mr. Uys was an employee at Vodacom as a member of the initial engineering team. Mr. Uys holds a Bachelor of Science degree in Engineering, a Masters in Engineering degree from the University of Stellenbosch and a Master of Business Administration degree from the Stellenbosch Business School.
Martyn Wade has served as a member of our board of directors since November 15, 2017. Mr. Wade served on the Grindrod Limited board from November 2011 until November 1, 2017. Mr. Wade continues to serve as the Chief Executive Officer of GSPL, a role he has been in since November 2011. Mr. Wade is currently a director of major international subsidiary companies, The UK Freight Demurrage & Defense Association (UK) and a member of the advisory panel to the Singapore Maritime Foundation. Mr. Wade has 40 years international shipping experience and has worked for vessel owners, operators and shipbrokers in London, Johannesburg, New York and now Singapore. The companies Mr. Wade has worked for include Van Ommeren UK, Simpson Spence and Young Johannesburg, Clipper Bulk USA and HSBC Shipping Services London. Mr. Wade is a member of the Baltic Exchange having been first elected in 1979.
Andrew Waller will serve as an Alternate Director beginning on the Listing Date. In 2011, Mr. Waller was appointed to his current role as an Executive Director and CFO of Parent. Mr. Waller is currently a director of various local and international subsidiaries. Mr. Waller's experience includes acquisitions and disposals across Parent's divisions and across geographies. Mr. Waller qualified as a Chartered Accountant (South Africa) in 1987 and completed his articles at Deloitte and Touche, which included training in Pietermaritzburg and 3 years in Aberdeen and Edinburgh. From 1995 to 2011, Mr. Waller was appointed audit partner in Pietermaritzburg, senior partner in KwaZulu Natal and lead client service partner of the firm's largest clients in South Africa.
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Senior Management
The table below details the names of, and information about, the individuals we expect to serve as Executive Officers:
Name
|
Age | Position | |||
---|---|---|---|---|---|
Martyn Wade |
58 | Chief Executive Officer | |||
Stephen Griffiths |
57 | Chief Financial Officer |
The business address of the persons noted above is Grindrod Shipping's executive office is #03-01 Southpoint, 200 Cantonment Road, Singapore 089763.
Compensation of Directors and Senior Management
Messrs. Wade and Griffiths received compensation from Parent's shipping business during 2017 for their service to Parent's shipping business as its Chief Executive Officer and Chief Financial Officer, respectively. The following table presents information regarding the compensation paid by Parent's shipping business for Messrs. Wade's and Griffith's services to Parent's shipping business for the year ended December 31, 2017.
|
Salary | Bonus |
Other
compensation (1) |
Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Martyn Wade |
$ | 553,589 | $ | 846,991 | $ | 95,148 | $ | 1,495,728 | |||||
Stephen Griffiths |
$ | 188,821 | $ | 105,327 | $ | 365 | $ | 294,513 |
Share-price linked options and forfeitable shares relating to Parent were also awarded to Messrs. Wade and Griffiths in 2017 as follows:
|
Parent
forfeitable shares (1) |
Parent share-price
linked options |
Award/exercise
price (1)(2) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Martyn Wade |
| 146,667 | $ | 1.12 | ||||||
|
| 146,667 | $ | 1.12 | ||||||
|
| 146,666 | $ | 1.12 | ||||||
Stephen Griffiths |
150,000 | | $ | 1.05 | ||||||
|
| 48,000 | $ | 1.12 | ||||||
|
| 48,000 | $ | 1.12 | ||||||
|
| 48,000 | $ | 1.12 |
Following the Spin-Off, we will not be required to disclose any information about an individual Executive Officer's compensation in our home country and we do not intend to disclose, to our shareholders or otherwise, any information about an individual Executive Officer's compensation going forward, unless Grindrod Shipping's shareholders exercise their power in accordance with the relevant provisions of the Singapore Companies Act to require disclosure of directors' emoluments.
In addition, Executive Officers are eligible for variable compensation under our forfeitable share plan for achieving company-wide objectives and for their individual contribution to our results and objectives. A summary of the forfeitable share plan is below. The following description is only a summary of the material provisions of the forfeitable share plan and is governed in its entirely by the forfeitable share plan which is filed as an exhibit to this registration statement.
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We adopted the forfeitable share plan to provide selected employees with the opportunity to receive compensatory equity awards of our ordinary shares and to serve as a retention mechanism and recruitment tool. The forfeitable share plan also provides participants with the opportunity to share in the success of the company and aligns forfeitable share plan participant interests with the interests of our shareholders. The forfeitable share plan will be administered by the compensation and nomination committee. Participants will receive grants of forfeitable ordinary shares, subject to applicable time and/or performance vesting conditions and other terms, that settle in ordinary shares when vested and are forfeited, in part in or in full, upon certain termination of employment events if not previously vested. Under the terms of the forfeitable share plan, the aggregate number of ordinary shares that may be granted and not yet vested under the forfeitable share plan at any one time shall not exceed 5% of the number of shares in issue (excluding treasury shares) as determined in reference to the day preceding the award.
We will obtain shareholder approval annually to authorize the award and the issuance of ordinary shares under the plan. We have obtained such approval until the conclusion of our first annual general meeting.
We paid an aggregate compensation of $70,000 to our non-executive directors in 2017. On an annual basis, each non-executive director, other than the chairman of the board, will be compensated with a fee of $65,000 for his or her services as one of our directors and an additional fee of $20,000 for his or her services as chairman of one of the board committees or an additional fee of $10,000 for his or her services as a member of one of the board committees. The chairman of the board will receive a total annual fee of $150,000 for his or her services, inclusive of any such services as a director and as a committee chairman or member. Mr. Waller will not receive any fees for services as an Alternate Director. In addition, Messrs. Wade, Hankinson, and Waller are entitled to receive incentive payments from Parent if the Spin-Off is consummated.
Board Practices
Grindrod Shipping's board of directors is expected to be initially comprised of seven directors, including five independent non-executive members. Each of Grindrod Shipping's directors is elected by Grindrod Shipping's shareholders or appointed by the directors pursuant to Grindrod Shipping's constitution. In addition, Mr. Waller will be an Alternate Director appointed by Mr. Hankinson. Mr. Waller will be entitled to notice of directors' meetings and, if Mr. Hankinson is not present at a meeting, will be entitled to vote and be counted in the quorum as a director. Mr. Waller will be entitled to attend, but not vote at, each meeting at which Mr. Hankinson is present. In addition, Mr. Quah is also a director of Samudera Shipping Line Ltd. To the extent that Mr. Quah's service as a member of the board of directors of Samudera Shipping Line Ltd. presents a conflict of interest with respect to any matters involving us, Mr. Quah has agreed to inform our board of directors of any such conflict and recuse himself from any proceedings or vote relating to such matters
At the first annual general meeting following the Spin Off, all of the directors, other than the Chief Executive Officer and the Chief Financial Officer, shall retire from office and shall be eligible for re-election. At each subsequent annual general meeting, one-third of the directors then in office, or if their number is not a multiple of three, the number nearest to one-third, shall retire from office by rotation, provided no director holding office as Chief Executive Officer or Chief Financial Officer shall be subject to retirement by rotation or be taken into account in determining the number of directors to retire. In addition, any director who has been appointed by the directors to fill a vacancy during any given year will be required to retire from office at the next annual general meeting and shall be eligible for re-election at such meeting. Directors holding office as Chief Executive Officer or Chief Financial Officer shall resign from their directorship upon no longer holding such positions.
The directors to retire in every year shall be those who have been longest serving in office since their last re-election or appointment. Where directors were re-elected or appointed on the same day, those to retire shall be agreed amongst themselves or be determined by lot.
A director shall vacate his office upon his resignation, removal, bankruptcy, becoming mentally disordered or disqualification. A director may only be removed from office by or according to resolution of the shareholders.
No director is entitled to any severance benefits on termination of his or her service as a director.
Grindrod Shipping has established two committees of the board of directors: the audit and risk committee and the compensation and nomination committee.
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Audit and Risk Committee
The members of the audit and risk committee are Messrs. Quah (chairman), Herholdt and Brahde. The audit and risk committee, among other things, oversees our financial reporting, risk management and internal controls (in relation to financial, operational, compliance and information technology controls), engages our external auditors and oversees our internal audit activities, tax policies and effectiveness of our legal and compliance systems.
Compensation and Nomination Committee
The members of the compensation and nomination committee are Messrs. Herholdt (chairman) and Brahde, and we expect to appoint Mr. Hankinson to this committee following the Spin-Off. The compensation and nomination committee oversees our compensation policy and the executive compensation policy, approves awards of stock based incentives, approves the individual package of the chief executive officer, reviews and monitors the nomination and appointment process and composition of the board of directors and succession planning of the board, the committees of the board of directors and the performance of the board.
Corporate Governance Practices
Pursuant to an exception under NASDAQ listing standards available to foreign private issuers, we are not required to comply with many of the corporate governance practices followed by U.S. companies under the NASDAQ listing standards. Accordingly, we are exempt from many of NASDAQ's corporate governance practices. We are incorporated under the laws of Singapore and have elected to voluntarily comply with the relevant guidelines of the 2012 Code of Corporate Governance issued by the Monetary Authority of Singapore, or the Singapore Code. In connection with the expected listing of our ordinary shares on NASDAQ, we have certified to NASDAQ that our corporate governance practices are in compliance with, and are not prohibited by, Singapore law. Set forth below is a list of the significant differences between our corporate governance practices and NASDAQ listing standards applicable to listed U.S. companies.
Independence of Directors. NASDAQ requires that a U.S.-listed company maintain a majority of independent directors. Our board of directors will consist of seven directors, three of whom are considered "independent" under Rule 10A-3 promulgated under the Exchange Act and under the rules of NASDAQ. Under the Singapore Code, our board of directors is not required to consist of a majority of independent directors. Under the Singapore Code, only one-third of our board of directors is required to be independent if the chairman of our board of directors is independent. However, the determination of independence under the Singapore Code is different from NASDAQ standards.
Compensation and Nomination Committee. NASDAQ requires that a listed U.S. company have a compensation committee consisting only of independent directors and that director nominees be selected or recommended for the board's selection by either a vote in which only independent directors participate or a nominations committee comprised solely of independent directors. Under the Singapore Code, a company's remuneration committee and nominating committee, which we combine as our compensation and nomination committee, are not required to consist entirely of independent directors. The Singapore Code requires each of these committees be comprised of three directors, a majority of whom should be independent (including the chairman or chairmen of such committee or committees), and that all members of the remuneration committee be non-executive directors. Our compensation and nomination committee currently consists of Messrs. Herholdt and Brahde, and we expect to appoint Mr. Hankinson to this committee following the Spin-Off, all of whom are non-executive directors under the Singapore Code.
Audit and Risk Committee. NASDAQ requires, among other things, that a U.S.-listed company have an audit committee comprised of three entirely independent directors. The Singapore Code requires an audit committee to be comprised of three directors, a majority of whom should be independent (including the chairman of such committee), and that all members of the audit committee be non-executive directors. Our audit and risk committee currently consists of Messrs. Quah, Herholdt and Brahde, all of whom are independent and non-executive directors under the Singapore Code and "independent" under Rule 10A-3 promulgated under the Exchange Act.
Executive Sessions. NASDAQ requires that the independent directors of a U.S.-listed company have regularly scheduled meetings at which only independent directors are present, or executive sessions. The Singapore Code provides that the independent directors should meet periodically without the presence of the other directors.
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Quorum. NASDAQ requires that a U.S.-listed company's bylaws provide for a quorum of at least 33 1/3 percent of the outstanding shares of the company's common voting stock. Our constitution provides that shareholders holding an aggregate not less than 15 percent of the issued and fully paid shares in the capital of the company, present in person or by proxy, shall be a quorum. The Singapore Code does not prescribe a quorum requirement.
Employees
As of December 31, 2017, we had approximately 808 employees, of which approximately 639 seagoing staff serve on the vessels that we manage and 169 provide general management, financial management, and commercial and technical management to the vessels that we manage. Our seafarers are represented by collective bargaining agreements but we have not experienced a work stoppage in the past few years. Seafarers employed by our vessel managers are unionized under various jurisdictions and are employed under various collective bargaining agreements which does expose us to a risk of potential labor unrest at times when those collective bargaining agreements are being re-negotiated.
Share Ownership of Directors and Executive Officers
All Grindrod Shipping shares are currently held by the founding shareholder. Therefore, no shares of Grindrod Shipping are held by the Directors or Executive Officers prior to the consummation of the Spin-Off.
The following sets forth, to the knowledge of Grindrod Shipping's management, the total amount of ordinary shares of Parent directly or indirectly owned by Grindrod Shipping's current and expected Directors, Alternate Directors and Executive Officers as of December 31, 2017 and the expected ownership by those individuals of Grindrod Shipping ordinary shares following the Spin-Off:
Holder
|
Parent
Ordinary Shares |
Grindrod
Shipping Ordinary Shares (1) |
Percentage
Ownership (2) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Cato Brahde |
* | * | * | |||||||
Michael Hankinson |
* | * | * | |||||||
John Herholdt |
* | * | * | |||||||
Quah Ban Huat |
* | * | * | |||||||
Stephen Griffiths |
* | * | * | |||||||
Pieter Uys |
* | * | * | |||||||
Martyn Wade |
* | * | * | |||||||
Andrew Waller |
* | * | * |
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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
As of June 15, 2018, which we refer to as the Record Date for the Spin-Off, the issued share capital of Grindrod Shipping consisted of 1 ordinary share, which was held by the founding shareholder. As of the Closing Date, the ordinary shareholders of Parent as at the Record Date shall be the same as the ordinary shareholders of Grindrod Shipping other than with respect to the rounding of any fractional interests. Please see "Item 9. The Offer and ListingOffer and Listing DetailsMechanics of the Spin-Off".
To our knowledge: (1) no corporation or foreign government owns more than 50% of our outstanding ordinary shares; and (2) there are no arrangements the operation of which may at a subsequent date result in a change in control of Grindrod Shipping. To the knowledge of Grindrod Shipping's management, after the Spin-Off, there will be no controlling shareholder of Grindrod Shipping.
A list of the individuals and organizations holding, to the knowledge of Grindrod Shipping's management, directly or indirectly, 5% or more of its issued share capital of Parent as of December 31, 2017 is set forth below.
Beneficial owner
|
Parent
Ordinary shares |
Grindrod
Shipping Ordinary Shares (1) |
Percentage
Ownership (2) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Remgro Limited |
173,183,235 | 4,329,580 | 22.7 | % | ||||||
Grindrod Investments Proprietary Limited |
76,909,634 | 1,922,740 | 10.1 | % | ||||||
Government Employees Pension Fund |
75,447,442 | 1,886,186 | 9.9 | % | ||||||
Newshelf 1279 Proprietary Limited |
64,000,000 | 1,600,000 | 8.4 | % | ||||||
PSG Konsult |
51,795,817 | 1,294,895 | 6.8 | % |
Except as described in "Item 9. The Offer and ListingOffer and Listing DetailsMechanics of the Spin-Off", there have been no alterations in Grindrod Shipping's share capital as of the date of this registration statement.
None of the above shareholders will hold voting rights which are different from those that will be held by Grindrod Shipping's other shareholders.
Register of Members
As of the date of this registration statement, all Grindrod Shipping ordinary shares were held by the founding shareholder.
Grindrod Shipping's ordinary shares are expected to trade in the United States on the NASDAQ under the symbol "GRIN". The principal non-United States trading market for the ordinary shares of Grindrod Shipping is expected to be the JSE, on which the ordinary shares will trade on the main board of the JSE, with a share code of GRN and under the abbreviated name GRINSHIP. Continental Stock Transfer & Trust Company will serve as transfer agent in the United States and Link Market Services Limited will serve as transfer secretary in South Africa and will each maintain a branch register of members for the ordinary shares listed on each transfer agent's or transfer secretary's respective exchange. In addition, since Grindrod Shipping is a Singapore company, a principal register of members will be made maintained by Grindrod Shipping at its offices in Singapore. See "Item 10. Additional Information General" for additional information about the Singapore register and shareholder rights.
On the Record Date, the number of U.S. record holders of Grindrod Shipping ordinary shares and the percentage of Grindrod Shipping ordinary shares held in the United States is expected to be the same as those of Parent. As of December 1, 2017, 19 record holders of Parent's ordinary shares holding an
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aggregate of 51,442,418 ordinary shares (approximately 6.8%), were listed as having addresses in the United States.
For more information on the listing, please see "Item 9. The Offer and ListingOffer and Listing DetailsMechanics of the Spin-Off".
Related Party Transactions
For a description of our material joint ventures, see "Item 4. Information on the CompanyOur Joint Ventures".
For a description of our financing arrangements with certain of our joint ventures, see "Item 4. Information on the CompanyBusiness OverviewOur Joint Ventures", "Item 5. Operating and Financial Review and ProspectsOff Balance Sheet Arrangements" and Note 10 to our combined financial statements.
For a description of our agreements relating to the Spin-Off, see "Item 10. Additional InformationMaterial Contracts".
Interests of Experts and Counsel
Not applicable.
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Reference is made to Item 18 for a list of all financial statements filed as part of this registration statement. For information on legal proceedings, please refer to "Item 4. Information on the CompanyBusiness OverviewLegal Proceedings".
Dividend Policy and Dividend Distributions
The declaration and payment of dividends, if any, are subject to the discretion of our board of directors. The timing and amount of any dividends declared will depend on, among other things: (i) our earnings, financial condition and cash requirements and available sources of liquidity, (ii) decisions in relation to our growth and leverage strategies, (iii) provisions of Singapore law governing the payment of dividends, (iv) restrictive covenants in our existing and future debt instruments and (v) global financial conditions. See "Item 3. Key InformationRisk FactorsGrindrod Shipping may not have sufficient distributable profits to pay dividends or otherwise distribute cash or assets to shareholders" and "Item 10. Additional InformationDividends".
Significant Changes
Please refer to "Item 5. Operating and Financial Review and ProspectsRecent Developments".
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Offer and Listing Details
Mechanics of the Spin-Off
The Spin-Off will be governed by, and will be carried out in accordance with, the listing requirements for the JSE, or the JSE Listings Requirements, the South African Companies Act No. 71 of 2008, or the Companies Act.
On the Closing Date, the board of directors of Parent will authorize Parent to make a distribution in specie consisting of the Convertible Notes to be distributed on the Closing Date pro rata to all of Parent's ordinary shareholders. Parent's ordinary shareholders will receive one Convertible Note for every 40 shares of Parent's ordinary shares. No fractional Convertible Notes or ordinary shares will be issued in connection with the Spin-Off. When fractional entitlements arise, the number of Convertible Notes issued will be rounded down to the nearest whole number and any fractional entitlement will be settled through a cash payment, in South African rand, for such fractional entitlement, calculated with reference to the implied value per Convertible Note of $16.82, calculated as the aggregate purchase consideration relating to the acquisition of GSPL and GSSA ($320.7 million) divided by the number of Grindrod Shipping ordinary shares (19,063,833). The Convertible Notes will immediately and automatically convert into ordinary shares of Grindrod Shipping following the distribution of the Convertible Notes to Parent's ordinary shareholders. Each Convertible Note will convert into one ordinary share of Grindrod Shipping with shareholders of Grindrod Shipping holding Grindrod Shipping ordinary shares in the same proportion, taking into account the fractional entitlements, as they hold their Parent ordinary shares immediately following the consummation of the Spin-Off. Strate, South Africa's central securities depositary, will automatically update the accounts of its participants with the share numbers, together with any cash payment for fractional entitlements, on the payment date. Such participants will then automatically update the shareholders' accounts under their custody on the same date.
Under Section 46 read with Section 4 of the Companies Act, the abovementioned distribution in specie of the Convertible Notes to Parent's ordinary shareholders must be approved by the board of directors of Parent and can only be given effect to if it reasonably appears that:
The Companies Act requires that the board of directors of Parent acknowledge, by resolution, that they are satisfied that the above requirements are fulfilled in order for the Spin-Off to proceed.
It is currently expected that trading of Grindrod Shipping ordinary shares on the JSE and trading of Grindrod Shipping ordinary shares on the NASDAQ will commence on or about June 18, 2018, or the Listing Date. Shareholders will initially receive Grindrod Shipping ordinary shares registered on the South African branch register. Non-South Africa residents (and those South Africa residents complying with applicable exchange control restrictions) will be able to immediately transfer their Grindrod Shipping ordinary shares to the U.S. branch register. Shareholders who wish to transfer their Grindrod Shipping ordinary shares to the U.S. branch register should contact their broker or CSDP for more information about transferring between the South African branch register and the U.S. branch register.
The board of directors of Parent approved the investigation of the Spin-Off on August 23, 2017. The board of directors of Parent passed the resolution necessary to implement the Spin-Off on March 23, 2018. On or about May 3, 2018, Parent shareholders will be provided a detailed Shareholder Circular, which contains key information including the rationale for and mechanics of the Spin-Off, a timetable of events and financial effects of the distribution. The Spin-Off will be subject to shareholder approval under the JSE Listings Requirements because the transaction consideration, as a percentage of Parent's market capitalization, will exceed 30%. The South African Reserve Bank, or SARB, has granted the necessary regulatory approvals for the Spin-Off. The agreements to effect the Spin-Off will be governed by the laws of South Africa. A copy of the Shareholder Circular is attached as Exhibit 99.1 hereto and is incorporated herein by reference. Grindrod Shipping ordinary shares are expected to list on the NASDAQ and on the JSE on the Listing Date.
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Transfer Restrictions
Prior to the Spin-Off, there has been no public market for our ordinary shares. Future sales of our ordinary shares in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. In addition, because our initial shareholder base upon listing will consist primarily of South African residents who, subject to certain allowances in terms of the Exchange Control Regulations in South Africa, will generally be required to hold their ordinary shares on the JSE, the liquidity of the ordinary shares on the NASDAQ may be adversely impacted. As a result, the initial trading prices of the Grindrod Shipping ordinary shares may not be indicative of future trading prices.
The ordinary shares issued in connection with the Spin-Off will be freely tradable without restriction or further registration under the Securities Act, unless owned by our "affiliates," as that term is defined in Rule 144 under the Securities Act. Ordinary shares owned by affiliates will be subject to certain restrictions on transfer under the U.S. securities laws. Affiliates will only be permitted to sell their shares pursuant to a valid exemption from the registration requirements of the Securities Act or pursuant to an effective registration statement.
In addition, in connection with the Spin-Off, we expect to enter into lock-up agreements with certain of our large shareholders pursuant to which they will generally agree, subject to certain exceptions, not to offer or sell any ordinary share or securities convertible into or exchangeable or exercisable for ordinary shares for a period of six months following the Spin-Off, unless there occurs an event having a material negative impact on the company. In addition, pursuant to the lock-up agreements, these large shareholders will agree to vote in favor of the Spin-Off.
Plan of Distribution
Not applicable.
Markets
The ordinary shares of Grindrod Shipping are expected to be listed and traded on the NASDAQ (symbol "GRIN"). Outside the United States, Grindrod Shipping's ordinary shares are expected to be admitted to trading on the JSE's regulated market and listed on the Main Board of the JSE (symbol "GRN"). For more information on the listing, see "Offer and ListingMechanics of the Spin-Off" above. Because our initial shareholder base upon listing will consist primarily of South African residents who are expected to initially trade their ordinary shares on the JSE and because all Grindrod Shipping ordinary shares will initially be registered on the South African branch share register, the liquidity of the ordinary shares on the NASDAQ may be adversely impacted.
JSE Limited
The JSE was formed in 1887. The JSE provides facilities for the buying and selling of a wide range of securities, including equity and corporate debt securities and warrants in respect of securities, as well as Krugerrands.
The JSE is a self-regulating organization operating under the ultimate supervision of the Ministry of Finance, through the Financial Services Board and its representative, the Registrar of Stock Exchanges. Following the introduction of the Stock Exchanges Control Amendment Act No. 54 of 1995, or the Stock Exchange Act, which provides the statutory framework for the deregulation of the JSE, the JSE's rules were amended with effect from November 8, 1995. These amendments removed the restrictions on corporate membership and allowed stockbrokers to form limited liability corporate entities. Members were, for the first time, also required to keep client funds in trust accounts separate from members' own funds. Further rules to complete the deregulation of the JSE, as envisaged by the Stock Exchange Act, were promulgated during 1996 to permit members of the JSE to trade either as agents or as principals in any transaction in equities and to allow members to negotiate freely the brokerage commissions payable on agency transactions in equities. With effect from 1996, screen trading commenced on the JSE. The Securities Services Act No. 36 of 2004 came into effect on January 18, 2005. This act consolidates and amends the laws relating to the regulation and control of exchanges and securities trading, the regulation and control of central securities depositories and the custody and administration of securities and the prohibition of insider trading.
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The market capitalization of companies listed on the stock exchange operated by the JSE Limited was approximately $1,231 billion as of December 31, 2017. The actual float available for public trading is significantly smaller than the aggregate market capitalization because of the large number of long-term holdings by listed holding companies in listed subsidiaries and associates, the existence of listed pyramid companies and cross-holdings between listed companies. The year to date liquidity on the JSE (measured by reference to the total market value of securities traded as a percentage of the total market capitalization) was 31.06% for the fiscal year ended December 31, 2017. Trading is concentrated in a small, but growing, number of companies. As of December 31, 2017, there were 324 listed companies on the JSE.
South Africa was included in the Morgan Stanley Capital International Emerging Markets Free Index and the International Finance Corporation Investable Index in March 1995 and May 1998, respectively. South Africa has a significant representation in these emerging market indices.
Strate Limited, or Strate, is a South African Central Securities Depository. Strate is licensed to be an independent provider of post-trade products and services for the financial markets. Being internationally recognized as a Financial Market Infrastructure, Strate provides sound risk management and a world-class service, to support and promote the safety and efficiency of the financial markets. Strate provides electronic settlement of equities, bonds and money market securities and provides collateral management services.
Investors are given the choice of either holding their securities in dematerialised form in the Central Securities Depositary or retaining their share certificates. Shareholders who elect to retain their share certificates are not able to trade their shares on the JSE, although they may trade their shares off-market. Settlement of dematerialised shares traded electronically on the JSE is made three days after each trade (T+3).
Selling Shareholders
Not applicable.
Dilution
Not applicable.
Expenses of the Issue
Not applicable.
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ITEM 10. ADDITIONAL INFORMATION
General
For the purposes of this section, references to "shareholders" mean those shareholders whose names and number of shares are entered in Grindrod Shipping's register of members. Only persons who are registered in Grindrod Shipping's register of members are recognized under Singapore law as shareholders of Grindrod Shipping with legal standing to institute shareholder actions against Grindrod Shipping or otherwise seek to enforce their rights as shareholders. Grindrod Shipping's branch register of members in the United States will be maintained by its transfer agent, Continental Stock Transfer & Trust Company. Grindrod Shipping's branch register of members in South Africa will be maintained by its South African transfer secretary, Link Market Services (Pty) Limited.
The ordinary shares of Grindrod Shipping which are expected to be listed and traded on the NASDAQ are expected to be held through the Depository Trust Company, or DTC. Accordingly, DTC or its nominee, Cede & Co., will be the shareholder of record registered in Grindrod Shipping's register of members. The holder of dematerialised interests in Grindrod Shipping's shares held through DTC or its nominee may become a registered shareholder by exchanging its interest in the shares for certificated shares and being registered in Grindrod Shipping's register of members. The procedures by which a holder of dematerialised interests held through DTC or its nominee may exchange such interests for certificated shares are determined by DTC and Continental Stock Transfer & Trust Company, in accordance with their internal policies and guidelines regulating the withdrawal and exchange of dematerialised interests for certificated shares, and following such an exchange Continental Stock Transfer & Trust Company will perform the procedures to register the shareholder in the register.
Shares may only be traded on the JSE in electronic form as dematerialised shares and will be trading for electronic settlement in terms of the Strate System (an electronic custody, clearing and settlement environment, managed by Strate), for all share transactions concluded on the JSE and off-market (and in terms of which transactions in securities are settled and transfers of ownership in securities are recorded electronically) immediately following the Listing. Dematerialised shares are shares that have been dematerialised (the process whereby physical share certificates are replaced with electronic records evidencing ownership of shares for the purpose of Strate). Accordingly, all Grindrod Shipping shareholders must appoint a Central Securities Depository Participant, or CSDP for shares traded on the JSE, directly or through a broker, to hold the dematerialised Grindrod Shipping shares on their behalf.
If (a) the name of any person is without sufficient cause entered in or omitted from the register of members; or (b) default is made or there is unnecessary delay in entering in the register of members the fact of any person having ceased to be a member, the person aggrieved or any member of the company or the company, may apply to the Singapore courts for rectification of the register of members. The Singapore courts may either refuse the application or order rectification of the register of members, and may direct the company to pay any damages sustained by any party to the application. The Singapore courts will not entertain any application for the rectification of a register of members in respect of an entry which was made in the register of members more than 30 years before the date of the application.
Share Capital
Following the Spin-Off, the issued and fully paid-up share capital of Grindrod Shipping will consist of 19,063,833 ordinary shares. Grindrod Shipping currently has only one class of issued ordinary shares, which have identical rights in all respects and rank equally with one another. Grindrod Shipping's ordinary shares have no par value and there is no requirement to set out an authorized share capital under Singapore law.
Grindrod Shipping's constitution provides that Grindrod Shipping may issue shares of a different class with preferential, deferred, qualified or special rights, privileges or conditions or subject to such restrictions, whether as regards dividend, return of capital, voting or otherwise, as Grindrod Shipping's board of directors may determine, provided always that (subject to any direction to the contrary that may be given by the shareholders in general meeting) any issue of shares for cash to shareholders holding shares of any class shall be offered to such shareholders in proportion as nearly as may be to the number of shares of such class then held by them, the rights attaching to shares of a class other than ordinary shares shall be expressed in the resolution creating the same, and to the extent that any shares of Grindrod Shipping are listed on the JSE, where the shareholders authorize the directors to issue unissued securities and/or grant options to subscribe for unissued securities, as the directors in their discretion deem fit, such corporate action has been approved by the JSE and are subject to the JSE Listings Requirements. The rights
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attached to shares issued upon special conditions must be clearly defined in Grindrod Shipping's constitution. Grindrod Shipping's constitution sets out that the shares of Grindrod Shipping in each class shall rank pari passu . If at any time the share capital is divided into different classes, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of the Singapore Companies Act, whether or not the company is being wound up, be varied or abrogated with the consent in writing of the holders of at least three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of that class.
All ordinary shares to be issued will be fully paid and existing shareholders will not be subject to any calls on shares. Although Singapore law does not recognize the concept of "non-assessability" with respect to newly-issued shares, any purchaser of Grindrod Shipping's shares who has fully paid up all amounts due with respect to such shares will not be subject under Singapore law to any personal liability to contribute to the assets or liabilities of Grindrod Shipping in such purchaser's capacity solely as a holder of such shares. All shares are in registered form. Grindrod Shipping cannot, except in the circumstances permitted by the Singapore Companies Act, grant any financial assistance for the acquisition or proposed acquisition of its own shares.
Constitution
The following description of Grindrod Shipping's constitution is a summary of the constitution that it expects to adopt and is qualified by reference to the constitution, which is filed as an exhibit to this registration statement.
Objects and purposes
Subject to the Singapore Companies Act, any other written law and the constitution, Grindrod Shipping has full capacity to carry on or undertake any business or activity, do any act or enter into any transaction.
Issuances of New Shares
Under Singapore law, new shares may be issued only with the prior approval of Grindrod Shipping's shareholders in a general meeting. General approval may be sought from Grindrod Shipping's shareholders in a general meeting for the issue of shares. Approval, if granted, will lapse at the earliest of:
Prior to the listing, Grindrod Shipping's shareholders will provide approval until the conclusion of our first annual general meeting, to issue new shares (i) up to 25% of the number of ordinary shares outstanding immediately after the Spin-Off to potentially purchase, directly or indirectly, the vessels currently owned by the IVS Bulk joint venture, or similar vessels if those vessels are not available for sale, and (ii) up to 20% of the number of ordinary shares outstanding immediately after the Spin-Off to purchase other vessels, which could dilute the percentage ownership of existing shareholders and negatively impact the price of the ordinary shares. We may, for these and other purposes, such as in connection with share incentive and share option plans (such as our forfeitable share plan, for which we have obtained shareholder approval until the conclusion of our first annual general meeting to issue shares provided that the aggregate number of ordinary shares that may be granted and not yet vested under the forfeitable share plan at any one time shall not exceed 5% of the number of shares in issue (excluding treasury shares) as determined in reference to the day preceding the award), issue additional ordinary shares or securities convertible into ordinary shares. Subject to this and the provisions of the Singapore Companies Act and Grindrod Shipping's constitution, all new shares are under the control of the directors who may allot and issue new shares to such persons on such terms and conditions and with the rights and restrictions as they may think fit to impose. See "Item 3. Key InformationRisk FactorsUnder Singapore law, shareholder approval is required to allow us to issue new shares which could impact our ability to raise capital or consummate
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acquisitions. Any issuance of new shares would dilute the percentage ownership of existing shareholders and could adversely impact the market price of the ordinary shares".
Repurchase of Ordinary Shares
Under Singapore law, repurchases of ordinary shares by us must be approved by shareholder resolutions. The number of ordinary shares that we may buy back cannot exceed 20% of the total number of shares ascertained as at the date of a resolution approving a share buyback mandate.
Preference Shares
Grindrod Shipping's constitution provides that Grindrod Shipping may issue shares of a different class with preferential, deferred, qualified or other special rights, privileges or conditions or subject to such restrictions, whether as regards dividend, return of capital, voting or otherwise as Grindrod Shipping's board of directors may determine. Under the Singapore Companies Act, Grindrod Shipping's preference shareholders will have the right to attend any general meeting insofar as the circumstances set forth below apply and on a poll at such general meeting, to have at least one vote for every preference share held:
Grindrod Shipping's constitution provides that, subject to applicable laws, the holders of securities, other than ordinary shares, and any special shares created for purpose of black economic empowerment in terms of the Broad-Based Black Economic Empowerment Act No.53 of 2003 of South Africa, shall not be entitled to vote on any resolution taken by Grindrod Shipping, save in the following instances
In the event that Grindrod Shipping issues preference shares in the future, in the instances that Grindrod Shipping's preference shareholders are permitted to vote at meetings as set out above, their votes will not carry any special rights or privileges and they shall be entitled to one vote for each share that they hold, provided that their total voting right at such a meeting may not exceed 24.99% of the total voting rights of all shareholders at such meeting.
Grindrod Shipping may, subject to the prior approval in a general meeting of Grindrod Shipping's shareholders, issue preference shares which are, or at Grindrod Shipping's option, subject to redemption provided that such preference shares may not be redeemed out of capital unless:
Further, the shares must be fully paid-up before they are redeemed. Following the Spin-Off, no preferences shares will be outstanding.
Transfer of Ordinary Shares
Subject to applicable securities laws in relevant jurisdictions and Grindrod Shipping's constitution, Grindrod Shipping's ordinary shares are freely transferable. Shares may be transferred by a duly signed instrument of transfer in any usual or common form or in a form acceptable to our directors. The directors may decline to register any transfer unless, among other things, evidence of payment of any stamp duty
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payable with respect to the transfer is provided together with other evidence as the directors may require to show the right of the transferor to make the transfer. Grindrod Shipping will replace lost or destroyed certificates for shares upon notice to Grindrod Shipping and upon, among other things, the applicant furnishing evidence and indemnity as the directors may require and the payment of all applicable fees. See "Item 10. Additional InformationSingapore Tax ConsiderationsStamp Duty".
Election and Re-election of Directors
Under Grindrod Shipping's constitution, Grindrod Shipping's shareholders by ordinary resolution, or Grindrod Shipping's board of directors, may appoint any person to be a director as an additional director or to fill a casual vacancy, provided that any person so appointed by Grindrod Shipping's board of directors shall hold office only until the next annual general meeting, and shall then be eligible for re-election.
Shareholders' Meetings
Grindrod Shipping is required by Singapore law and its constitution to hold an annual general meeting each year, provided that so long as Grindrod Shipping holds its first annual general meeting within 18 months of its incorporation, it need not hold it in the year of its incorporation or in the following year. Each annual general meeting must be held not more than 15 months after the holding of the last preceding annual general meeting, and in each case, not later than six months from Grindrod Shipping's financial year end, being December 31. The directors may convene an extraordinary general meeting whenever they think fit and they must do so upon the written request of shareholders representing not less than one-tenth of the paid-up shares as at the date of deposit of the written request that carry the right to vote at general meetings (disregarding paid-up shares held as treasury shares). In addition, two or more registered shareholders holding not less than one-tenth of Grindrod Shipping's total number of issued shares (excluding Grindrod Shipping's treasury shares) may call a meeting of Grindrod Shipping's shareholders. The Singapore Companies Act requires not less than:
Grindrod Shipping's constitution further provides that in computing the notice period, both the day on which the notice is served, or deemed to be served, and the day for which the notice is given shall be excluded.
Unless otherwise required by law or by Grindrod Shipping's constitution, voting at general meetings is by ordinary resolution, requiring the affirmative vote of a simple majority of the shareholders present in person or represented by proxy at the meeting and entitled to vote on the resolution. An ordinary resolution suffices, for example, for appointments of directors. A special resolution, requiring an affirmative vote of not less than three-fourths of the shareholders present in person or represented by proxy at the meeting and entitled to vote on the resolution, is necessary for certain matters under Singapore law, such as an alteration of Grindrod Shipping's constitution.
Only shareholders who are registered in Grindrod Shipping's register of members, and their proxies, will be entitled to attend, speak and vote at any meeting of shareholders. A shareholder entitled to attend and vote at a meeting of Grindrod Shipping, or at a meeting of any class of shareholders of Grindrod Shipping, shall be entitled to appoint another person or persons, whether a shareholder or not, as his proxy to attend and vote instead of the shareholder at the meeting. A proxy appointed to attend and vote instead of the shareholder shall also have the same right as the shareholder to speak at the meeting, but unless Grindrod Shipping's constitution otherwise provides, (i) a shareholder shall not be entitled to appoint more than two proxies to attend and vote at the same meeting and (ii) where a shareholder appoints two proxies the appointment shall be invalid unless the shareholder specifies the proportions of his holdings to be represented by each proxy.
Voting Rights
Voting at any meeting of shareholders is by a poll. On a poll, every shareholder who is present in person or by proxy or by attorney, or in the case of a corporation, by a representative, has one vote for every share held by him or her or which he or she represents. Proxies need not be shareholders. Only those
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shareholders who are registered in Grindrod Shipping's register of members will be entitled to vote at any meeting of shareholders.
Dividends
No dividend may be paid except out of profits. Any dividends would be limited by the amount of available distributable reserves, which, under Singapore law, will be assessed on the basis of Grindrod Shipping's standalone unconsolidated accounts, which will be based upon IFRS. Under Singapore law, it is also possible to effect a capital reduction exercise to return cash and/or assets to Grindrod Shipping's shareholders. The completion of a capital reduction exercise may require the approval of the Singapore courts, and Grindrod Shipping may not be successful in its attempts to obtain such approval.
Additionally, because Grindrod Shipping is a holding company, Grindrod Shipping's ability to pay cash dividends, or make a distribution-in-kind of the ordinary shares of any of Grindrod Shipping's subsidiaries, may be limited by restrictions on Grindrod Shipping's ability to obtain sufficient funds through dividends from Grindrod Shipping's businesses, including restrictions under the terms of the agreements governing the indebtedness of Grindrod Shipping's businesses. Subject to the foregoing, the payment of cash dividends in the future, if any, will be at the discretion of Grindrod Shipping's board of directors and will depend upon such factors as earnings levels, capital requirements, contractual restrictions, Grindrod Shipping's overall financial condition, available distributable reserves and any other factors deemed relevant by Grindrod Shipping's board of directors. A final dividend may be declared out of profits disclosed by the accounts presented to the annual general meeting, and requires approval of Grindrod Shipping's shareholders. However, Grindrod Shipping's board of directors can declare interim dividends without approval of Grindrod Shipping's shareholders.
Bonus
In a general meeting, Grindrod Shipping's shareholders may, upon the recommendation of the directors, capitalize any reserves or profits and distribute them as fully paid bonus shares to the shareholders in proportion to their shareholdings.
Takeovers
The Singapore Code on Take-overs and Mergers, the Singapore Companies Act and the Securities and Futures Act, Chapter 289 of Singapore regulate, among other things, the acquisition of voting shares of Singapore-incorporated public companies. Any person acquiring an interest, whether by a series of transactions over a period of time or not, either on his own or together with parties acting in concert with such person, in 30% or more of Grindrod Shipping's voting rights, or, if such person holds, either on his own or together with parties acting in concert with such person, between 30% and 50% (both amounts inclusive) of Grindrod Shipping's voting rights, and if such person (or parties acting in concert with such person) acquires additional voting shares representing more than 1% of Grindrod Shipping's voting rights in any six-month period, must, except with the consent of the Securities Industry Council in Singapore, extend a mandatory takeover offer for the remaining voting shares in accordance with the provisions of the Singapore Code on Take-overs and Mergers.
"Parties acting in concert" comprise individuals or companies who, pursuant to an agreement or understanding (whether formal or informal), cooperate, through the acquisition by any of them of shares in a company, to obtain or consolidate effective control of that company. Certain persons are presumed (unless the presumption is rebutted) to be acting in concert with each other. They include:
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Subject to certain exceptions, a mandatory takeover offer must be in cash or be accompanied by a cash alternative at not less than the highest price paid by the offeror or parties acting in concert with the offeror during the offer period and within the six months preceding the acquisition of shares that triggered the mandatory offer obligation.
Under the Singapore Code on Take-overs and Mergers, where effective control of a company is acquired or consolidated by a person, or persons acting in concert, a general offer to all other shareholders is normally required. An offeror must treat all shareholders of the same class in an offeree company equally. A fundamental requirement is that shareholders in the company subject to the takeover offer must be given sufficient information, advice and time to consider and decide on the offer. These legal requirements may impede or delay a takeover of Grindrod Shipping by a third-party.
The Singapore Code on Take-overs and Mergers provides that the board of directors of Grindrod Shipping should bring the offer to the shareholders of Grindrod Shipping in accordance with the Singapore Code on Take-overs and Mergers and refrain from an action which could effectively result in any bona fide offer being frustrated or the shareholders being denied an opportunity to decide on its merits.
Liquidation or Other Return of Capital
On a winding-up or other return of capital, subject to any special rights attaching to any other class of shares, holders of ordinary shares will be entitled to participate in any surplus assets in proportion to their shareholdings.
Limitations on Rights to Hold or Vote Ordinary Shares
Except as discussed above under "Takeovers", there are no limitations imposed by the laws of Singapore or by Grindrod Shipping's constitution on the right of non-resident shareholders to hold or vote ordinary shares.
Limitations of Liability and Indemnification Matters
Grindrod Shipping's constitution currently provides that, subject to the provisions of the Singapore Companies Act and every other act applicable to Grindrod Shipping, every director, auditor, secretary or other officer of Grindrod Shipping or Grindrod Shipping's subsidiaries and affiliates shall be entitled to be indemnified by Grindrod Shipping against all costs, interests, charges, losses, expenses and liabilities incurred by him or her in the execution and discharge of his or her duties (and where he serves at Grindrod Shipping's request as a director, officer, employee or agent of any of Grindrod Shipping's subsidiaries or affiliates) or in relation thereto and in particular and without prejudice to the generality of the foregoing, no director, secretary or other officer of Grindrod Shipping shall be liable for the acts, receipts, neglects or defaults of any other director or officer or for joining in any receipt or other act for conformity or for any loss or expense happening to Grindrod Shipping through the insufficiency or deficiency of title to any property acquired by order of the directors for or on behalf of Grindrod Shipping or for the insufficiency or deficiency of any security in or upon which any of the moneys of Grindrod Shipping shall be invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person with whom any
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moneys, securities or effects shall be deposited or left or for any other loss, damage or misfortune whatever which shall happen in the execution of the duties of his or her office or in relation thereto unless the same shall happen through his or her own negligence, wilful default, breach of duty or breach of trust.
The limitation of liability and indemnification provisions in Grindrod Shipping's constitution may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit Grindrod Shipping and Grindrod Shipping's shareholders. A shareholder's investment may be harmed to the extent Grindrod Shipping pays the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to Grindrod Shipping's directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, Grindrod Shipping has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.
Comparison of Shareholder Rights
Grindrod Shipping is incorporated under the laws of Singapore. The following discussion summarizes material differences between the rights of holders of Grindrod Shipping's ordinary shares and the general rights of holders of the common stock under the laws of the state of Delaware, which result from differences in the laws of Singapore and Delaware.
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This discussion does not purport to be a complete statement of the rights of holders of Grindrod Shipping's ordinary shares under applicable law in Singapore and Grindrod Shipping's constitution or the general rights of holders of the common stock of a corporation under applicable Delaware law.
Delaware | Singapore | |
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Board of Directors | ||
The board of directors must consist of at least one member. The number of directors shall be fixed by, or in a manner provided in, 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. |
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The constitution of companies will typically state the minimum and maximum number of directors as well as provide that the number of directors may be increased or reduced by shareholders via ordinary resolution passed at a general meeting, provided that the number of directors following such increase or reduction is within the maximum and minimum number of directors provided in the constitution and the Singapore Companies Act, respectively. Grindrod Shipping's constitution provides that, unless otherwise determined by a general meeting, the minimum number of directors is five and the maximum number is twelve. |
Limitation on Personal Liability of Directors |
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A corporation's certificate of incorporation may provide for the elimination of personal monetary liability of directors for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director: (i) For any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derived an improper personal benefit. |
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Pursuant to the Singapore Companies Act, any provision (whether in the constitution, contract or otherwise) purporting to exempt a director (to any extent) from any liability that would otherwise attach to him or her in connection with any negligence, default, breach of duty or breach of trust in relation to Grindrod Shipping will be void. Nevertheless, a director can be released by the shareholders of Grindrod Shipping for breaches of duty to Grindrod Shipping, except in the case of fraud, illegality, insolvency and oppression or disregard of minority interests. |
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Delaware | Singapore | |
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Removal of Directors |
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Under Delaware law, any director or the entire board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Unless the certificate of incorporation provides otherwise, in the case of a corporation whose board is classified, stockholders may effect such removal only for cause. |
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According to the Singapore Companies Act, directors of a public company may be removed before expiration of their term of office with or without cause by ordinary resolution of the shareholders (i.e., a resolution which is passed by a simple majority of those shareholders present and voting in person or by proxy). Notice of the intention to move such a resolution has to be given to Grindrod Shipping not less than 28 days before the meeting at which it is moved. Grindrod Shipping shall then give notice of such resolution to its shareholders not less than 14 days before the meeting. |
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Where any director removed in this manner was appointed to represent the interests of any particular class of shareholders or debenture holders, the resolution to remove such director will not take effect until such director's successor has been appointed. |
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Grindrod Shipping's constitution provides that Grindrod Shipping may by ordinary resolution of which special notice has been given, remove any director from office, notwithstanding anything in Grindrod Shipping's constitution or in any agreement between Grindrod Shipping and such director, and appoint another person in place of the director so removed from office. |
Filling Vacancies on the Board of Directors |
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Any vacancy, whether arising through death, resignation, retirement, disqualification, removal, an increase in the number of directors or any other reason, shall be filled as the corporation's bylaws provide. In the absence of such provision, the vacancy shall be filled by a majority vote of the remaining directors, even if such directors remaining in office constitute less than a quorum, or by the sole remaining director. In the case of a corporation with a classified board of directors, any directors elected due to an increase in the authorized number of directors shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be elected and qualified. |
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The constitution of a Singapore company typically provides that the directors have the power to appoint any person to be a director, either to fill a vacancy or as an addition to the existing directors, but so that the total number of directors will not at any time exceed the maximum number fixed in the constitution. Any newly elected director shall hold office until the next following annual general meeting, where such director will then be eligible for re-election. Grindrod Shipping's constitution provides that the shareholders may by ordinary resolution, or the directors may, appoint any person to be a director as an additional director or to fill a vacancy. The directors have the power at any time so to do, but so that the total number of directors will not at any time exceed the maximum number fixed in Grindrod Shipping's constitution. Any person so appointed by the directors will only hold office until the next annual general meeting, and will then be eligible for re-election. |
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Delaware | Singapore | |
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Amendment of Governing Documents |
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Under the Delaware General Corporation Law, amendments to a corporation's certificate of incorporation require the approval of stockholders holding a majority of the outstanding shares entitled to vote on the amendment. If a class vote on the amendment is required by the Delaware General Corporation Law, a majority of the outstanding stock of the class is required, unless a greater proportion is specified in the certificate of incorporation or by other provisions of the Delaware General Corporation Law. |
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Grindrod Shipping's constitution may be altered by special resolution (i.e., a resolution passed by at least a three-fourths majority of the shareholders entitled to vote, present in person or by proxy at a meeting for which not less than 21 days written notice is given). The board of directors has no right to amend the constitution. |
The power to adopt, amend or repeal bylaws shall be in the stockholders entitled to vote. Notwithstanding the foregoing, any corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the board of directors. |
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Meetings of Shareholders |
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Annual and Special Meetings |
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Annual General Meetings |
Meetings of stockholders may be held at such place, either within or outside of Delaware, as may be designated by or in the manner provided in the certificate of incorporation or bylaws, or if not so designated, as determined by the board of directors. Under the Delaware General Corporation Law, special meetings of the stockholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws. Quorum Requirements Under the Delaware General Corporation Law, a corporation's certificate of incorporation or bylaws may specify the number of shares and/or the amount of other securities having voting power, the holders of which shall be present or represented by proxy at any meeting in order to constitute a quorum for, and the votes that shall be necessary for, the transaction of any business, but in no event shall a quorum consist of less than one third of the shares entitled to vote at the meeting. |
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All companies are required to hold an annual general meeting once every calendar year provided that so long as a company holds its first annual general meeting within 18 months of its incorporation, it need not hold it in the year of its incorporation or in the following year. The first annual general meeting is required to be held within 18 months of Grindrod Shipping's incorporation and subsequently, annual general meetings must be held not more than 15 months after the holding of the last preceding annual general meeting, and in each case, not later than 6 months from Grindrod Shipping's financial year end. Extraordinary General Meetings Any general meeting other than the annual general meeting is called an "extraordinary general meeting". Two or more members (shareholders) holding not less than 10% of the total number of issued shares (excluding treasury shares) may call an extraordinary general meeting. In addition, the constitution usually also provides that general meetings may be convened in accordance with the Singapore Companies Act by the directors. |
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Notwithstanding anything in the constitution, the directors are required to convene a general meeting if required to do so by requisition (i.e., written notice to directors requiring that a meeting be called) by shareholder(s) holding not less than 10% of the total number of paid-up shares of Grindrod Shipping carrying voting rights. |
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Delaware | Singapore | |
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Grindrod Shipping's constitution provides that the directors may, whenever they think fit, convene an extraordinary general meeting. | ||
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Quorum Requirements |
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Grindrod Shipping's constitution provides that shareholders holding in aggregate not less than 15 per cent of the issued and fully paid shares (excluding treasury shares) in the capital of the company, present in person or by proxy shall be a quorum. In the event a quorum is not present, the meeting may be adjourned for one week. In the event a quorum is not present at the adjourned meeting, the meeting may again be adjourned for one week. At the second adjourned meeting, any one or more members present in person or by proxy shall be a quorum. |
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Shareholders' Rights at Meetings |
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The Singapore Companies Act provides that every member shall, notwithstanding any provision in the constitution, have a right to attend any general meeting of the company and to speak on any resolution before the meeting. The holder of a share may vote on a resolution before a general meeting of the company if, in accordance with the provisions of the Singapore Companies Act, the share confers on the holder a right to vote on that resolution. |
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Delaware | Singapore | |
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Indemnification of Officers, Directors and Employers |
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Under the Delaware General Corporation Law, subject to specified limitations in the case of derivative suits brought by a corporation's stockholders in its name, a corporation shall have 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, 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 the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent 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 the person in connection with such action, suit or proceeding if the person:
acted in good faith and in a
manner the person 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 the person's conduct was unlawful.
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The Singapore Companies Act specifically provides that Grindrod Shipping is allowed to:
purchase and maintain for any
officer insurance against any liability attaching to such officer in respect of any negligence, default, breach of duty or breach of trust in relation to Grindrod Shipping;
indemnify such officer
against liability incurred by the officer to a person other than Grindrod Shipping except when the indemnity is against (i) any liability of the officer to pay a fine in criminal proceedings or a sum payable to a regulatory authority by way of a
penalty in respect of non-compliance with any requirement of a regulatory nature (however arising); or (ii) any liability incurred by the officer (1) in defending criminal proceedings in which he is convicted, (2) in defending civil
proceedings brought by Grindrod Shipping or a related company of Grindrod Shipping in which judgment is given against him or her or (3) in connection with an application for relief under specified sections of the Singapore Companies Act in which
the court refuses to grant him or her relief;
indemnify any auditor against
any liability incurred or to be incurred by such auditor in defending any proceedings (whether civil or criminal) in which judgment is given in such auditor's favor or in which such auditor is acquitted; or
indemnify any auditor against
any liability incurred by such auditor in connection with any application under specified sections of the Singapore Companies Act in which relief is granted to such auditor by a court.
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Delaware | Singapore | |
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(including attorneys' fees) incurred by an officer or director of the corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation. |
to excuse the director.
Grindrod Shipping's constitution currently provides that, subject to the provisions of the Singapore Companies Act and every other act for the time being in force concerning companies and affecting Grindrod Shipping, every director, auditor, secretary or other officer of Grindrod Shipping and its subsidiaries and affiliates shall be entitled to be indemnified by Grindrod Shipping against all liabilities incurred by him or her in the execution and discharge of his or her duties and where he or she serves at the request of Grindrod Shipping as a director, officer, employee or agent of any subsidiary or affiliate of Grindrod Shipping or in relation thereto, including any liability incurred by him or her in defending any proceedings, whether civil or criminal, which relate to anything done or omitted or alleged to have been done or omitted by him or her as an officer or employee of Grindrod Shipping, and in which judgment is given in his or her favor (or the proceedings otherwise disposed of without any finding or admission of any material breach of duty on his or her part) or in which he or she is acquitted, or in connection with an application under statute in respect of such act or omission in which relief is granted to him or her by the court. |
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Shareholder Approval of Issuances of Shares |
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Under Delaware law, the directors may, at any time and from time to time, if all of the shares of capital stock which the corporation is authorized by its certificate of incorporation to issue have not been issued, subscribed for, or otherwise committed to be issued, issue or take subscriptions for additional shares of its capital stock up to the amount authorized in its certificate of incorporation. |
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The Singapore Companies Act provides that notwithstanding anything in the company's constitution, the directors shall not exercise any power to issue shares without prior approval of the shareholders in general meeting. The affirmative vote of a simple majority of the shareholders present in person or represented by proxy at the meeting and entitled to vote on the resolution is required for this authorization. Once this shareholders' approval is obtained, unless subsequently revoked or varied by the company in general meeting, it continues in force until the conclusion of the next annual general meeting or the expiration of the period within which the next annual general meeting after that date is required by law to be held, whichever is earlier. |
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Delaware | Singapore | |
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Shareholder Approval of Business Combinations |
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The Singapore Companies Act mandates that specified corporate actions require approval by the shareholders in a general meeting, notably:
notwithstanding anything in
Grindrod Shipping's constitution, directors are not permitted to carry into effect any proposals for disposing of the whole or substantially the whole of Grindrod Shipping's undertaking or property unless those proposals have been approved by
shareholders in a general meeting;
subject to the constitution
of each amalgamating company, an amalgamation proposal must be approved by the shareholders of each amalgamating company via special resolution at a general meeting;
a compromise or arrangement
proposed between a company and its shareholders, or any class of them must, among other things, be approved by a majority in number representing three-fourths in value of the shareholders or class of shareholders present and voting either in person
or by proxy at the meeting ordered by the court; and
notwithstanding anything in Grindrod Shipping's constitution, the directors may not, without the prior approval of shareholders, issue shares, including shares being issued in connection with corporate actions. |
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Shareholder Action Without a Meeting |
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Under the Delaware General Corporation Law, unless otherwise provided in the certificate of incorporation, any action taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. |
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There are no equivalent provisions under the Singapore Companies Act in respect of passing shareholders' resolutions by written means that apply to public companies listed on a securities exchange. |
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Delaware | Singapore | |
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Shareholder Suits |
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Under the Delaware General Corporation Law, a stockholder may bring a derivative action on behalf of the corporation to enforce the rights of the corporation. An individual also may commence a class action suit on behalf of himself or herself and other similarly situated stockholders where the requirements for maintaining a class action under the Delaware Court Rules have been met. A person may institute and maintain such a derivative suit only if such person was a stockholder at the time of the transaction which is the subject of the suit or his or her shares thereafter devolved upon him or her by operation of law. Additionally, under Delaware case law, the plaintiff bringing a derivative suit on behalf of a corporation generally must be a stockholder not only at the time of the transaction which is the subject of the suit, but also through the duration of the derivative suit. The Delaware Court Rules also require that the derivative plaintiff make a demand on the directors of the corporation to assert the corporate claim before the suit may be prosecuted by the derivative plaintiff, unless such demand would be futile. |
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Standing Only registered shareholders reflected in the register of members are recognized under Singapore law as shareholders of a company. As a result, only registered shareholders have legal standing to institute shareholder actions or otherwise seek to enforce their rights as shareholders. Holders of dematerialised interests in Grindrod Shipping's shares will be required to exchange their dematerialised interests for certificated shares and to be registered as shareholders in the register of members in order to institute or enforce any legal proceedings or claims against Grindrod Shipping, the directors or officers relating to shareholder rights. A holder of dematerialised interests may become a registered shareholder of Grindrod Shipping by exchanging its interest in the shares for certificated shares and being registered in the register of members. Personal remedies in cases of oppression or injustice |
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A shareholder may apply to the court for an order under the Singapore Companies Act to remedy situations where (i) the company's affairs are being conducted or the powers of the company's directors are being exercised in a manner oppressive to, or in disregard of the interests of, one or more of the shareholders or holders of debentures of the company, including the applicant; or (ii) the company has done an act, or threatens to do an act, or the shareholders or holders of debentures have passed or proposed some resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or more of the company's shareholders or holders of debentures, including the applicant. |
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Singapore courts have wide discretion as to the relief they may grant under such application, including, inter alia , directing or prohibiting any act or cancelling or varying any transaction or resolution, providing that the company be wound up, or authorizing civil proceedings to be brought in the name of or on behalf of the company by such person or persons and on such terms as the court directs. |
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Derivative actions and arbitrations |
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The Singapore Companies Act has a provision which provides a mechanism enabling shareholders to apply to the court for leave to bring a derivative action or arbitration on behalf of Grindrod Shipping. |
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Delaware | Singapore | |
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Applications are generally made by shareholders, but courts are given the discretion to allow such persons as they deem proper to apply (e.g., beneficial owner of shares). | ||
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It should be noted that this provision of the Singapore Companies Act is primarily used by minority shareholders to bring an action or arbitration in the name and on behalf of a company or intervene in an action or arbitration to which a company is a party for the purpose of prosecuting, defending or discontinuing the action or arbitration on behalf of the company. |
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Prior to commencing a derivative action or arbitration, the court must be satisfied that (i) 14 days' notice has been given to the directors of the company of the party's intention to commence such action or arbitration if the directors of the company do not bring, diligently prosecute or defend or discontinue the action, (ii) the party is acting in good faith and (iii) it appears to be prima facie in the interests of the company that the action be brought, prosecuted, defended or discontinued. |
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Class actions |
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The concept of class action suits, which allows individual shareholders to bring an action seeking to represent the class or classes of shareholders, generally does not exist in Singapore. However, it is possible as a matter of procedure for a number of shareholders to lead an action and establish liability on behalf of themselves and other shareholders who join in or who are made parties to the action. |
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These shareholders are commonly known as "lead plaintiffs". Further, there are circumstances under the provisions of certain Singapore statutes where shareholders may file and prove their claims for compensation in the event that a company has been convicted of a criminal offense or has a court order for the payment of a civil penalty made against it. |
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Delaware | Singapore | |
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Dividends or Other Distributions; Repurchases and Redemptions |
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The Singapore Companies Act provides that no dividends can be paid to shareholders except out of profits. The Singapore Companies Act does not provide a definition on when profits are deemed to be available for the purpose of paying dividends and this is accordingly governed by case law. Grindrod Shipping's constitution provides that no dividend can be paid otherwise than out of profits of Grindrod Shipping. Acquisition of a company's own shares The Singapore Companies Act generally prohibits a company from acquiring its own shares subject to certain exceptions. Any contract or transaction by which a company acquires or transfers its own shares is void. However, provided that it is expressly permitted to do so by its constitution and subject to the special conditions of each permitted acquisition contained in the Singapore Companies Act, Grindrod Shipping may:
redeem redeemable preference
shares (the redemption of these shares will not reduce the capital of Grindrod Shipping). Preference shares may be redeemed out of capital if all the directors make a solvency statement in relation to such redemption and Grindrod Shipping lodges a
copy of the statement with the Registrar of Companies in accordance with the Singapore Companies Act;
whether listed on a
securities exchange (in Singapore or outside Singapore) or not, make an off-market purchase of its own shares in accordance with an equal access scheme authorized in advance at a general meeting;
whether listed on a
securities exchange (in Singapore or outside Singapore) or not, make a selective off-market purchase of its own shares in accordance with an agreement authorized in advance at a general meeting by a special resolution where persons whose shares are
to be acquired and their associated persons have abstained from voting; and
whether listed on a
securities exchange (in Singapore or outside Singapore) or not, make an acquisition of its own shares under a contingent purchase contract which has been authorized in advance at a general meeting by a special resolution.
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Delaware | Singapore | |
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Grindrod Shipping may also purchase its own shares by an order of a Singapore court. | ||
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The total number of ordinary shares that may be acquired by Grindrod Shipping in a relevant period may not exceed 20% of the total number of ordinary shares in that class as of the date of the resolution pursuant to the relevant share repurchase provisions under the Singapore Companies Act. Where, however, Grindrod Shipping has reduced its share capital by a special resolution or a Singapore court made an order to such effect, the total number of ordinary shares shall be taken to be the total number of ordinary shares in that class as altered by the special resolution or the order of the court. Payment must be made out of Grindrod Shipping's distributable profits or capital, provided that Grindrod Shipping is solvent. Such payment may include any expenses (including brokerage or commission) incurred directly in the purchase or acquisition by Grindrod Shipping of its ordinary shares. |
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Financial assistance for the acquisition of shares |
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Grindrod Shipping may not give financial assistance to any person whether directly or indirectly for the purpose of: |
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the acquisition or proposed acquisition of shares in Grindrod Shipping or units of such shares; or |
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the acquisition or proposed acquisition of shares in its holding company or ultimate holding company, as the case may be, or units of such shares. |
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Financial assistance may take the form of a loan, the giving of a guarantee, the provision of security, the release of an obligation, the release of a debt or otherwise. |
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However, it should be noted that Grindrod Shipping may provide financial assistance for the acquisition of its shares or shares in its holding company if it complies with the requirements (including, where applicable, approval by the board of directors or by the passing of a special resolution by its shareholders) set out in the Singapore Companies Act. Grindrod Shipping's constitution provides that subject to the provisions of the Singapore Companies Act, Grindrod Shipping may purchase or otherwise acquire Grindrod Shipping's own shares upon such terms and subject to such conditions as Grindrod Shipping may deem fit. These shares may be held as treasury shares or cancelled as provided in the Singapore Companies Act or dealt with in such manner as may be permitted under the Singapore Companies Act. |
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Delaware | Singapore | |
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On cancellation of the shares, the rights and privileges attached to those shares will expire. | ||
Transactions with Officers and Directors |
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Under the Delaware General Corporation Law, no contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers, are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee which authorizes the contract or transaction, or solely because any such director's or officer's votes are counted for such purpose, if: (1) The material facts as to the director's or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) The material facts as to the director's or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction. |
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Under the Singapore Companies Act, the chief executive officer and directors are not prohibited from dealing with Grindrod Shipping, but where they have an interest in a transaction with Grindrod Shipping, that interest must be disclosed to the board of directors. In particular, the chief executive officer and every director who is in any way, whether directly or indirectly, interested in a transaction or proposed transaction with Grindrod Shipping must, as soon as practicable after the relevant facts have come to such officer or director's knowledge, declare the nature of such officer or director's interest at a board of directors' meeting or send a written notice to Grindrod Shipping containing details on the nature, character and extent of his interest in the transaction or proposed transaction with Grindrod Shipping. In addition, a director or chief executive officer who holds any office or possesses any property which, directly or indirectly, duties or interests might be created in conflict with such officer's duties or interests as director or chief executive officer, is required to declare the fact and the nature, character and extent of the conflict at a meeting of directors or send a written notice to Grindrod Shipping containing details on the nature, character and extent of the conflict. The Singapore Companies Act extends the scope of this statutory duty of a director or chief executive officer to disclose any interests by pronouncing that an interest of a member of the director's or, as the case may be, the chief executive officer's family (including spouse, son, adopted son, step-son, daughter, adopted daughter and step-daughter) will be treated as an interest of the director. There is however no requirement for disclosure where the interest of the director or chief executive officer (as the case may be) consists only of being a member or creditor of a corporation which is interested in the proposed transaction with Grindrod Shipping if the interest may properly be regarded not being a material interest. Where the proposed transaction relates to any loan to Grindrod Shipping, no disclosure need be made where the director or chief executive officer has only guaranteed or joined in guaranteeing the repayment of such loan, unless the constitution provides otherwise. |
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Delaware | Singapore | |
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Further, where the proposed transaction is to be made with or for the benefit of a related company (i.e. the holding company, subsidiary or subsidiary of a common holding company) no disclosure need be made of the fact that the director or chief executive officer is also a director or chief executive officer of that corporation, unless the constitution provides otherwise. | ||
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Subject to specified exceptions, including a loan to a director for expenditure in defending criminal or civil proceedings, etc. or in connection with an investigation, or an action proposed to be taken by a regulatory authority in connection with any alleged negligence, default, breach of duty or breach of trust by him or her in relation to Grindrod Shipping, the Singapore Companies Act prohibits Grindrod Shipping from: (i) making a loan or quasi-loan to its directors or to directors of a related company, each a "relevant director"; (ii) giving a guarantee or security in connection with a loan or quasi-loan made to a relevant director by any other person; (iii) entering into a credit transaction as creditor for the benefit of a relevant director; (iv) giving a guarantee or security in connection with such credit transaction entered into by any person for the benefit of a relevant director; (v) taking part in an arrangement where another person enters into any of the transactions in (i) to (iv) above or (vi) below and such person obtains a benefit from Grindrod Shipping or a related company; or (vi) arranging for the assignment to Grindrod Shipping or assumption by Grindrod Shipping of any rights, obligations or liabilities under a transaction in (i) to (v) above. Grindrod Shipping is also prohibited from entering into the transactions in (i) to (vi) above with or for the benefit of a relevant director's spouse or children (whether adopted or naturally or step-children). |
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Delaware | Singapore | |
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Subject to specified exceptions, the Singapore Companies Act prohibits Grindrod Shipping from: (i) making a loan or quasi-loan to another company or a limited liability partnership; (ii) giving a guarantee or security in connection with a loan or quasi-loan made to another company or a limited liability partnership by any other person; (iii) entering into a credit transaction as creditor for the benefit of another company or a limited liability partnership; (iv) giving a guarantee or security in connection with such credit transaction entered into by any person for the benefit of another company or a limited liability partnership; (v) taking part in an arrangement where another person enters into any of the transactions in (i) to (iv) above or (vi) below and such person obtains a benefit from Grindrod Shipping or a related company; or (vi) arranging for the assignment to Grindrod Shipping or assumption by Grindrod Shipping of any rights, obligations or liabilities under a transaction in (i) to (v) above if a director or directors of Grindrod Shipping is or together are interested in 20% or more of the total voting power in the other company or the limited liability partnership, as the case may be, unless there is prior approval for the transaction by Grindrod Shipping in general meeting at which the interested director or directors and his or their family members abstained from voting, or the other company is Grindrod Shipping's subsidiary or holding company or a subsidiary of its holding company. | ||
Dissenters' Rights |
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Under the Delaware General Corporation Law, any stockholder of a corporation who holds shares of stock on the date of the making of a demand pursuant to the statute with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with the requirements of the Delaware General Corporation Law who has neither voted in favor of the merger or consolidation nor consented thereto in writing shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock. |
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There is no equivalent provision under the Singapore Companies Act in respect of companies incorporated in Singapore. |
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Delaware | Singapore | |
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Cumulative Voting |
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Under the Delaware General Corporation Law, the certificate of incorporation of any corporation may provide that at all elections of directors of the corporation, or at elections held under specified circumstances, each holder of stock or of any class or classes or of a series or series thereof shall be entitled to as many votes as shall equal the number of votes which (except for such provision as to cumulative voting) such holder would be entitled to cast for the election of directors with respect to such holder's shares of stock multiplied by the number of directors to be elected by such holder, and that such holder may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any 2 or more of them as such holder may see fit. |
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There is no equivalent provision under the Singapore Companies Act in respect of companies incorporated in Singapore. |
Anti-Takeover Measures |
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Under the Delaware General Corporation Law, the certificate of incorporation of a corporation may give the board the right to issue new classes of preferred stock with voting, conversion, dividend distribution, and other rights to be determined by the board at the time of issuance, which could prevent a takeover attempt. In addition, Delaware law does not prohibit a corporation from adopting a stockholder rights plan, or "poison pill," which could prevent a takeover attempt. |
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The constitution of a Singapore company typically provides that the company may allot and issue new shares of a different class with preferential, deferred, qualified or other special rights as its board of directors may determine with the prior approval of the company's shareholders in a general meeting. Subject to certain provisions of the Singapore Companies Act and Grindrod Shipping's constitution, Grindrod Shipping's constitution provides that Grindrod Shipping's shareholders may grant to Grindrod Shipping's board the general authority to issue such preference shares until the next general meeting. For further information, see "Preference Shares" above. |
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Singapore law does not generally prohibit a corporation from adopting "poison pill" arrangements which could prevent a takeover attempt and also preclude shareholders from realizing a potential premium over the market value of their shares |
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However, under the Singapore Code on Take-overs and Mergers, if, in the course of an offer, or even before the date of the offer announcement, the board of the offeree company has reason to believe that a bona fide offer is imminent, the board must not, except pursuant to a contract entered into earlier, take any action, without the approval of shareholders at a general meeting, on the affairs of the offeree company that could effectively result in any bona fide offer being frustrated or the shareholders being denied an opportunity to decide on its merits. |
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For further information on the Singapore Code on Take-overs and Mergers, see "Takeovers" above. |
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Material Contracts
The below descriptions are only summaries of the material provisions of the GSPL and GSSA Share Purchase Agreements and Implementation Agreement and are qualified in their entirety by reference to a copy of the GSPL Share Purchase Agreement, GSPL Share Purchase Agreement and Implementation Agreement, which are filed as exhibits to this registration statement.
Contracts Relating to the Spin-Off
The GSPL and GSSA Share Purchase Agreements
The Share Purchase Agreement between Grindrod Limited and Grindrod Shipping, dated as of March 23, 2018, sets forth the terms by which Grindrod Shipping will purchase all of the shares of GSPL from Parent. Under the terms of this agreement, Parent will sell all of the issued shares in GSPL to Grindrod Shipping on the Closing Date. The purchase price for such shares will be the market value of the GSPL shares, estimated to be approximately $279.7 million, to be settled by way of Grindrod Shipping issuing 16,626,000 Convertible Notes to Parent. Under the terms of this agreement, Parent will provide certain warranties in favor of Grindrod Shipping, including (i) that the GSPL shares are unencumbered, (ii) that GSPL holds shares in its specified subsidiaries, and (iii) that Parent has no claims against GSPL and Parent will waive any such claims that Parent may have against GSPL. The terms of this agreement permit Grindrod Shipping to bring any claims against Parent in respect of the breach of such warranties or otherwise in connection with the purchase of the GSPL shares, to the extent that there is a basis in law to do so, up to an aggregate liability of Parent in respect of such claims in an amount equal to the purchase price for the GSPL shares. Grindrod Shipping must also bring any such claims within 36 months of the Spin-Off and may only bring claims over a minimum threshold of $100,000 Under the agreement, Parent will not be liable to make payment of any claim by Grindrod Shipping, to the extent that making such payment would be contrary to any law. Notwithstanding the foregoing, Grindrod Shipping and Parent do not expressly indemnify one another under this agreement against any third-party claims. However, this agreement does not preclude the parties from seeking such indemnification or other remedies in respect of third-party claims under applicable law.
The Share Purchase Agreement between Grindrod Limited and Grindrod Shipping, dated as of March 23, 2018, sets forth the terms by which Grindrod Shipping will purchase all of the shares of GSSA from Parent. Under the terms of this agreement, Parent will sell all of the issued shares in GSSA to Grindrod Shipping on the Closing Date. The purchase price for such shares will be the market value of the GSSA shares, estimated to be approximately amount of $41.0 million, to be settled by way of Grindrod Shipping issuing 2,437,232 Convertible Notes to Parent. Under the terms of this agreement, Parent will provide certain warranties in favor of Grindrod Shipping, including (i) that the GSSA shares are unencumbered, (ii) that GSSA holds shares in its specified subsidiaries, and (iii) that Parent has no claims against GSSA and Parent will waive any such claims that Parent may have against GSSA. The terms of this agreement permit Grindrod Shipping to bring any claims against Parent in respect of the breach of such warranties or otherwise in connection with the purchase of the GSSA shares, to the extent that there is a basis in law to do so, up to an aggregate liability of Parent in respect of such claims in an amount equal to the purchase price for the GSSA shares. Grindrod Shipping must also bring any such claims within 36 months of the Spin-Off and may only bring claims over a minimum threshold of $100,000 Under the agreement, Parent will not be liable to make payment of any claim by Grindrod Shipping, to the extent that making such payment would be contrary to any law. Notwithstanding the foregoing, Grindrod Shipping and Parent do not expressly indemnify one another under this agreement against any third-party claims. However, this agreement does not preclude the parties from seeking such indemnification or other remedies in respect of third-party claims under applicable law.
The Implementation Agreement
The Implementation Agreement was entered into on March 23, 2018 between Parent, Grindrod Shipping, GSPL and GSSA and governs the mechanics of the Spin-Off. Under the terms of the Implementation Agreement, the Spin-Off can only occur once the GSPL Share Purchase Agreement and GSSA Share Purchase Agreement have become effective. In addition, the Implementation Agreement is subject to the following conditions precedent:
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See "Item 10. Additional InformationMaterial Contracts".
Joint Venture Agreements
For a description of our material joint ventures, see "Item 4. Information on the CompanyOur Joint Ventures".
Loan Agreements
For a description of our material loan agreements, see "Item 5. Operating and Financial Review and ProspectsLiquidity and Capital ResourcesLoan Agreements".
Exchange Controls
South Africa
Exchange controls in South Africa are administered by SARB in terms of the Exchange Control Regulations, 1961, and regulate transactions involving South African residents. The purpose of exchange controls is to mitigate the decline of foreign capital reserves in South Africa. Parent expects that South African exchange controls will continue to operate in the foreseeable future. The Government of South Africa has, however, committed itself to relaxing exchange controls gradually and significant relaxation has occurred in recent years.
Approval for the Spin-Off has been obtained from the SARB in respect of the disposal of South African securities by Parent and the acquisition of South African securities by Grindrod Shipping, a non-resident of South Africa. No financial guarantee with recourse to Parent will exist at the time of the issuing of the Grindrod Shipping ordinary shares.
The issuance of the Grindrod Shipping ordinary shares by Grindrod Shipping does not require any exchange control approval from the SARB, as Grindrod Shipping is not a resident of South Africa.
Residents of the CMA
Residents in the CMA (comprising South Africa, the Republic of Namibia, the Kingdom of Lesotho and the Kingdom of Swaziland) or offshore subsidiaries of a resident in the CMA may not own ordinary shares through the NASDAQ or beneficially own or hold any of the Grindrod Shipping ordinary shares on the U.S. branch register of members unless specific approval has been obtained from the SARB by such persons for any subscription, purchase or beneficial holding or ownership as otherwise permitted under the South African Exchange Control Regulations or the rulings promulgated thereunder.
Singapore
There are no exchange control restrictions in effect in Singapore.
Taxation
Material U.S. Federal Income Tax Considerations
The following is a discussion of the material U.S. federal income tax considerations applicable to us and to beneficial owners of Convertible Notes and ordinary shares. This discussion is based upon provisions of the Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations thereunder, and administrative rulings and court decisions, all as in effect or in existence on the date of this registration statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. Any such change could result in U.S. federal income tax consequences that are materially different from those described below. Moreover, any change after the date of this registration statement in any of the factual matters set forth in this filing or in our or our subsidiaries' conduct, practices or activities may affect the considerations discussed below. We are under no obligation to update the discussion to reflect future changes in law or changes in any of the foregoing factual matters that may later come to our attention.
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This discussion is for general information purposes only, does not purport to be a comprehensive description of all of the U.S. federal income tax considerations applicable to us or beneficial owners of ordinary shares and does not address any tax laws other than U.S. federal income tax laws. Potential investors are encouraged to consult their tax advisers concerning the overall tax consequences arising in their own particular situations under U.S. federal, state, local and non-U.S. laws. The conclusions expressed in this discussion are not binding on the Internal Revenue Service, or the IRS, or any court, and there is no assurance that the IRS or a court would not reach a contrary conclusion. No ruling from the IRS or opinion of counsel has been obtained or will be requested regarding any matter affecting us or prospective holders of our ordinary shares.
Treatment as a Corporation
We are treated as a non-U.S. corporation for U.S. federal income tax purposes. As such, we are subject to U.S. federal income tax on our income to the extent it is from sources within the United States or is effectively connected with the conduct of a trade or business in the United States as discussed below. U.S. Holders (as defined below) are not directly subject to U.S. federal income tax on their shares of our income, but rather will be subject to U.S. federal income tax on distributions received from us and dispositions of ordinary shares as described below.
Taxation of Operating Income
Under the Code, income derived from, or in connection with, the use (or hiring or leasing for use) of a vessel, or the performance of services directly related to the use of a vessel, is treated as "Transportation Income." Transportation Income that is attributable to transportation that either begins or ends, but that does not both begin and end, in the United States is considered to be 50% derived from sources within the United States, or U.S. Source International Transportation Income. Transportation Income attributable to transportation that both begins and ends in the United States is considered to be 100% derived from sources within the United States, or U.S. Source Domestic Transportation Income. Transportation Income that is attributable to transportation exclusively between non-U.S. destinations is considered to be 100% derived from sources outside the United States. Transportation Income derived from sources outside the United States generally is not subject to U.S. federal income tax.
We expect that we and our subsidiaries will earn income that will constitute Transportation Income. We do not expect us or our subsidiaries to earn U.S. Source Domestic Transportation Income. However, certain of our and our subsidiaries' activities could give rise to U.S. Source International Transportation Income, and future expansion of or changes in our and our subsidiaries' operations could result in an increase in the amount thereof, which generally would be subject to U.S. federal income taxation, unless the exemption from U.S. federal income taxation under Section 883 of the Code, or the Section 883 Exemption, applied. Based on our current plans and expectations regarding our and our subsidiaries' organization and operations, we expect that only a relatively small portion of our and our subsidiaries' gross Transportation Income will likely constitute U.S. Source International Transportation Income and, if the Section 883 Exemption were not to apply, we expect that the effective rate of U.S. federal income tax on our and our subsidiaries' gross Transportation Income would be less than 1%.
The Section 883 Exemption
In general, the Section 883 Exemption provides that if a non-U.S. corporation satisfies the requirements of Section 883 of the Code and the Treasury Regulations thereunder, or Section 883 Regulations, it will not be subject to the net basis and branch profit taxes or the 4% gross basis tax described below on its U.S. Source International Transportation Income, including any U.S. Source International Transportation Income it derives from participation in a pool, partnership or other joint venture arrangement that satisfies the requirements of the Section 883 Regulations. The Section 883 Exemption applies only to U.S. Source International Transportation Income and does not apply to U.S. Source Domestic Transportation Income. The Section 883 Exemption applies separately to us and each of our subsidiaries that is treated as a corporation for U.S. federal income tax purposes and earns U.S. Source International Transportation Income (which we refer to below as our "applicable subsidiaries").
We and our applicable subsidiaries will qualify for the Section 883 Exemption if, among other matters, we and our applicable subsidiaries meet the following three requirements:
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States with respect to the types of U.S. Source International Transportation Income that we earn, or an Equivalent Exemption;
We are organized under the laws of Singapore and our applicable subsidiaries are organized under the laws of Singapore, South Africa, the Isle of Man and the Marshall Islands. The U.S. Treasury Department has recognized each of these jurisdictions as a jurisdiction that grants an Equivalent Exemption with respect to the type of U.S. Source International Transportation Income that we or our applicable subsidiaries generally expect to earn. Consequently, our and our applicable subsidiaries' U.S. Source International Transportation Income should be exempt from U.S. federal income taxation provided we and our applicable subsidiaries meet the Publicly Traded Test or the Qualified Shareholder Stock Ownership Test and we and our applicable subsidiaries satisfy certain substantiation, reporting and other requirements.
Publicly Traded Test
In order to meet the Publicly Traded Test, the equity interests in the non-U.S. corporation at issue must be "primarily traded" and "regularly traded" on an established securities market either in the United States or in a jurisdiction outside the United States that grants an Equivalent Exemption. The Section 883 Regulations generally provide, in pertinent part, that equity of a non-U.S. corporation will be considered to be "primarily traded" on one or more established securities markets in a given country if, with respect to the class or classes of equity relied upon to meet the "regularly traded" requirement described below, the number of shares of each such class that are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. We expect that our ordinary shares, which will be our only class of equity interests, will be traded on the NASDAQ and the JSE, each of which is considered to be an established securities market for purposes of these rules. As long as our ordinary shares will only be traded on the NASDAQ and the JSE, our ordinary shares will be "primarily traded" on an established securities market either in the United States or in South Africa, which is a jurisdiction outside the United States that grants an Equivalent Exemption.
Equity interests in a non-U.S. corporation will be considered to be "regularly traded" on an established securities market under the Section 883 Regulations provided one or more classes of such equity interests representing more than 50% of the aggregate vote and value of all of the outstanding equity interests in the non-U.S. corporation satisfy certain listing and trading volume requirements. These requirements are satisfied with respect to a class of equity interests listed on an established securities market, provided that either (a) trades in such class of equity interests are effected, other than in de minimis quantities, on such market on at least 60 days during the taxable year and the aggregate number of shares in such class that are traded on such market or markets during the taxable year are at least 10% of the average number of shares outstanding in that class during the taxable year (with special rules for short taxable years) or (b) such class of equity interests is traded on an established securities market in the United States and is "regularly quoted by dealers making a market" in such class (within the meaning of the Section 883 Regulations). Our ordinary shares will represent 100% of the total combined voting power and value of our equity interests. Accordingly, provided that our ordinary shares (i) satisfy the listing and trading volume requirements described immediately above and (ii) are not subject to the Closely Held Block Exception described immediately below, our ordinary shares will be considered to be "regularly traded" on an established securities market. There can be no assurance that our ordinary shares will satisfy the listing and trading volume requirements described immediately above for any taxable year.
Notwithstanding these rules, a class of equity that would otherwise be treated as "regularly traded" on an established securities market will not be so treated if, for more than half of the number of days during the taxable year, one or more "5% shareholders" (i.e., shareholders owning, actually or constructively, at least 5% of the vote and value of that class) own in the aggregate 50% or more of the vote and value of that class, or the Closely Held Block Exception, unless the corporation can establish that a sufficient proportion of such 5% shareholders are Qualified Shareholders (as defined below) so as to preclude other persons who are 5% shareholders from owning 50% or more of the value of that class for more than half the days during the taxable year.
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We expect that one or more 5% shareholders may own 50% or more of our ordinary shares for more than half of the number of days during our current taxable year and/or future taxable years. In such case, we will lose eligibility for the Publicly Traded Test with respect to any such taxable year, unless can establish that a sufficient proportion of such 5% shareholders are Qualified Shareholders (as defined below) so as to preclude other persons who are 5% shareholders from owning 50% or more of the value of that class for more than half the days during the taxable year. Under the applicable Treasury regulations, we would also have to satisfy certain substantiation requirements regarding the identity of our 5% shareholders. These requirements are onerous and there is no assurance that we would be able to satisfy them. In particular, we would be required to obtain certifications of Qualified Shareholder status from our 5% shareholders, which our 5% shareholders may not be willing or able to provide. Given the factual nature of the issues involved and the practical uncertainties, we can give no assurances as to our qualification for the Section 883 Exemption for any taxable year. Furthermore, our board of directors could determine that it is in our best interests to take an action that would result in our not being able to satisfy the Publicly Traded Test in the future. We do not expect any of our applicable subsidiaries to satisfy the Publicly Traded Test.
Qualified Shareholder Stock Ownership Test
As an alternative to satisfying the Publicly Traded Test, a non-U.S. corporation will qualify for the Section 883 Exemption if it is able to satisfy the Qualified Shareholder Stock Ownership Test. The Qualified Shareholder Stock Ownership Test generally is satisfied if more than 50% of the value of the outstanding equity interests in the non-U.S. corporation is owned, or treated as owned after applying certain attribution rules, for at least half of the number of days in the taxable year by:
We do not expect to be able to satisfy the Qualified Shareholder Stock Ownership Test for any taxable year. However, because stock owned by a non-U.S. corporation meeting the Publicly Traded Test is treated as owned by a Qualified Shareholder for purposes of the Qualified Shareholder Stock Ownership Test, in the event that we are able to satisfy the Publicly Traded Test described above for a taxable year, we expect that each of our applicable subsidiaries that is more than 50%-owned (by value) by us for at least half of the number of days in such taxable year would satisfy the Qualified Shareholder Stock Ownership Test for such taxable year. We do not expect any applicable subsidiary that is not more than 50%-owned (by value) by us to satisfy the Qualified Shareholder Stock Ownership Test for any taxable year, unless a sufficient portion of such subsidiary's other equity interests were owned by Qualified Shareholders to cause such subsidiary to be more than 50%-owned (by value) by Qualified Shareholders for at least half the number of days in a taxable year and such other Qualified Shareholders were to provide certifications of their Qualified Shareholder status. There can be no assurance that these requirements will be satisfied with respect to any of our applicable subsidiaries for any taxable year.
The Net Basis Tax and Branch Profits Tax
If we or our subsidiaries earn U.S. Source International Transportation Income and the Section 883 Exemption does not apply, the U.S. source portion of such income may be treated as effectively connected with the conduct of a trade or business in the United States, or Effectively Connected Income, if we or any of our subsidiaries have a fixed place of business in the United States and substantially all of our or any such subsidiary's U.S. Source International Transportation Income is attributable to regularly scheduled transportation or, in the case of bareboat charter income, is attributable to a fixed place of business in the United States. Based on our and our subsidiaries' current operations, none of our or our subsidiaries' potential U.S. Source International Transportation Income is attributable to regularly scheduled transportation or is received pursuant to bareboat charters, nor do we or any of our subsidiaries have a fixed place of business in the United States. As a result, we do not anticipate that any of our or our subsidiaries' U.S. Source International Transportation Income will be treated as Effectively Connected Income. However, there is no assurance that we or any of our subsidiaries will not have a fixed place of business in the United States or that we or any of our subsidiaries will not earn substantially all of its U.S. Source International Transportation Income pursuant to regularly scheduled transportation or bareboat charters attributable to a fixed place of business in the United States in the future, which would result in
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such income being treated as Effectively Connected Income. In addition, any U.S. Source Domestic Transportation Income generally will be treated as Effectively Connected Income.
Any income we or our subsidiaries earn that is treated as Effectively Connected Income would be subject to U.S. federal corporate income tax (imposed at up to a 21% rate from January 1, 2018) as well as 30% branch profits tax imposed under Section 884 of the Code. In addition, a 30% branch interest tax could be imposed on certain interest paid or deemed paid by us or our subsidiaries.
On the sale of a vessel that has produced Effectively Connected Income, we or our subsidiaries could be subject to the net basis corporate income tax as well as branch profits tax with respect to the gain recognized up to the amount of certain prior deductions for depreciation that reduced Effectively Connected Income. Otherwise, we and our subsidiaries would not be subject to U.S. federal income tax with respect to gain realized on the sale of a vessel, provided the sale is considered to occur outside of the United States (as determined under U.S. tax principles) and the gain is not attributable to an office or other fixed place of business maintained by us or our subsidiaries in the United States under U.S. federal income tax principles.
The 4% Gross Basis Tax
If the Section 883 Exemption does not apply and the net basis tax does not apply, we and our subsidiaries would be subject to a 4% U.S. federal income tax on our U.S. Source International Transportation Income, without benefit of deductions.
U.S. Federal Income Taxation of U.S. Holders
The following is a discussion of the material U.S. federal income tax considerations that may be relevant to beneficial owners of our ordinary shares.
The following discussion applies only to beneficial owners of our ordinary shares that own the ordinary shares as "capital assets" (generally, property held for investment purposes). The following discussion does not address all aspects of U.S. federal income taxation which may be important to particular beneficial owners of our ordinary shares in light of their individual circumstances, such as (i) beneficial owners of our ordinary shares subject to special tax rules (e.g., banks or other financial institutions, real estate investment trusts, regulated investment companies, insurance companies, broker-dealers, traders that elect to mark-to-market for U.S. federal income tax purposes, tax-exempt organizations and retirement plans, individual retirement accounts and tax-deferred accounts, or former citizens or long-term residents of the United States) or to beneficial owners that will hold the ordinary shares as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for U.S. federal income tax purposes, (ii) partnerships or other entities classified as partnerships for U.S. federal income tax purposes or their partners, (iii) U.S. Holders (as defined below) that have a functional currency other than the U.S. dollar or that transact in ordinary shares in a currency other than U.S. dollars, or (iv) beneficial owners of ordinary shares that own 2% or more (by vote or value) of our ordinary shares, all of whom may be subject to tax rules that differ significantly from those summarized below. This discussion does not contain information regarding any state or local, estate, gift or alternative minimum tax considerations concerning the ownership or disposition of our ordinary shares.
If a partnership or other entity classified as a partnership for U.S. federal income tax purposes holds our ordinary shares, the tax treatment of its partners generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. If you are a partner in a partnership holding our ordinary shares, you should consult your own tax advisor regarding the tax consequences to you of the partnership's ownership of our ordinary shares.
Each prospective beneficial owner of our ordinary shares should consult its own tax advisor regarding the U.S. federal, state, local, and other tax consequences of the ownership or disposition of our ordinary shares.
As used in this registration statement, the term "U.S. Holder" means a beneficial owner of our ordinary shares that:
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We believe that Parent should not be treated as a passive foreign investment company for U.S. federal income tax purposes, or a PFIC, and the following discussion assumes that Parent is not so treated.
The Spin-Off
A U.S. Holder that receives Convertible Notes is expected to be treated for U.S. federal income tax purposes as receiving a distribution from Parent. The tax consequences of the distribution depend on whether the Spin-Off satisfies the conditions for tax-free treatment with respect to Parent's ordinary shareholders imposed by Section 355 of the Code. While this determination is ultimately based on all the relevant facts and circumstances, Parent intends to take the position, to the extent relevant for information reporting and any other U.S. tax purposes, that the Spin-Off satisfies the conditions for such tax-free treatment. However, no rulings have been or will be sought from the IRS concerning whether the Spin-Off qualifies for such tax-free treatment, and there is no assurance that the IRS will not take a contrary view or that a court would not agree with the IRS if the matter were contested.
Assuming that the Spin-Off satisfies all the requirements for tax-free treatment under Section 355 of the Code, a U.S. Holder should not recognize gain or loss for U.S. federal income tax purposes as a result of the receipt of the Convertible Notes or the compulsory conversion of such Convertible Notes into our ordinary shares. In such a case, a U.S. Holder must allocate its adjusted tax basis in its Parent ordinary shares over its existing Parent ordinary shares and our ordinary shares received upon conversion of the Convertible Notes in proportion to their respective fair market values on the Closing Date, and a U.S. Holder's holding period in our ordinary shares that it receives upon conversion of the Convertible Notes will include such U.S. Holder's holding period in its Parent ordinary shares.
A U.S. Holder that receives cash in lieu of a fractional entitlement to Convertible Notes in the Spin-Off should be treated as receiving a fractional amount of our ordinary shares in the Spin-Off (taxed in the manner described above) and then selling the fractional amount of our ordinary share for the amount of cash received.
U.S. Treasury Regulations require certain shareholders that receive stock in a distribution to attach to their U.S. federal income tax return for the year in which the distribution occurs a detailed statement setting forth certain information relating to the tax-free nature of the distribution.
In the event that the Spin-Off does not qualify for tax-free treatment under Section 355 of the Code, a U.S. Holder receiving ordinary shares in the Spin-Off should be treated as receiving a taxable dividend distribution to the extent of such U.S. Holder's share of Parent's current and accumulated earnings and profits (as determined under U.S. federal income tax purposes), in an amount equal to the fair market value of the ordinary shares (in U.S. dollars) received on the date of the distribution. Since Parent does not intend to compute (or to provide U.S. Holders with information necessary to compute) earnings and profits under U.S. federal income tax principles, a U.S. Holder should generally expect to treat the entire distribution as a taxable dividend. Under these circumstances, a U.S. Holder's basis in the ordinary shares received in the Spin-Off should be the fair market value of such ordinary shares, and a U.S. Holder's holding period for such ordinary shares should begin on the date of the distribution.
U.S. Holders are urged to consult their own tax advisors regarding the potential U.S. federal income tax consequences of the Spin-Off, including the potential treatment of the Spin-Off under Section 355 of the Code, the receipt of cash in lieu of fractional entitlements and any U.S. federal income tax reporting requirements that may apply to such U.S. Holders.
Distributions
Subject to the discussion below of the rules applicable to a PFIC, any distributions to a U.S. Holder made by us with respect to our ordinary shares generally will constitute dividends, which will be taxable as ordinary income or "qualified dividend income" as described in more detail below, to the extent of our
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current and accumulated earnings and profits, as determined under U.S. federal income tax principles. We do not intend to compute (or to provide U.S. Holders with information necessary to compute) earnings and profits under U.S. federal income tax principles. Accordingly, U.S. Holders generally should expect to treat all distributions on the ordinary shares as taxable dividends. U.S. Holders that are corporations generally will not be entitled to claim a dividend received deduction with respect to distributions they receive from us. Dividends received with respect to the ordinary shares will be treated as foreign source income and generally will be treated as "passive category income" for U.S. foreign tax credit purposes.
Dividends received with respect to our ordinary shares by a U.S. Holder who is an individual, trust or estate, or a non-corporate U.S. Holder, generally will be treated as "qualified dividend income" that is taxable to such non-corporate U.S. Holder at preferential long-term capital gain tax rates, provided that: (i) our ordinary shares are traded on an "established securities market" in the United States (such as the NASDAQ, where our ordinary shares are traded) and are "readily tradeable" on such an exchange; (ii) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we do not believe we are, have been or will be, as discussed below); (iii) the non-corporate U.S. Holder has owned the ordinary shares for more than 60 days during the 121-day period beginning 60 days before the date on which the ordinary shares become ex-dividend (and has not entered into certain risk limiting transactions with respect to such ordinary shares); and (iv) the non-corporate U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. It is not currently known whether our ordinary shares will be considered "readily tradeable" on the NASDAQ for purposes of these rules. If a dividend is treated as qualified dividend income, the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation generally will be reduced to appropriately take into account the tax rate differential between the reduced rate of tax applicable to qualified dividend income and the highest rate of tax normally applicable to dividends. Any dividends paid on our ordinary shares that are not treated as qualified dividend income will be taxed as ordinary income to a non-corporate U.S. Holder. In addition, a 3.8% tax may apply to certain investment income. See "Medicare Tax" below.
Special rules may apply to any amounts received in respect of our ordinary shares that are treated as "extraordinary dividends." In general, an extraordinary dividend is a dividend with respect to an ordinary share that is equal to or in excess of 10% of a U.S. Holder's adjusted tax basis (or fair market value upon the U.S. Holder's election) in such ordinary share. In addition, extraordinary dividends include dividends received within a one-year period that, in the aggregate, equal or exceed 20% of a U.S. Holder's adjusted tax basis (or fair market value) in an ordinary share. If we pay an "extraordinary dividend" on our ordinary shares that is treated as "qualified dividend income," then any loss recognized by a U.S. Individual Holder from the sale or exchange of such ordinary shares will be treated as long-term capital loss to the extent of the amount of such dividend.
Sale, Exchange or Other Disposition of Ordinary Shares
Subject to the discussion of the PFIC rules below, a U.S. Holder generally will recognize capital gain or loss upon a sale, exchange or other disposition of our ordinary shares in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder's adjusted tax basis in such ordinary shares. The U.S. Holder's initial tax basis in the ordinary shares generally will be the U.S. Holder's purchase price for the ordinary shares (except in the case of ordinary shares received upon the compulsory conversion of the Convertible Notes, in which case the tax basis of such ordinary shares will be determined in the manner discussed under "The Spin-Off" above). Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder's holding period is greater than one year at the time of the sale, exchange or other disposition.
A corporate U.S. Holder's capital gains, long-term and short-term, are taxed at ordinary income tax rates. If a corporate U.S. Holder recognizes a loss upon the disposition of our ordinary shares, such U.S. Holder is limited to using the loss to offset other capital gain. If a corporate U.S. Holder has no other capital gain in the tax year of the loss, it may carry the capital loss back three years and forward five years.
Long-term capital gains of non-corporate U.S. Holders are subject to the favorable tax rate of a maximum of 20%. In addition, a 3.8% tax may apply to certain investment income. See "Medicare Tax" below. A non-corporate U.S. Holder may deduct a capital loss resulting from a disposition of our ordinary shares to the extent of capital gains plus up to $3,000 ($1,500 for married individuals filing separate tax returns) annually and may carry forward a capital loss indefinitely.
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PFIC Status and Significant Tax Consequences
In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which the holder holds our ordinary shares, either:
Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast, rental income generally would constitute "passive income" unless we were treated as deriving our rental income in the active conduct of a trade or business under the applicable rules. The PFIC provisions contain a look-through rule under which we will be treated as earning directly our proportionate share of any income, and owning directly our proportionate share of any assets, of another corporation if we own at least 25% of the value of the stock of such other corporation.
Based on our current and projected, income, assets and methods of operations, we believe that we should not be treated as a PFIC with respect to our taxable year following the completion of the Spin-Off (as described in "Item 10. Additional InformationTaxationPFIC Status and Significant Tax Consequences") and we expect that we should not become a PFIC for the foreseeable future. In this regard, we believe that the income we receive from time and voyage chartering activities should constitute services income, rather than rental income. Consequently, we believe that such income should not constitute passive income and the assets engaged in generating such income should not be treated as passive assets and, so long as our income from time and voyage charters exceeds 25% of our gross income for each taxable year after our initial taxable year and the value of our vessels contracted under time and voyage charters exceeds 50% of the average value of our assets for each taxable year after our initial taxable year, we should not be a PFIC.
We expect that substantially all of the vessels in our fleet will be engaged in time or voyage chartering activities and intend to treat our income from those activities as non-passive income, and the vessels engaged in those activities as non-passive assets, for PFIC purposes. We believe that there is a significant amount of legal authority consisting of the Code, legislative history, IRS pronouncements and administrative rulings supporting our position that the income from time and voyage chartering activities constitutes services income (rather than rental income). There is, however, no direct legal authority under the PFIC rules addressing whether income from time chartering activities is services income or rental income. Moreover, in a case not interpreting the PFIC rules, Tidewater Inc. v. United States , 565 F.3d 299 (5th Cir. 2009), the Fifth Circuit held that the vessel time charters at issue generated predominantly rental income rather than services income. However, the IRS stated in an Action on Decision (AOD 2010-001) that it disagrees with, and will not acquiesce to, the way that the rental versus services framework was applied to the facts in the Tidewater decision, and in its discussion stated that the time charters at issue in Tidewater would be treated as producing services income for PFIC purposes. The IRS's AOD, however, is an administrative action that cannot be relied upon or otherwise cited as precedent by taxpayers.
The determination of whether we are a PFIC in any taxable year is fact specific and will depend upon the portion of our assets (including goodwill) and income that are characterized as passive under the PFIC rules and other factors, some of which may be beyond our control. In particular, because the total value of our assets for purposes of the asset test described above will generally be calculated using the market price of our ordinary shares, our PFIC status may depend in large part on the market price of our ordinary shares. Accordingly, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. In addition, the composition of our income and assets will be affected by how, and how quickly, we use the cash generated by our business operations and any net proceeds that we receive from any future financing or capital transactions. The PFIC determination also depends on the application of complex U.S. federal income tax rules concerning the classification of our assets and income for this purpose, and these rules are uncertain in some respects. Further, the PFIC determination is made annually and our circumstances or the nature of our operations may change. Accordingly, there can be no assurance that we will not be classified as a PFIC for the current taxable year or any future taxable year, and no ruling from the IRS or opinion of counsel has been issued or has been or will be sought with respect to our potential status as a PFIC.
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If we were treated as a PFIC for any taxable year in which a U.S. Holder owned our ordinary shares, the U.S. Holder generally would be subject to special tax rules resulting in increased tax liability with respect to any "excess distribution" the U.S. Holder receives on, and any gain the U.S. Holder realizes from a sale or other disposition (including a pledge) of, our ordinary shares, unless a "mark-to-market" election is available and a U.S. Holder makes such election with respect to the ordinary shares, as discussed below. In addition, if we were treated as a PFIC for any taxable year in which a U.S. Holder owned our ordinary shares, the U.S. Holder would be required to file IRS Form 8621 with the U.S. Holder's U.S. federal income tax return for each year to report the U.S. Holder's ownership of such ordinary shares. Substantial penalties apply to any failure to timely file IRS Form 8621, unless the failure is shown to be due to reasonable cause and not due to willful neglect. In the event a U.S. Holder does not file IRS Form 8621, the statute of limitations on the assessment and collection of U.S. federal income taxes of such U.S. Holder for the related tax year will not close before the date which is three years after the date on which such report is filed. A U.S. Holder would not be able to make a "qualified electing fund" election as we do not expect to provide the information necessary for U.S. Holders to make "qualified electing fund" elections.
Taxation of U.S. Holders Making a "Mark-to-Market" Election
If we were to be treated as a PFIC for any taxable year and our ordinary shares were treated as "marketable stock" for purposes of these rules, then a U.S. Holder would be allowed to make a "mark-to-market" election with respect to our ordinary shares, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the U.S. Holder's ordinary shares at the end of the taxable year over the U.S. Holder's adjusted tax basis in the ordinary shares. The U.S. Holder also would be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder's adjusted tax basis in the ordinary shares over the fair market value thereof at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holder's tax basis in the U.S. Holder's ordinary shares would be adjusted to reflect any such income or loss recognized. Gain recognized on the sale, exchange or other disposition of our ordinary shares would be treated as ordinary income, and any loss recognized on the sale, exchange or other disposition of the ordinary shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Holder. A mark-to-market election would not apply to our ordinary shares owned by a U.S. Holder in any taxable year during which we are not a PFIC, but would remain in effect with respect to any subsequent taxable year for which we are a PFIC, unless our ordinary shares are no longer treated as "marketable stock" or the IRS consents to the revocation of the election.
A "mark-to-market" election may itself have negative tax consequences to a U.S. Holder and would not mitigate any negative tax consequences with respect to PFICs directly or indirectly owned by us. In addition, even if a U.S. Holder makes a "mark-to-market" election for one of our taxable years, if we were a PFIC for a prior taxable during which the U.S. Holder owned our ordinary shares and for which the U.S. Holder did not make a timely mark-to-market election, the U.S. Holder would also be subject to the more adverse rules described below under "Taxation of U.S. Holders Not Making a Timely Mark-to-Market Election." U.S. holders should consult with their tax advisers regarding the availability and advisability making a mark-to-market election with respect to the ordinary shares.
Taxation of U.S. Holders Not Making a Timely Mark-to-Market Election
If we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make a timely "mark-to-market" election for that year (i.e., the taxable year in which the U.S. Holder's holding period commences), whom we refer to as a "Non-Electing Holder," would be subject to special rules resulting in increased tax liability with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on our ordinary shares in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder's holding period for the ordinary shares), and (2) any gain realized on the sale, exchange or other disposition of our ordinary shares. Under these special rules:
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In addition, a U.S. Holder would be treated as owning a proportionate amount of any shares that we own, directly or indirectly by application of certain attribution rules, in other PFICs (including any of our subsidiaries, if they are PFICs) and would be subject to the PFIC rules on a separate basis with respect to its indirect interests in any such PFICs. If we were treated as a PFIC for any taxable year and a Non-Electing Holder who is an individual dies while owning our ordinary shares, such holder's successor generally would not receive a step-up in tax basis with respect to such ordinary shares.
Medicare Tax
A U.S. Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will generally be subject to a 3.8% tax on the lesser of (i) the U.S. Holder's "net investment income" for a taxable year and (ii) the excess of the U.S. Holder's modified adjusted gross income for such taxable year over $200,000 ($250,000 in the case of joint filers). For these purposes, "net investment income" will generally include dividends paid with respect to our ordinary shares and net gain attributable to the disposition of our ordinary shares not held in connection with certain trades or businesses, but will be reduced by any deductions properly allocable to such income or net gain.
U.S. Federal Income Taxation of Non-U.S. Holders
A beneficial owner of our ordinary shares (other than a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder is a "Non-U.S. Holder."
Distributions
Distributions we pay to a Non-U.S. Holder will not be subject to U.S. federal income tax or withholding tax if the Non-U.S. Holder is not engaged in a U.S. trade or business. If the Non-U.S. Holder is engaged in a U.S. trade or business, our distributions will be subject to U.S. federal income tax to the extent they constitute income effectively connected with the Non-U.S. Holder's U.S. trade or business (and a corporate Non-U.S. Holder may also be subject to U.S. federal branch profits tax). However, distributions paid to a Non-U.S. Holder who is engaged in a trade or business may be exempt from taxation under an income tax treaty if the income arising from the distribution is not attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder.
Disposition of Ordinary Shares
In general, a Non-U.S. Holder will not be subject to U.S. federal income tax or withholding tax on any gain resulting from the disposition of our ordinary shares provided the Non-U.S. Holder is not engaged in a U.S. trade or business. A Non-U.S. Holder that is engaged in a U.S. trade or business will be subject to U.S. federal income tax in the event the gain from the disposition of ordinary shares is effectively connected with the conduct of such U.S. trade or business (provided, in the case of a Non-U.S. Holder entitled to the benefits of an income tax treaty with the United States, such gain also is attributable to a U.S. permanent establishment). However, even if not engaged in a U.S. trade or business, individual Non-U.S. Holders may be subject to tax on gain resulting from the disposition of our ordinary shares if they are present in the United States for 183 days or more during the taxable year in which those ordinary shares are disposed and meet certain other requirements.
Backup Withholding and Information Reporting
In general, payments to a non-corporate U.S. Holder of distributions or the proceeds of a disposition of ordinary shares may be subject to information reporting. These payments to a non-corporate U.S. Holder also may be subject to backup withholding, if the non-corporate U.S. Holder:
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A U.S. Holder generally is required to certify its compliance with the backup withholding rules on IRS Form W-9.
Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on IRS Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY, as applicable.
Backup withholding is not an additional tax. Rather, a shareholder generally may obtain a credit for any amount withheld against his liability for U.S. federal income tax (and obtain a refund of any amounts withheld in excess of such liability) by filing a U.S. federal income tax return with the IRS.
Individual U.S. Holders (and to the extent specified in applicable U.S. Treasury Regulations, certain individual Non-U.S. Holders and certain U.S. Holders that are entities) that hold "specified foreign financial assets," including our ordinary shares, whose aggregate value exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year (or such higher amounts as prescribed by applicable Treasury Regulations) are required to file a report on IRS Form 8938 with information relating to the assets for each such taxable year. Specified foreign financial assets would include, among other things, our ordinary shares, unless such ordinary shares are held in an account maintained by a U.S. "financial institution" (as defined). Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in the event an individual U.S. Holder (and to the extent specified in applicable Treasury Regulations, an individual Non-U.S. Holder or a U.S. entity) that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed. U.S. Holders (including U.S. entities) and Non-U.S. Holders should consult their own tax advisors regarding their reporting obligations.
South African Tax Considerations
The following summary describes the principal South African income tax considerations generally applicable to the Spin-Off. This summary is based on the current provisions of the Income Tax Act, and the prevailing practice adopted by the South African Revenue Service, or SARS, published in writing prior to the date hereof. This summary does not consider legislative proposals to amend the Income Tax Act.
This summary is of a general nature only and is not intended to be legal or tax advice to any particular shareholder. This summary is not exhaustive of all South African income tax considerations. Accordingly, shareholders should consult their own tax advisors as to the tax consequences under the tax laws of the country of which they are resident or otherwise subject to tax of participating in the Parent Distribution.
As used in this registration statement, the term "SA Corporate" means a person in section 64F(1)(a) of the Income Tax Act being "a company which is a resident" for tax purposes in South Africa.
As used in this registration statement, the term "Regulated Intermediary" means a regulated intermediary as contemplated in section 64D of the Income Tax Act.
As used in this registration statement, the term "Qualifying SA Corporate(s)" means:
As used in this registration statement, the term "CSDP" means a Central Securities Depository Participant, being a "participant" as defined in section 1 of the Financial Markets Act, No. 19 of 2012, as amended or FMA, duly authorised by a central securities depository in terms of the depository rules
139
pursuant to section 31 of the FMA. The term "Broker" means any person registered as a "broker member equities" in terms of the rules of the JSE in accordance with the provisions of the FMA.
Parent
Grindrod Shipping Business Disposal
Parent will receive Convertible Notes as consideration (i.e. proceeds) for the disposal of all the ordinary shares in GSPL. Parent will disregard any capital loss or capital gain on the disposal of the GSPL shares as it will meet the requirements of the participation exemption for the disposal of shares in foreign companies (Paragraph 64B of the Eighth Schedule to the Income Tax Act).
Parent will receive Convertible Notes as consideration (i.e. proceeds) for the disposal of all the ordinary shares in GSSA. A capital loss will be derived by Parent on disposal of the equity shares in GSSA as the base cost will exceed the proceeds (i.e. the Convertible Notes in respect of the GSSA ordinary shares) and Parent will include the capital loss in determining its aggregate capital loss for that year of assessment.
Parent Distribution
Parent will be deemed to have disposed of the Convertible Notes for proceeds equal to the market value thereof (i.e. the face value) and this value will also be the base cost of the Convertible Notes. Therefore the proceeds will be equivalent to the base cost and Parent will not derive a capital gain or loss on the distribution of the convertible notes to Parent ordinary shareholders.
Parent will distribute the Convertible Notes as a dividend in specie to Qualifying SA Corporates and as a return of capital to all other ordinary shareholders (i.e. South African tax resident individuals and trusts as well as all non-South African tax resident Ordinary Shareholders). Parent will therefore not be liable for any dividends tax on the distribution to the Qualifying SA Corporates.
There are no South African securities transfer tax implications on the distribution of the Convertible Notes, as they will not be a " security " as defined in the relevant South African legislation.
As used in this registration statement, the term "SA Tax Resident Shareholder" means a beneficial owner of our ordinary shares that is a "resident" as defined in terms of South African Income Tax Act, No. 58 of 1962 which we refer to as the "South African Income Tax Act".
Consequently, the term "Non-SA Tax Resident Shareholder" means a beneficial owner of our ordinary shares that does not meet the requirements to be a "resident" as defined in terms of the South African Income Tax Act.
The tax treatment for the distribution of the Convertible Notes by Parent for each category of ordinary shareholder is set out below:
SA Tax Resident Shareholders
SA Tax Resident Shareholders will initially be reflected in the branch register of members in South Africa and not in the U.S. branch register of members.
SA Tax Resident Shareholders who choose to be reflected in the U.S. branch register of members will need to ensure they have sufficient single discretionary allowance in respect of individuals and trusts or foreign direct investment allowance for SA Corporates.
After the consummation of the Spin-Off, South African dividends tax at 20% will be withheld on any foreign cash dividends declared and paid by Grindrod Shipping to SA Tax Resident Shareholders holding Grindrod Shipping ordinary shares listed on the JSE, subject to any applicable exemptions that may apply.
No South African dividends tax at 20% will be withheld on any foreign cash dividends declared and paid by Grindrod Shipping to SA Tax Resident Shareholders holding Grindrod Shipping ordinary shares registered on the U.S. branch register of members.
SA Tax Resident Shareholders that dispose of their Grindrod Shipping ordinary shares will be subject to either income tax (in the case of share dealers) or capital gains tax (in the case of capital investors).
A controlled foreign company, or CFC, is a non-South African company in which more than 50% of the participation rights/voting rights are held/exercisable by SA Tax Residents who are not headquarter companies. The Grindrod Shipping ordinary shares will be held more than 50% by SA Tax Resident
140
Shareholders, who will each hold at least 5% of the listed Grindrod Shipping ordinary shares, and thus Grindrod Shipping will be a CFC after conversion of the Convertible Notes to Grindrod Shipping ordinary shares. Any non-South African subsidiaries of Grindrod Shipping in which it can exercise more than 50% of the voting rights will also be CFCs. Certain profits of CFCs are included in the taxable income of SA Tax Resident Shareholders.
SA Tax Resident Shareholders who, together with connected persons, will acquire more than 10% of the Grindrod Shipping ordinary shares are advised to obtain tax advice regarding whether they will have a South African tax exposure as a result of Grindrod Shipping being a CFC forming part of the same group of companies as the receiving CFC.
Profits of a CFC will be exempted from imputation (i.e. not included in net income):
Non-SA Tax Resident Shareholders
Non-SA Tax Resident Shareholders, for purposes of the Income Tax Act will acquire their Convertible Notes from the Parent distribution as a return of capital and obtain a base cost equivalent to the market value of the distributed Convertible Notes on the Closing Date.
Non-SA Tax Resident Shareholders for purposes of the Income Tax Act will acquire their Convertible Notes from the Parent distribution as a return of capital and must reduce the expenditure on their ordinary shares by the market value of the Convertible Notes on the Closing Date. Any excess amount will not be treated as a capital gain as it does not relate to an asset subject to South African capital gains tax provided the return of capital is not attributable to a permanent establishment of the Non-SA Tax Resident Shareholder in South Africa.
Under current law, no South African withholding tax will be levied on the receipt of the Convertible Notes as a return of capital from the Parent distribution by a Non-SA Tax Resident Shareholder.
On the basis that the conversion of the Convertible Notes to ordinary shares is a term of the issuance of the convertible notes, in terms of SARS practice and the Income Tax Act, there is no disposal on conversion of the Convertible Notes to Grindrod Shipping ordinary shares, and consequently, there is no capital gain or loss derived by the Non-SA Tax Resident Shareholder.
Accordingly, Non-SA Tax Resident Shareholders will after conversion of the Convertible Notes to Grindrod Shipping ordinary shares obtain a base cost in the ordinary shares equivalent to the market value of the distributed Convertible Notes on the Closing Date.
Following the Spin-Off, no South African dividends tax at 20% will be withheld on any foreign cash dividends declared and paid by Grindrod Shipping to Non-SA Tax Resident Shareholders holding Grindrod Shipping ordinary shares registered on the U.S. branch register of members as a specific exemption is applicable in terms of the Income Tax Act.
Non-SA Tax Resident Shareholders that dispose of their Grindrod Shipping ordinary shares registered on the U.S. branch register of members will not be subject to capital gains tax (in the case of capital investors) provided that the Grindrod Shipping ordinary shares are not attributable to a permanent establishment of the Non-SA Tax Resident Ordinary Shareholder in South Africa.
141
Where the Non-SA Tax Resident Shareholders are share dealers no income tax will be payable on disposal of their Grindrod Shipping ordinary shares registered on the U.S. branch register of members as the income will not be from a South African source.
Singapore Tax Considerations
Dividends or Other Distributions with Respect to Ordinary Shares
Under the one-tier corporate tax system which currently applies to all Singapore tax resident companies, tax on corporate profits is final, and dividends paid by a Singapore tax resident company will be income tax exempt in the hands of a shareholder, whether or not the shareholder is a company or an individual and whether or not the shareholder is a Singapore tax resident.
Capital Gains upon Disposition of Ordinary Shares
Under current Singapore tax laws, there is no tax on capital gains. There are no specific laws or regulations which deal with the characterization of whether a gain is income or capital in nature. Gains arising from the disposal of Grindrod Shipping's ordinary shares may be construed to be of an income nature and subject to Singapore income tax, if they arise from activities which the Inland Revenue Authority of Singapore regards as the carrying on of a trade or business in Singapore. However, under Singapore tax laws, any gains derived by a divesting company from its disposal of ordinary shares in an investee company between June 1, 2012 and May 31, 2022 are generally not taxable if immediately prior to the date of the relevant disposal, the investing company has held at least 20% of the ordinary shares in the investee company for a period of at least 24 months.
Goods and Services Tax
The issue or transfer of ownership of Grindrod Shipping's ordinary shares should be exempt from Singapore Goods and Services Tax. Hence, the holders would not incur any Goods and Services Tax on the subscription or subsequent transfer of the shares.
Stamp Duty
If Grindrod Shipping's ordinary shares evidenced in certificated forms are acquired in Singapore, stamp duty is payable on the instrument of their transfer at the rate of 0.2% of the consideration for or market value of Grindrod Shipping's ordinary shares, whichever is higher.
Where an instrument of transfer is executed outside Singapore or no instrument of transfer is executed, no stamp duty is payable on the acquisition of Grindrod Shipping's ordinary shares. However, stamp duty may be payable if the instrument of transfer is executed outside Singapore and is received in Singapore. The stamp duty is borne by the purchaser unless there is an agreement to the contrary.
On the basis that any transfer instrument in respect of Grindrod Shipping's shares traded on the NASDAQ or the JSE are executed outside Singapore through Grindrod Shipping's transfer agent/transfer secretary and share registrar in the United States and South Africa for registration in Grindrod Shipping's branch registers of members maintained in the United States and South Africa (without any transfer instrument being received in Singapore), no stamp duty should be payable in Singapore on such transfers.
Tax Treaties Regarding Withholding Taxes
There is no comprehensive avoidance of double taxation agreement between the United States and Singapore which applies to withholding taxes on dividends or capital gains.
Dividends and Paying Agents
The paying agents for shareholders who hold ordinary shares listed on the Main Board of the JSE are expected to be Strate. The paying agent for shareholders listed on the NASDAQ is expected to be Continental Stock Transfer & Trust Company.
Statement by Experts
The combined financial statements of Grindrod Shipping Pte. Ltd. and Grindrod Shipping (South Africa) Pty. Ltd., as of and for the years ended December 31, 2017, 2016 and 2015, included in this registration statement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm,
142
as stated in their report appearing herein. Such combined financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The financial statement of Grindrod Shipping Holdings Pte. Ltd. as of November 2, 2017, included in this registration statement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statement is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
Documents on Display
Grindrod Shipping will file annual and special reports and other information with the Securities and Exchange Commission, or SEC. You may read and copy any reports or other information on file at the SEC's public reference room at the following location:
100 F
Street, N.E.
Washington, D.C. 20549
Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC filings are also available to the public from commercial document retrieval services. Grindrod Shipping's SEC filings may also be obtained electronically via the EDGAR system on the website maintained by the SEC at http://www.sec.gov.
The above information and certain other documents may be obtained at the registered office of Grindrod Shipping and will be accessible at www.grinshipping.com.
Subsidiary Information
Not applicable.
143
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Spot Market Rate Risk
We currently employ our vessels primarily in the spot market or spot market-oriented pools and do not have a significant amount of fixed revenue cover and we are therefore exposed to the cyclicality and volatility of the spot market. Spot market charter rates may fluctuate significantly based upon the supply of and demand for seaborne shipping capacity.
Interest Rate Risk
Borrowings under our credit facilities generally bear interest at rates based on a premium over LIBOR (and to a limited extent, TIBOR). Therefore, we are exposed to the risk that our interest expense may increase if interest rates rise. We currently do not have any interest rate swaps in place. We may, in the future use interest rate swaps to reduce our exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with our variable-rate debt and are not for speculative or trading purposes.
For the years ended December 31, 2017, 2016 and 2015, we paid interest on our outstanding debt at a weighted average interest rate of 3.8%, 3.1% and 2.7%, respectively. A 0.5% increase or decrease in LIBOR would have increased or decreased our interest expense for the years ended December 31, 2017, 2016 and 2015, by $0.5 million, $0.6 million and $0.4 million, respectively.
Foreign Exchange Rate Risk
Our primary economic environment is the international shipping market. This market utilizes the U.S. dollar as its functional currency. Consequently, virtually all of our revenues and expenses are in U.S. dollars. Transactions in currencies other than the functional currency are translated at the exchange rate on the transaction date and the relevant payment is translated on the payment date, with the difference being reported in the income statement as an exchange gain or loss. In addition a part of our debt obligations are denominated in currencies other than the U.S. dollar, being the Japanese Yen. Assets and liabilities denominated in currencies different from the functional currency are translated into the functional currency for the preparation of the balance sheet at the exchange rate prevailing on the balance sheet date. Differences in exchange rates between balance sheet dates may lead to gains or losses being reported in the income statement. Extraordinary transactions and the translation of the financial statements of the subsidiary whose functional currency is not the U.S. dollar for purposes of preparing our consolidated accounts, may follow different translation procedures. Depreciation in the value of the U.S. dollar relative to other currencies will increase the U.S. dollar cost of us paying such expenses. The portion of our business conducted in other currencies could increase in the future, which could expand our exposure to losses arising from currency fluctuations.
There is a risk that currency fluctuations will have a negative effect on our cash flows. We have not entered into any hedging contracts to protect against currency fluctuations. We may seek to hedge this currency fluctuation risk in the future.
If the relevant foreign currency strengthens by 10% against our functional currency, profit or loss will increase/(decrease) by:
|
Impact on
profit or loss |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
(in millions)
|
2017 | 2016 | 2015 | |||||||
South African rands |
$ | (1.9 | ) | $ | 2.3 | $ | 0.2 | |||
Japanese yen |
1.1 | 1.1 | 1.1 |
Freight Derivatives Risk
From time to time, we may take positions in freight derivatives, mainly FFAs. Generally freight derivatives may be used to hedge exposure to charter rate market risk through the purchase or sale of specified time charter rates for forward positions. Settlement of FFA is in cash, against a daily market index published by the Baltic Exchange. By taking positions in FFAs or other derivative instruments we could suffer losses in the settling or termination of these agreements.
144
As of December 31, 2017, December 31, 2016 and December 31, 2015, we had seven, four and six FFAs outstanding, respectively. For the year ended December 31, 2017, we recorded a net loss on FFAs of $0.1 million in our combined financial statements, which resulted from fair value loss. For the year ended December 31, 2016, we recorded a net loss on FFAs of $0.4 million in our combined financial statements, which resulted from fair value loss. For the year ended December 31, 2015, we recorded a net gain of $0.3 million in our combined financial statements, which resulted from fair value gain.
Bunker Price Risk
Our operating results are affected by movement in the price of fuel oil consumed by the vesselsknown in the industry as bunkers. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply of 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. Further, fuel may become much more expensive in the future, which may reduce our profitability. We do hedge some of our exposure to bunker price risk.
A 10% increase or decrease in the bunker price, would result in a decrease or increase of the hedging reserve for the years ended December 31, 2017, 2016 and 2015, by $0.1, $0.3 million and $0.1 million, respectively.
Concentration of Credit Risk
Financial instruments, which potentially subject us to significant concentrations of credit risk, consist principally of trade accounts receivable and bank balances. We closely monitor our exposure to customers for credit risk. We have policies in place to ensure that we trade with customers with an appropriate credit history. We do not take out credit default insurance.
Our maximum exposure to credit risk in the event that counterparties fail to perform their obligations as at the end of each financial year in relation to each class of recognized financial assets is the carrying amount of those assets as indicated in our statement of financial position.
Inflation
We do not expect inflation to be a significant risk to direct expenses in the current and foreseeable economic environment.
145
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Debt Securities
Not applicable.
Warrants and Rights
Not applicable.
Other Securities
Not applicable.
American Depositary Shares
Not applicable.
146
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
Not applicable.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable.
Not applicable.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
None.
ITEM 16G. CORPORATE GOVERNANCE
Not applicable.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
147
PART III
Grindrod Shipping has responded to Item 18 in lieu of responding to this item.
Historical Combined Financial Statements
See pages F-1 to F-81 for the financial statements of Grindrod Shipping filed as part of this registration statement.
Unaudited Pro Forma Condensed Financial Information
As described above, Parent will sell all of the shares it holds in GSPL, and GSSA, to Grindrod Shipping Holdings Pte. Ltd., ("we" or "Grindrod Shipping") a newly formed entity incorporated on November 2, 2017 in accordance with the laws of the Republic of Singapore, created to hold Parent's shipping business.
The combined financial statements of GSPL and GSSA, included elsewhere, have been prepared on a stand-alone basis and are derived from combining the financial statements of GSPL and GSSA, which we will acquire immediately prior to the Spin-Off, and their respective underlying accounting records. In addition, the combined financial statements of GSPL and GSSA include components of Parent's shipping businessOACL and Unicorn Bunker, both previously owned by GSSA, which were disposed to other Parent subsidiaries effective January 2018. Such businesses will not be part of our results of operations for periods following the disposal on January 1, 2018. The Spin-Off and disposal of OACL and Unicorn Bunker are referred to as the "Pro Forma Transactions".
The unaudited pro forma condensed statement of profit or loss has been adjusted to give effect to the Pro Forma Transactions as if they had occurred or became effective as of January 1, 2017. The unaudited pro forma condensed statement of financial position has been adjusted to give effect to the Pro Forma Transactions as though the Pro Forma Transactions had occurred or become effective as of December 31, 2017.
The unaudited pro forma condensed financial information included in this registration statement have been derived from the historical combined financial statements of GSPL and GSSA, including the audited combined statement of profit or loss for the year ended December 31, 2017 and the audited combined statement of financial position as of December 31, 2017, which are included elsewhere in this registration statement. The unaudited pro forma condensed financial information do not purport to represent what our financial position and results of operations would have been had the Spin-Off occurred on the dates indicated or to project our financial performance for any future period. In addition, the unaudited pro forma condensed financial information is provided for illustrative and informational purposes only and are not necessarily indicative of our future results of operations or financial condition as a separate, stand-alone public company. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable, but actual results may differ from the pro forma adjustments.
The assumptions and estimates underlying the unaudited adjustments to the pro forma condensed financial statements are described in the accompanying notes, which should be read together with the pro forma condensed financial statements.
148
GRINDROD SHIPPING HOLDINGS PTE. LTD.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF PROFIT OR LOSS
For the financial year ended December 31, 2017
|
Combined
Historical of GSPL and GSSA |
Adjustment
for disposal of OACL |
Adjustment
for disposal of Unicorn Bunker |
Pro Forma | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
US$'000 |
|||||||||||||
Revenue |
409,522 | (45,935) | (2) | (9,004) | (5) | 354,583 | |||||||
Cost of sales |
(387,408 | ) | 34,279 | (2) | 4,967 | (5) | (348,741 | ) | |||||
| | | | | | | | | | | | | |
Gross profit (loss) |
22,114 | (11,656 | ) | (4,037 | ) | 5,842 | |||||||
Other operating income |
4,696 | (257) | (2) | (1,352) | (5) | 3,087 | |||||||
Administrative expenses |
(32,868 | ) | 6,807 | (2) | 789 | (5) | (24,693 | ) | |||||
Other operating expenses |
(39,198 | ) | 296 | (2) | 521 | (5) | (38,381 | ) | |||||
Share of loss of joint ventures |
(12,946 | ) | | (2) | | (5) | (12,946 | ) | |||||
Interest income |
7,164 | (1,545) | (2) | (356) | (5) | 5,263 | |||||||
Interest expense |
(6,548 | ) | 1 | (2) | 380 | (5) | (6,167 | ) | |||||
| | | | | | | | | | | | | |
Loss before taxation |
(57,586 | ) | (6,354 | ) | (4,055 | ) | (67,995 | ) | |||||
Taxation |
(3,226 | ) | 1,854 | (2) | 1,689 | (5) | (317 | ) | |||||
| | | | | | | | | | | | | |
Loss for the period |
(60,812 | ) | (4,500 | ) | (2,366 | ) | (68,312 | ) | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
149
GRINDROD SHIPPING HOLDINGS PTE. LTD.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF FINANCIAL POSITION
As at December 31, 2017
US$'000
|
Grindrod
Shipping Holdings Pte. Ltd. |
Historical
combined GSPL and GSSA |
Adjustments
for disposal of OACL |
Adjustments
for disposal of Unicorn Bunker |
Pro Forma | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS |
||||||||||||||||
Current assets |
||||||||||||||||
Cash and bank balances |
* | 46,522 | 20,985 | (3) | 15,494 | (6) | 69,666 | |||||||||
|
(8,878) | (3) | (1,229) | (8) | ||||||||||||
|
(3,228) | (6) | ||||||||||||||
Trade receivables |
| 13,399 | | | 13,399 | |||||||||||
Other receivables and prepayments |
| 17,187 | | | 17,187 | |||||||||||
Due from related parties |
| 26,998 | | | 26,998 | |||||||||||
Loans to joint ventures |
| 18,180 | | | 18,180 | |||||||||||
Derivative financial instruments |
| 123 | | | 123 | |||||||||||
Inventories |
| 9,078 | | | 9,078 | |||||||||||
Current tax assets |
| 761 | | | 761 | |||||||||||
| | | | | | | | | | | | | | | | |
|
* | 132,248 | 12,107 | 11,037 | 155,392 | |||||||||||
Assets classified as held for sale |
| 54,954 | (30,050) | (3) | (24,904) | (5) | | |||||||||
| | | | | | | | | | | | | | | | |
Total current assets |
187,202 | (17,943 | ) | (13,867 | ) | 155,392 | ||||||||||
| | | | | | | | | | | | | | | | |
Non-current assets |
||||||||||||||||
Other receivables and prepayments |
| 72 | | | 72 | |||||||||||
Loans to joint ventures |
| 7,301 | | | 7,301 | |||||||||||
Ships, property, plant and equipment |
| 238,592 | | | 238,592 | |||||||||||
Interest in joint ventures |
| 64,296 | | | 64,296 | |||||||||||
Intangible assets |
| 61 | | | 61 | |||||||||||
Goodwill |
| 8,419 | | | 8,419 | |||||||||||
Deferred tax assets |
| 1,179 | | | 1,179 | |||||||||||
| | | | | | | | | | | | | | | | |
Total non-current assets |
| 319,920 | | | 319,920 | |||||||||||
| | | | | | | | | | | | | | | | |
Total assets |
* | 507,122 | (17,943 | ) | (13,867 | ) | 475,312 | |||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
150
GRINDROD SHIPPING HOLDINGS PTE. LTD.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF FINANCIAL POSITION
As at December 31, 2017
151
GRINDROD SHIPPING HOLDINGS PTE. LTD.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
For the year ended December 31, 2017
Basis of presentation
Adjustments for disposal of OACL
Adjustments for disposal of Unicorn Bunker
Transitional service agreement
152
The following instruments and documents are included as Exhibits to this registration statement.
153
154
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.
|
GRINDROD SHIPPING HOLDINGS PTE. LTD. | |||
|
/s/ MARTYN WADE
|
|||
|
Name | Martyn Wade | ||
|
Title: | Chief Executive Officer | ||
|
Date: | April 6, 2018 |
155
INDEX TO FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF GRINDROD SHIPPING HOLDINGS PTE. LTD.
We have audited the accompanying statement of financial position of Grindrod Shipping Holdings Pte. Ltd. (the "Company") as of 2 November 2017, the incorporation date of the Company. The financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the 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 balance sheet is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audits included consideration of its 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 Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of financial position presents fairly, in all material respects, the financial position of the Company as of 2 November 2017 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Deloitte & Touche LLP
Singapore
9 January 2018
F-2
GRINDROD SHIPPING HOLDINGS PTE. LTD.
STATEMENT OF FINANCIAL POSITION
As at of November 2, 2017
Amount in US$
|
|
|||
---|---|---|---|---|
Assets: |
||||
Current Assets |
||||
Other receivables |
$ | 1 | ||
| | | | |
Total Assets |
1 | |||
| | | | |
| | | | |
| | | | |
Equity: |
||||
Share Capital and Reserves |
||||
Share Capital |
$ | 1 | ||
| | | | |
Total Equity |
1 | |||
| | | | |
| | | | |
| | | | |
See accompanying notes to financial statement.
F-3
GRINDROD SHIPPING HOLDINGS PTE. LTD.
NOTES TO THE FINANCIAL STATEMENT
1 GENERAL
Organisation and principal activities
In anticipation of an initial listing in the United States, Grindrod Shipping Holdings Pte. Ltd. was incorporated under the laws of the Republic of Singapore on 2 November 2017 as the holding company for the shipping business to be spun off by Grindrod Limited. The Company has no operations.
2 SHARE CAPITAL
As of the incorporation date, 2 November 2017, the total issued share capital of the Company is US$1 consisting of 1 ordinary share. The share is fully paid, which has no par value, carries one vote per share and a right to dividends as and when declared by the Company.
F-4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
Opinion on the Financial Statements
We have audited the accompanying combined statements of financial position of Grindrod Shipping Pte. Ltd. and subsidiaries and Grindrod Shipping (South Africa) Pty Ltd and subsidiaries (the "Group") as of 31 December 2017, 2016 and 2015, the related combined statements of profit or loss and other comprehensive income, combined statements of changes in equity and combined statements of cash flows for each of the three years in the period ended 31 December 2017 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material aspects, the financial position of the Group as of 31 December 2017, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period ended 31 December 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on the Group's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Singapore
23 March
2018
We have served as the Group's auditor since 2015.
F-5
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
COMBINED STATEMENTS OF FINANCIAL POSITION
As at 31 December
See accompanying notes to combined financial statements.
F-6
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
COMBINED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Year ended 31 December
|
Notes | 2017 | 2016 | 2015 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
US$'000
|
US$'000
|
US$'000
|
||||||||
Revenue |
26 | 409,522 | 371,532 | 434,439 | ||||||||
Cost of sales |
27 | (387,408 | ) | (365,735 | ) | (407,577 | ) | |||||
| | | | | | | | | | | | |
Gross profit |
22,114 | 5,797 | 26,862 | |||||||||
Other operating income |
29 | 4,696 | 5,687 | 6,142 | ||||||||
Administrative expenses |
(32,868 | ) | (30,140 | ) | (27,670 | ) | ||||||
Other operating expenses |
30 | (39,198 | ) | (18,093 | ) | (71,829 | ) | |||||
Share of losses of joint ventures |
15 | (12,946 | ) | (3,472 | ) | (18,748 | ) | |||||
Interest income |
31 | 7,164 | 5,260 | 3,101 | ||||||||
Interest expense |
32 | (6,548 | ) | (4,899 | ) | (4,448 | ) | |||||
| | | | | | | | | | | | |
Loss before taxation |
33 | (57,586 | ) | (39,860 | ) | (86,590 | ) | |||||
Income tax expense |
34 | (3,226 | ) | (3,849 | ) | (3,764 | ) | |||||
| | | | | | | | | | | | |
Loss for the year |
(60,812 | ) | (43,709 | ) | (90,354 | ) | ||||||
Other comprehensive income: |
|
|
|
|
||||||||
Items that will not be reclassified subsequently to profit or loss |
||||||||||||
Remeasurement of defined benefit obligation |
41 | 157 | 339 | 31 | ||||||||
| | | | | | | | | | | | |
Items that may be reclassified subsequently to profit or loss |
||||||||||||
Exchange differences arising on translation of foreign operations |
4,232 | 5,141 | (8,905 | ) | ||||||||
Cash flow hedges |
210 | 2,417 | 4,122 | |||||||||
| | | | | | | | | | | | |
|
4,442 | 7,558 | (4,783 | ) | ||||||||
Other comprehensive income for the year, net of income tax |
4,599 | 7,897 | (4,752 | ) | ||||||||
| | | | | | | | | | | | |
Total comprehensive loss for the year |
(56,213 | ) | (35,812 | ) | (95,106 | ) | ||||||
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See accompanying notes to combined financial statements.
F-7
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
COMBINED STATEMENTS OF CHANGES IN EQUITY
For the year ended 31 December
|
Share
capital |
Share
premium |
Share
option reserve |
Hedging
reserve |
Translation
reserve |
Non-
distributable reserve |
Accumulated
profits (losses) |
Total | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||||||||||
Balance at 1 January 2015 |
417,599 | 19,905 | (450 | ) | (6,764 | ) | 5,305 | (20,596 | ) | 61,562 | 476,561 | ||||||||||||||
Loss for the year |
| | | | | | (90,354 | ) | (90,354 | ) | |||||||||||||||
Other comprehensive income (loss) for the year, net of income tax |
| | | 4,122 | (8,905 | ) | 31 | | (4,752 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive loss for the year |
| | | 4,122 | (8,905 | ) | 31 | (90,354 | ) | (95,106 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Issue of ordinary shares (Note 23) |
* | 21,597 | | | | | | 21,597 | |||||||||||||||||
Recognition of share-based payments (Note 24) |
| | 166 | | | | | 166 | |||||||||||||||||
Dividends (Note 35) |
| | | | | | (4,135 | ) | (4,135 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Transaction with owners, recognised directly in equity |
| 21,597 | 166 | | | | (4,135 | ) | 17,628 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2015 |
417,599 | 41,502 | (284 | ) | (2,642 | ) | (3,600 | ) | (20,565 | ) | (32,927 | ) | 399,083 | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Loss for the year |
| | | | | | (43,709 | ) | (43,709 | ) | |||||||||||||||
Other comprehensive loss for the year, net of income tax |
| | | 2,417 | 5,141 | 339 | | 7,897 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive loss for the year |
| | | 2,417 | 5,141 | 339 | (43,709 | ) | (35,812 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Recognition of share-based payments (Note 24), representing transaction with owners, recognised directly in equity |
| | (176 | ) | | | | | (176 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2016 |
417,599 | 41,502 | (460 | ) | (225 | ) | 1,541 | (20,226 | ) | (76,636 | ) | 363,095 | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Loss for the year |
| | | | | | (60,812 | ) | (60,812 | ) | |||||||||||||||
Other comprehensive loss for the year, net of income tax |
| | | 210 | 4,232 | 157 | | 4,599 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive loss for the year |
| | | 210 | 4,232 | 157 | (60,812 | ) | (56,213 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Issue of ordinary shares (Note 23) |
15,000 | | | | | | | 15,000 | |||||||||||||||||
Recognition of share-based payments (Note 24) |
| | (472 | ) | | | | | (472 | ) | |||||||||||||||
Dividends (Note 35) |
| | | | | | (1,674 | ) | (1,674 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Transaction with owners, recognised directly in equity |
15,000 | | (472 | ) | | | | (1,674 | ) | 12,854 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2017 |
432,599 | 41,502 | (932 | ) | (15 | ) | 5,773 | (20,069 | ) | (139,122 | ) | (319,736 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
See accompanying notes to combined financial statements.
F-8
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
COMBINED STATEMENTS OF CASH FLOWS
Year ended 31 December
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Operating activities |
||||||||||
Loss before taxation |
(57,586 | ) | (39,860 | ) | (86,590 | ) | ||||
Adjustments for: |
||||||||||
Share of losses of joint ventures |
12,946 | 3,472 | 18,748 | |||||||
Gain on disposal of ships |
(167 | ) | | | ||||||
Loss (gain) on disposal of plant and equipment |
107 | 1,078 | (116 | ) | ||||||
Depreciation of ships, property, plant and equipment and amortisation |
19,680 | 21,551 | 27,729 | |||||||
Impairment loss recognised on ships |
16,503 | 12,625 | 67,800 | |||||||
Impairment loss on goodwill and intangibles |
12,119 | | | |||||||
Impairment loss on net assets of disposal group |
5,092 | | | |||||||
Allowance for (Reversal of) doubtful debts |
18 | (3 | ) | 149 | ||||||
(Reversal of) provision for onerous contracts |
(7,427 | ) | 3,821 | 3,353 | ||||||
Recognition (Reversal) of share-based payments expenses |
33 | (176 | ) | 166 | ||||||
Net (gain) loss on derivatives financial instruments |
| (22 | ) | 22 | ||||||
Net foreign exchange (gain) loss |
(1,242 | ) | (965 | ) | 630 | |||||
Interest expense |
6,548 | 4,899 | 4,448 | |||||||
Interest income |
(7,164 | ) | (5,259 | ) | (3,101 | ) | ||||
Components of defined benefit costs recognised in profit or loss |
63 | 170 | 62 | |||||||
| | | | | | | | | | |
Operating cash flows before movements in working capital |
(477 | ) | 1,331 | 33,300 | ||||||
Inventories |
1,017 | (3,002 | ) | 5,501 | ||||||
Capital expenditure on ships |
(5,219 | ) | (28,836 | ) | (9,745 | ) | ||||
Proceeds from disposal of ships |
17,727 | 12,275 | 12,858 | |||||||
Trade receivables, other receivables and prepayments |
(279 | ) | 9,281 | 43,496 | ||||||
Trade and other payables |
(3,055 | ) | (5,000 | ) | (17,851 | ) | ||||
Due from related parties |
(5,049 | ) | (16,377 | ) | (628 | ) | ||||
Due to related parties |
6,737 | 11,983 | 42,798 | |||||||
| | | | | | | | | | |
Net cash generated from (used in) operations |
11,402 | (18,345 | ) | 109,729 | ||||||
Interest paid |
(6,206 | ) | (3,986 | ) | (4,537 | ) | ||||
Interest received |
2,677 | 2,806 | 9,493 | |||||||
Income tax paid |
(4,498 | ) | (1,732 | ) | (26 | ) | ||||
| | | | | | | | | | |
Net cash flows generated from (used in) operating activities |
3,375 | (21,257 | ) | 114,659 | ||||||
| | | | | | | | | | |
Investing activities |
||||||||||
Advances to immediate holding company and related parties |
(1,264 | ) | (24,463 | ) | (34,058 | ) | ||||
Repayment from immediate holding company and related parties |
415 | | 1,109 | |||||||
Purchase of plant and equipment |
(1,212 | ) | (719 | ) | (2,369 | ) | ||||
Purchase of intangible assets |
(19 | ) | | (59 | ) | |||||
Proceeds from disposal of plant and equipment |
18 | 50 | 35 | |||||||
Repayment of loans by joint ventures |
| | 500 | |||||||
Dividends received from joint ventures |
| 3,320 | 11,731 | |||||||
Investment in joint ventures |
| (13,735 | ) | (20,240 | ) | |||||
Net cash outflow on acquisition of assets (Note 42.1) |
| | (12,250 | ) | ||||||
Loan to third party |
| (158 | ) | | ||||||
| | | | | | | | | | |
Net cash used in investing activities |
(2,062 | ) | (35,705 | ) | (55,601 | ) | ||||
| | | | | | | | | | |
Financing activities |
||||||||||
Long-term interest bearing debt raised |
45,150 | 39,512 | 10,000 | |||||||
Payment of capital portion of long term interest-bearing debt |
(40,869 | ) | (28,665 | ) | (35,933 | ) | ||||
Loans from related parties |
5,000 | 37,000 | | |||||||
Restricted cash |
58 | (109 | ) | (3,201 | ) | |||||
Issuance of share |
15,000 | | | |||||||
Repayment of loans from related parties |
(42,000 | ) | | | ||||||
Dividends paid |
(1,674 | ) | | (4,135 | ) | |||||
Purchase of Parent's ordinary shares for forfeitable share plan |
(505 | ) | | | ||||||
| | | | | | | | | | |
Net cash flows (used in) generated from financing activities |
(19,840 | ) | 47,738 | (33,269 | ) | |||||
| | | | | | | | | | |
Net (decrease)increase in cash and cash equivalents |
(18,527 | ) | (9,224 | ) | 25,789 | |||||
Cash and cash equivalents at the beginning of the year |
62,470 | 70,030 | 48,270 | |||||||
Effect of exchange rate changes on the balance of cash held in foreign currencies |
1,302 | 1,664 | (4,029 | ) | ||||||
| | | | | | | | | | |
Cash and cash equivalents at the end of the year |
45,245 | 62,470 | 70,030 | |||||||
| | | | | | | | | | |
F-9
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
COMBINED STATEMENTS OF CASH FLOWS (Continued)
Year ended 31 December
Note A:
Reconciliation of liabilities arising from financing activities
The table below details changes in the group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the group's combined statement of cash flows as cash flows from financing activities.
|
1 January,
2017 |
Financing
cash flows (i) |
Non-cash
changes |
Other
changes (ii) |
31 December,
2017 |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||||
Bank loans (Note 18) |
112,545 | 4,281 | (7,950 | ) (iii) | (122 | ) | 108,754 | |||||||||
Loans from related parties (Note 22) |
37,253 | (37,000 | ) | | (253 | ) | | |||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
See accompanying notes to combined financial statements
F-10
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS
1 GENERAL
General information
The board of directors of Grindrod Limited, a public company incorporated in accordance with the laws of the Republic of South Africa, or Parent, has approved the demerger of its shipping business, which we refer to as the Spin-Off. It is expected that Grindrod Limited will sell all of the shares it holds in Grindrod Shipping Pte. Ltd., or GSPL, and Grindrod Shipping (South Africa) Pty Ltd, or GSSA, to Grindrod Shipping Holdings Pte. Ltd., or Grindrod Shipping. Grindrod Shipping is a newly formed entity incorporated on 2 November 2017 in accordance with the laws of the Republic of Singapore, created to hold Grindrod Limited's shipping business, in exchange for a market related consideration that will be settled by way of the issuance by Grindrod Shipping of compulsorily convertible notes which will convert to the ordinary shares of Grindrod Shipping.
These combined financial statements represent the combination of Grindrod Shipping Pte. Ltd. and its subsidiaries and Grindrod Shipping (South Africa) Pty Ltd and its subsidiaries (the "Group"). For all periods presented in these combined financial statements, the Group was under the management of Grindrod Limited and therefore considered to be under common management which forms the basis of the combination. The purpose of the combined financial statements is to provide general purpose historical financial information of Grindrod Shipping Pte. Ltd. and Grindrod Shipping (South Africa) Pty Ltd for the years ended 31 December 2017, 2016 and 2015.
The principal activities of the Group are vessel ownership, operation and management, acquisition, sale and purchase and employment. Information of the entities within the Group is contained in Note 14.
The combined financial statements of the Group for the financial year ended 31 December 2017, 2016 and 2015 were authorised for issue by the Board of Director of Grindrod Limited on 23 March 2018.
2 SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of compliance
The combined financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB").
2.2 Basis of preparation of historical combined financial information
The combined financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is 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 measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.
F-11
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
The combined financial statements have been prepared on the parent basis and therefore reflect the transferred assets and liabilities at the historical cost of Grindrod Limited, the ultimate parent of the Group before the transfer to Grindrod Shipping Holdings Pte. Ltd.
The combined financial statements of the Group have been derived from the financial statements of Grindrod Shipping Pte. Ltd. and Grindrod Shipping (South Africa) Pty Ltd and their direct and indirect subsidiaries on the following basis:
All intra-group balances, income, expenses and unrealized gains and losses arising from transactions between entities within the Group were eliminated when preparing the combined financial statements. Transactions with Grindrod Limited companies, which do not belong to the Group, have been disclosed as transactions with related parties.
2.3 Application of new and revised International Financial Reporting Standards (IFRSs)
From 1 January 2015, the Group has applied a number of amendments to IFRSs issued by the IASB that are mandatorily effective for an accounting period that begins on or after 1 January 2015. The adoption of these new/revised IFRSs has not resulted in significant changes to the Group's accounting policies and has no material effect on the amounts reported for the current or prior periods.
F-12
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.4 New and revised International Financial Reporting Standards (IFRSs) in issue but not yet effective
The Group has not applied the following new and revised IFRSs that are relevant to the Group that were issued but are not yet effective:
IFRS 9 |
Financial Instruments (1) | |
IFRS 15 |
Revenue from Contracts with Customers (and the related Clarifications) (1) | |
IFRS 16 |
Leases (2) | |
Amendments to IFRS 2 |
Classification and Measurement of Share-based Payment Transactions (1) | |
Amendments to IFRS 10 and IAS 28 |
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (3) | |
IFRIC 22 |
Foreign Currency Transactions and Advanced Consideration (1) |
IFRS 9 Financial Instruments
IFRS 9 issued in November 2009 introduced new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a 'fair value through other comprehensive income' (FVTOCI) measurement category for certain simple debt instruments.
Key requirements of IFRS 9:
With regard to the measurement of financial liabilities as at fair value through profit or loss, IFRS 9 requires that the amount of change in fair value of such financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in other comprehensive income would create or enlarge an accounting mismatch to profit or loss. Changes in fair value attributable to the financial liability's credit risk are not subsequently reclassified to profit or loss. Under IAS 39,
F-13
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss.
Based on an analysis of the Group's financial assets and financial liabilities as at 31 December 2017 on the basis of the facts and circumstances that exist at that date, management has assessed the impact of IFRS 9 to the Group's consolidated financial statements as follows:
Classification and measurement
All financial assets and liabilities will continue to be measured on the same bases as is currently adopted under IAS 39.
Impairment
Financial assets measured at amortised cost will be subject to the impairment provision of IFRS 9.
The Group expects to apply the simplified approach to recognise lifetime expected credit losses for its trade receivables as required or permitted by IFRS 9. Accordingly, management expects to recognise lifetime and 12-month expected credit losses for the trade receivables.
Management anticipates that the application of the expected credit loss model of IFRS 9 will result in earlier recognition of credit losses for the trade receivable and an increase in the amount of loss allowance recognised but does not expect that it will have a material impact on the Group's combined financial statements.
Hedge accounting
Management does not anticipate that the application of the IFRS 9 hedge accounting requirements will have a material impact on the Group's consolidated financial statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective.
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition:
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Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when "control" of the goods or services underlying the particular performance obligation is transferred to the customer.
Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.
In April 2016, the IASB issued Clarifications to IFRS 15 in relation to the identification of performance obligations, principal versus agent considerations as well as licensing application guidance.
The Group plans to adopt the new standard on the required effective date using the modified retrospective method. Further details of the Group's revenue are disclosed in Notes 2.17 and 26. The Group has two significant revenue streams: freight revenue and charter hire revenue. The latter contains a lease component which is therefore out of scope of IFRS 15.
Management has preliminarily assessed that each voyage under a freight revenue contract has been considered as a performance obligation. The transaction price is agreed with the customer for all types of contracts. The voyage result (revenue and voyage related costs) recognised during the voyage is based on estimates of costs and the duration of the voyage. According to IFRS 15 the revenue should be recognised when the entity satisfies a performance obligation that is when a voyage is carried out, based on a contract with a customer. As such, revenue is recognized over time from the point when there is a transfer of control to the customer (i.e., when the ship is ready for load of cargo until the discharge of cargo at the destination).
Under the existing revenue standard, the Group recognises freight revenue over time from the loading of cargo to the discharge of cargo, except for freight revenue earned within the pools, which are recognised over time from the discharge of cargo in the previous voyage to the discharge of cargo in the current voyage. As such, the adoption of IFRS 15 will impact uncompleted voyages in the pools at the reporting date. Based on management's analysis, management does not expect the effect of the changed revenue recognition to be material.
Apart from the providing more extensive disclosure on the Group's revenue transaction and the timing of recognition of the above revenue, management does not anticipate that the application of IFRS 15 will have a significant impact on the financial position and/or financial performance of the Group.
IFRS 16 Leases
IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. IFRS 16 will supersede the current lease guidance including IAS 17 Leases and the related interpretations when it becomes effective.
IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees (i.e. all on balance sheet) except for short-term leases and leases of low value assets.
The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the
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impact of lease modifications, amongst others. Furthermore, the classification of cash flows will also be affected as operating lease payments under IAS 17 are presented as operating cash flows; whereas under the IFRS 16 model, the lease payments will be split into a principal and an interest portion which will be presented as financing and operating cash flows respectively.
In contrast to lessee accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, and continues to require a lessor to classify a lease either as an operating lease or a finance lease.
Furthermore, extensive disclosures are required by IFRS 16.
Management anticipates that the application of IFRS 16 in the future will have a material impact on amounts reported in respect of its financial assets and financial liabilities as there are a significant number of leases in its operations. Assets will increase on the recognition of "right of use" of an underlying asset and liabilities will increase for the obligation to make lease payments. The profit and loss will be affected as the relevant lease expenses will be recognised as amortisation of the right of use asset and interest expense. Statement of cash flows will be affected by lease payments being classified as cash flows used in financing activities instead of cash flow used in operating activities. IFRS 16 will become effective for the Group in 2019 and management does not plan to early adopt. Currently, it is not possible to provide a reasonable estimate of the effect of IFRS 16 until the management have completed a detailed review.
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
The amendments to IFRS 10 and IAS 28 deal with situations where there is a sale or contribution of assets between an investor and its associate or joint venture. Specifically, the amendments state that gains or losses resulting from the loss of control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method, are recognised in the parent's profit or loss only to the extent of the unrelated investors' interests in that associate or joint venture. Similarly, gains and losses resulting from the remeasurement of investments retained in any former subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) to fair value are recognised in the former parent's profit or loss only to the extent of the unrelated investors' interests in the new associate or joint venture.
The effective date of the amendments has yet to be set by the IASB; however, earlier application of the amendments is permitted. Management anticipates that the application of these amendments may have an impact on the Group's combined financial statements in future periods should such transactions arise. Management does not plan to early adopt the amendments to IFRS 10 and IAS 28.
IFRIC 22 Foreign Currency Transactions and Advance Consideration
IFRIC 22 addresses how to determine the 'date of transaction' for the purpose of determining the exchange rate to use on initial recognition of an asset, expense or income, when consideration for that item has been paid or received in advance in a foreign currency which resulted in the recognition of a non-monetary asset or non-monetary liability (e.g. a non-refundable deposit or deferred revenue).
The Interpretation specifies that the date of transaction is the date on which the entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the Interpretation requires an entity to determine the date of transaction for each payment or receipt of advance consideration.
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The Interpretation is effective for annual periods beginning on or after 1 January 2018 with earlier application permitted. Entities can apply the Interpretation either retrospectively or prospectively. Specific transition provisions apply to prospective application.
Management do not anticipate that the application of the amendments in the future will have an impact on the Group's combined financial statements. This is because the Group already accounts for transactions involving the payment or receipt of advance consideration in a foreign currency in a way that is consistent with the amendments. Management does not plan to early adopt IFRIC 22.
2.5 Business Combinations
Acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values of assets given, liabilities incurred by the Group to the former owners of the acquiree, and equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustment depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39 Financial Instruments: Recognition and Measurement , or IAS 37 Provisions, Contingent Liabilities and Contingent Assets , as appropriate, with the corresponding gain or loss being recognised in profit or loss.
Where a business combination is achieved in stages, the Group's previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have been previously recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.
The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under the IFRS are recognised at their fair value at the acquisition date, except that:
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.
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The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date and is subjected to a maximum of one year from acquisition date.
2.6 Financial Instruments
Financial assets and financial liabilities are recognised on the statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period.
Income and expense is recognised on an effective interest basis for debt instruments other than those financial instruments "at fair value through profit or loss".
Financial assets
Financial assets are classified as either financial assets "at fair value through profit or loss" or "loans and receivables".
Financial assets at fair value through profit or loss (FVTPL)
Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL.
A financial asset is classified as held for trading if:
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the 'other operating income' or 'other operating expenses' lines in the statement of profit or loss and other comprehensive income. Fair value is determined in the manner described in Note 4.
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Loans and receivables
Trade and other receivables (including trade and other receivables, loans to joint ventures, amounts due from related parties and cash and cash equivalents) that have fixed or determinable payments that are not quoted in an active market are classified as "loans and receivables". Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest method, except for short-term receivables when the effect of discounting is immaterial.
Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.
Objective evidence of impairment could include:
For certain categories of financial asset, such as receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.
For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of receivables where the carrying amount is reduced through the use of an allowance account. When a receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
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Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue cost.
Financial liabilities
Financial liabilities are classified as either financial liabilities "at fair value through profit or loss" or "other financial liabilities".
Financial liabilities at fair value through profit or loss (FVTPL)
Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
Financial liabilities at fair value through profit or loss are initially measured at fair value and subsequently stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the 'other operating income' or 'other operating expenses' lines in the statement or profit or loss and other comprehensive income. Fair value is determined in the manner described in Note 4.
Other financial liabilities
Trade and other payables (including amounts due to related parties and loans from related parties) are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis, except for short-term payables when the effect of discounting is immaterial.
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Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Interest expense calculated using the effective interest method is recognised over the term of borrowings in accordance with the Group's accounting policy for borrowing costs (see Note 2.18).
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.
Derivative financial instruments and hedge accounting
The Group enters into freight forward agreements and bunker swaps to manage its exposure to freight rate and bunker prices respectively. Further details of derivative financial instruments are disclosed in Note 11.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The Group designates the derivatives as hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges).
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instruments is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.
Hedge accounting
The Group designates hedges of freight rate risk and bunker prices as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item.
Note 11 contains details of the fair values of the derivative instruments used for hedging purposes. Movements in the hedging reserve in equity are also detailed in the statements of other comprehensive income ("OCI").
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in OCI. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of other operating expense or other operating income.
Amounts recognised in OCI and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss in the same line of the statement of profit or loss and other comprehensive income as the recognised hedged item. However, when the forecast transaction that is hedged, results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and when the forecast transaction is ultimately recognised in profit or loss, such gains and losses are recognised in profit or loss, or transferred from equity and included in the initial measurement of the cost of the asset or liability as described above.
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When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was accumulated in equity is recognised immediately in profit or loss.
2.7 Offsetting Arrangements
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when the Group has a legally enforceable right to set off the recognised amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. A right to set-off must be available today rather than being contingent on a future event and must be exercisable by any of the counterparties, both in the normal course of business and in the event of default, insolvency or bankruptcy.
2.8 Inventories
Inventories are assets held for sale in the ordinary course of business, in the process of production for such sale or in the form of materials or supplies to be consumed in the production process or in the rendering of services. Inventories which include bunkers on board ships and other consumable stores are valued at the lower of cost and net realisable value. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Cost is determined on a first-in first-out basis. Spares on board ships are charged against income when issued to the ships.
When inventories are sold, the carrying amount is recognised as part of cost of sales. Any write-down of inventories to net realisable value and all losses of inventories or reversals of previous write-downs or losses are recognised in cost of sales in the period the write-down, loss or reversal occurs.
Assets that are held for rental are initially classified as ships, property, plant and equipment. When these assets cease to be rented and a decision is made to sell these assets, the carrying amount is transferred to inventories. Upon sale of these assets, the sales value is recorded in gross revenue and the related carrying value of these assets (held as inventories) is recorded in cost of sales.
2.9 Ships, Property, Plant and Equipment
Ships, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is charged so as to write off the cost of assets other than property and ships under construction over their estimated useful lives, using the straight-line method, on the following bases:
Office equipment and furniture and fittings | - | 3 years | ||
Plant and equipment | - | 3 to 5 years | ||
Motor vehicles | - | 5 years | ||
Ships | - | 15 years | ||
Dry-docking | - | 2.5 years |
The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
Ships and properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Depreciation of these assets, on the same bases as other assets, commences when the assets are available for use.
Ships are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost comprises acquisition cost and costs directly related to the acquisition up until the time when the asset is ready for use, including interest expense incurred during the period. The market average useful life of a ship is estimated to range from 25 to 30 years at which point it would usually be scrapped. The Group policy is to maintain a young fleet compared to the market average and estimates useful life as 15 years from date of delivery for new ships. Ships are depreciated on a straight-line basis to an estimated residual value over their useful life.
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From time to time, the Group's ships are required to be dry-docked for inspection and re-licensing at which time major repairs and maintenance that cannot be performed while the ships are in operation are generally performed. The Group capitalises the costs associated with dry-docking as they occur and amortises these costs on a straight-line basis over 2.5 years, which is generally the period until the next scheduled dry-docking. A portion of the cost of acquiring a new ship is estimated and allocated to the components expected to be replaced or refurbished at the next scheduled dry-docking. If the ship is disposed before the next dry-docking, the carrying amount of dry-docking expenses is included in determining the gain or loss on disposal of the ship and taken to the profit or loss. If the period to the next dry-docking is shorter than expected, the unamortised balance of the deferred dry-docking cost is charged immediately as an expense before the next dry-docking.
Fully depreciated ships, property, plant and equipment still in use are retained in the financial statements.
Assets that are held for rental are initially classified as ships, property, plant and equipment. When these assets cease to be rented and a decision is made to sell these assets, the carrying amount is transferred to inventories. Upon sale of these assets, the sales value is recorded in gross revenue and the related carrying value of these assets (held as inventories) is recorded in cost of sales.
2.10 Intangible Assets
Intangible assets are stated at cost less any impairment in net recoverable value that has been recognised in profit or loss.
Intangible assets acquired separately are reported at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives are not amortised. Each period, the useful lives of such assets are reviewed to determine whether events and circumstances continue to support an indefinite useful life assessment for the asset, such events are tested for impairment in accordance with the policy below.
2.11 Impairment of Tangible and Intangible Assets Excluding Goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
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Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is indication that the asset may be impaired.
2.12 Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer's previously held equity interest (if any) in the entity over net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
If, after reassessment, the Group's interest in the fair value of the acquiree's identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer's previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary or the relevant cash generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
2.13 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income.
The Group as lessee
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the year in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
2.14 Interests in Joint Ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control
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of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of joint ventures are incorporated in these combined financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations . Under the equity method, an investment in a joint venture is initially recognised in the combined statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the joint venture. When the Group's share of losses of a joint venture exceeds the Group's interest in that joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture.
An investment in a joint venture is accounted for using the equity method from the date on which the investee becomes a joint venture. On acquisition of the investment in a joint venture, any excess of the cost of the investment over the Group's share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.
The requirements of IAS 39 Financial Instruments: Recognition and Measurement are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group's investment in a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 Impairment of Assets to the extent that the recoverable amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the date when the investment ceases to be a joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with IAS 39 Financial Instruments: Recognition and Measurement . The difference between the carrying amount of the joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the joint venture is included in the determination of the gain or loss on disposal of the joint venture. In addition, the Group accounts for all amounts previously recognised in OCI in relation to that joint venture on the same basis as would be required if that joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in OCI by that joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued.
The Group continues to use the equity method when the investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.
When the Group reduces its ownership interest in a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss, the proportion of the gain or loss that had previously been recognised in OCI relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.
F-25
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
When a group entity transacts with a joint venture of the Group, profits and losses resulting from the transactions with the joint venture are recognised in the Group's combined financial statements only to the extent of interests in the joint venture that are not related to the Group.
2.15 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.
2.16 Non-current assets and disposal groups held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the group will retain a non-controlling interest in its former subsidiary after the sale. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.
2.17 Revenue Recognition
Revenue represents the gross inflow of economic benefits during the period arising in the course of the ordinary activities when those inflows result in increases in equity, other than increases relating to contributions from equity participants. Included in revenue are freight, charter hire, sale of ships, bunker and consumables related to the ship sales and management fee income.
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.
Charter hire is recognised on a daily accrual basis. Freight revenue is recognised on completion of the voyage and for uncompleted voyages at year-end on the percentage of completion basis. Results of uncompleted voyages are included based on the estimated voyage result and the voyage time elapsed. Anticipated losses for contracts arising on uncompleted voyages are provided in full.
F-26
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
Sales of ships, bunkers and consumables are recognised when all the following conditions are satisfied:
Management fee income is recognised on accrual basis over the period of services rendered.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income from investments is recognised when the shareholders' rights to receive payment have been established.
2.18 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
2.19 Share-Based Payments
Equity-settled share optionsCertain employees have been granted equity-settled share options operated by the ultimate holding company. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant and recognised in profit or loss on the straight-line basis over the vesting period, based on the estimated number of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured using a binomial pricing model. The financial effects of the share options granted to the employees of the Group are accordingly recharged to the group entities by the ultimate holding company.
Cash-settled share-based paymentsShare appreciation rights granted to employees for services rendered or to be rendered are raised as a liability and recognised in profit or loss immediately or, if vesting requirements are applicable, over the vesting period. The liability is remeasured annually until settled and any changes in value are recognised in profit or loss. Fair value is measured using a binomial pricing model.
2.20 Retirement Benefit Costs
Payments to defined contribution retirement benefit plans are charged as an expense when employees have rendered the services entitling them to the contributions. Payments made to state-managed retirement benefit schemes, such as the Singapore Central Provident Fund, and South African defined contribution provident funds, are dealt with as payments to defined contribution plans where the Group's obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period.
F-27
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Defined benefit costs are categorised as follows:
The Group presents the first two components of defined benefit costs in profit or loss in the line item 'Administrative expense'. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the combined statement of financial position represents the actual deficit or surplus in the Group's defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
2.21 Employee Leave Entitlement
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.
2.22 Income Tax
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in statement of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted in countries where the company and subsidiaries operate by the end of the reporting period.
Deferred tax is recognised on the differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
F-28
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited outside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss (either in other comprehensive income or directly in equity, respectively), or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over cost.
2.23 Foreign Currency Transactions and Translation
The individual financial statements of each group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency which is either United States dollars or South African Rands). The combined financial statements of the Group are presented in United States Dollars.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the year. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the year except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in OCI. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in OCI.
Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
For the purpose of presenting combined financial statements, the assets and liabilities of the Group's foreign operations (including comparatives) are expressed in United States Dollars using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in OCI and accumulated in a separate component of equity under the header of translation reserve.
F-29
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to profit or loss.
In the case of a partial disposal (i.e. no loss of control) of a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. of associates or jointly controlled entities not involving a change of accounting basis), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in OCI.
2.24 Cash and Cash Equivalents in the Statement of Cash Flows
Cash and cash equivalents in the statement of cash flows comprise cash on hand and demand deposits that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
2.25 Financial Guarantee Contracts
Financial guarantee contracts are accounted for in terms of IFRS 4 Insurance Contracts and are measured initially at cost and thereafter, in accordance with IAS 37 Provisions, contingent liabilities and contingent assets .
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, which are described in Note 2, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
(i) Critical judgements in applying the Group's accounting policies
The following are the critical judgements, apart from those involving estimations (see below), that management has made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
Classification of certain investments as a joint venture
Note 15 describes that Tri-view Shipping Pte. Ltd., IM Shipping Pte. Ltd., Island Bulk Carriers Pte. Ltd. and IVS Bulk Pte. Ltd. as joint ventures of the Group even though the Group has 51%, 51%, 65% and 33.5% of ownership interest and voting rights in these entities respectively. Management has assessed that the interests in these entities would be considered as joint ventures given that the contractual agreement between the parties in undertaking the economic activities of these entities would be subject to joint control. Joint control is the contractually agreed sharing of control over an economic activity, and exists
F-30
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)
only when the strategic financial and operating decisions relating to the activity require the unanimous consent of all the parties sharing control.
Ships classified as inventories
The Group regularly engaged in trading of ships. When a ship ceased to be rented and a decision is made for the ship to be sold, the ship would be classified as inventories. The proceeds from the sale of such assets shall be recognised as revenue in accordance with IAS 18 Revenue . The corresponding cost shall be accounted for as cost of sales.
(ii) Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are disclosed below.
Provision for onerous contracts
Full provision is made for the present obligations of the unavoidable future losses of fulfilling the terms of onerous ship charter contracts or contracts of affreightment to which the Group is committed.
Management has estimated the provision for onerous contracts based on the present value of the future charter payments that the Group is expected to make under non-cancellable onerous operating charter agreements and contract of affreightment, less charter revenue expected to be earned on the charter. The estimate is very sensitive to changes in the freight rates. Note 20 provide more details on this provision.
Recoverability of amounts due from related parties and loans to joint ventures
The recoverability of the amounts due from related parties and loan to joint ventures is based on the ongoing evaluation of recoverability and analysis of the outstanding receivables and on management's estimate of the ultimate realisation of these receivables, including creditworthiness, past collection history and the estimated net asset value of the related parties and joint ventures which approximates their fair value less cost to sell. Based on the assessment, the carrying amounts for the amounts due from related parties and loans to joint ventures will be recovered in full. Adjustment will be made in future periods in the event that there is objective evidence of impairment resulting from future loss event.
The carrying amounts of the amounts due from related parties and loan to joint ventures are disclosed in Notes 9 and 10.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit (based on past performance and management's expectations of the market developments) and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the end of the reporting period was $8,419,000 (2016: $16,022,000 and 2015: $14,435,000)) after an impairment of $8,483,000 (2016: $Nil and 2015: $Nil) was recognised during the financial year. Details of the impairment loss calculation are provided in Note 17.
Impairment of interest in joint ventures
The recoverable amount of the investments has been determined based on the estimated net asset value of the joint ventures which approximates their fair value less cost to sell.
The carrying amounts of interest in joint ventures are disclosed in Note 15.
F-31
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)
Percentage of completion of voyages recognised as revenue
The stage of completion of a voyage is determined by calculating the total number of actual days from the loading of the cargo at the commencement of a voyage to the period end, divided by the total estimated number of days from loading to discharging the cargo.
The duration of a voyage depends on the size of the ship being loaded, cargo type and quantity, ship speed as well as delays occasioned by weather or due congestion at load or discharge ports.
Ship life, residual value and impairment
In the shipping industry, the use of the 25 to 30 year ship life has become the prevailing standard for the type of ship owned by the Group. However, management depreciates the ships on a straight-line basis after deduction for residual values over the ship's estimated useful life of 15 years, from the date the ship was originally delivered from the shipyard as the Group maintains a young fleet compared to the market average and generally aims to replace ships that are 15 years or older. As a result, ships are depreciated over 15 years to the expected residual market value of a ship of a similar age and specification. Management reassesses the depreciation period of ships that surpass this limit with special consideration of the ships and the purpose for which the ship was retained in the fleet.
Residual values of the ships are reassessed by management at the end of each reporting period based on the current shipping markets, the movement of the markets over the previous five years and the age, specification and condition of the respective ships.
Considerations for useful life of the ships also include maintenance and repair cost, technical or commercial obsolescence and legal or similar limits to the use of ships.
Management also reviews the ships for impairment whenever there is an indication that the carrying amount of the ships may not be recoverable. Management measures the recoverability of an asset by comparing its carrying amount against its recoverable amount. Recoverable amount is the higher of the fair value less cost to sell and value in use. If the ship is considered to be impaired, an impairment loss is recognised to an amount to the excess of the carrying value of the asset over its recoverable amount.
Value in use is the future cash flows that the ships are expected to generate from charter hire of the ships and the expected running costs thereof over their remaining useful lives, with a cash inflow in the final year equal to the residual value of the ships. Management determined the value-in-use based on past performance of the ships and their expectations of the market development. The future cash flows are determined based on the combination of the following assumptions:
Forecast charter rates are based on existing charter contracts published time charter rates and a growth rate as follows:
F-32
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)
As at 31 December 2017 and 2016, a possible change to the following estimate used in management's assessment will result in the recoverable amount to be below the total carrying amount of the ships (on the basis that each of the other key assumptions remain unchanged):
Bulk Carriers
Chemical Tankers
As at 31 December 2015, as the carrying amount of the ships exceed the recoverable amount, the above analysis is not applicable.
Based on the key assumptions and taking into account the sensitivity analysis above, management has determined that the estimated recoverable amount of the ships (excluding ships classified as inventories held for sale) are appropriate. Accordingly, no further allowance impairment loss is required except for the impairment loss of US$16,503,000 (2016: US$12,625,000 and 2015: US$67,800,000) recognised during the year recorded in "other operating expenses" (Note 30).
The recoverable amounts of ships classified as inventories were determined based on fair value less cost of disposal, which were determined based on the market comparable approach that reflects recent transaction prices for similar ships, with similar age and specifications. In valuing the ships, the appraisers have taken into consideration the prevailing market conditions and have made adjustments for differences where necessary before arriving at the most appropriate value for the ships.
Tax liabilities
The Group acquired a wholly-owned subsidiary, Unicorn Tankers International Ltd ("UTI"), in 2013. UTI and its subsidiary are tax residents in United Kingdom ("UK"). In recent years, the UK tax authorities have revised their interpretations of certain areas of tonnage tax legislation. If certain legislation is interpreted in an alternative manner, additional taxation of up to US$5,657,000 (2016: US$5,657,000 and 2015: US$5,657,000) could arise. A tax provision of US$2,400,000 (2016: US$2,400,000 and 2015: US$2,400,000) has been provided.
In 2013, there were queries raised by the UK tax authorities on a subsidiary of UTI. At the date of authorisation of these financial statements, the inquiries by the UK tax authorities are still ongoing. Management is of the opinion that UTI and its subsidiary had complied with the tax legislation and does not expect any additional taxation will arise out of the queries raised by the UK tax authorities.
F-33
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT
(i) Categories of financial instruments
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Financial assets |
||||||||||
Derivative instruments in designated hedge accounting relationships |
123 | 225 | 300 | |||||||
| | | | | | | | | | |
Loans and receivables (including cash and cash equivalents) |
163,600 | 182,719 | 166,575 | |||||||
Less: Transferred to asset of disposal group classified as held for sale (Note 39) |
(35,500 | ) | | | ||||||
| | | | | | | | | | |
|
128,100 | 182,719 | 166,575 | |||||||
| | | | | | | | | | |
|
128,223 | 182,944 | 166,875 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Financial liabilities |
||||||||||
Derivative instruments in designated hedge accounting relationships |
138 | 450 | 2,964 | |||||||
| | | | | | | | | | |
Amortised cost |
171,117 | 199,146 | 153,863 | |||||||
Less: Transferred to asset of disposal group classified as held for sale (Note 39) |
(16,975 | ) | | | ||||||
| | | | | | | | | | |
|
154,142 | 199,146 | 153,863 | |||||||
| | | | | | | | | | |
|
154,280 | 199,596 | 156,827 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
(ii) Financial risk management policies and objectives
The management of the Group monitors and manages the financial risks relating to the operations of the Group to ensure appropriate measures are implemented in a timely and effective manner. These risks include market risk (foreign currency risk, interest rate risk), credit risk and liquidity risk.
The Group does not hold or issue derivative financial instruments for speculative purpose.
There has been no change to the Group's exposure to these financial risks or the manner in which it manages and measures the risk. Market risk exposures are measured using sensitivity analysis indicated below.
(a) Credit risk management
The Group's primary exposure to credit risk arises through its trade and other receivables. Significant credit risk is mitigated through entering into transactions with credit worthy counterparties and monitoring of the recoverability of the debts on an on-going basis.
Other sources of exposure to credit risk include cash and derivative financial instruments. Cash is placed with reputable banks and derivatives are only entered into with credit worthy counterparties.
The Group's maximum exposure to credit risk in the event that counterparties fail to perform their obligations as at the end of the financial year in relation to each class of recognised financial assets is the carrying amount of those assets as indicated in the combined statement of financial position.
Sound credit risk management involves prudently managing the risk and reward relationship and controlling and minimising credit risks across a variety of dimensions, such as quality, concentration, maturity and security.
At the end of the reporting period, other than amounts due from related parties and loans to joint ventures, there were no significant concentrations of credit risk in the event of changes in economic, industry or geographical factors.
Further details to credit risks on trade and other receivables, due from related parties and loans to joint ventures are disclosed in Notes 7, 8, 9 and 10 respectively.
F-34
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (Continued)
(b) Interest rate risk management
The Group is exposed to interest rate risk through the impact of bank loans and loans granted from/to related parties at variable interest rates. The Group monitors its exposure to fluctuating interest rates and generally enters into contracts that are linked to market rates relative to the currency of the asset or liability.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonably possible change in interest rates.
If interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group's:
(c) Foreign currency exchange risk management
The Group's main operational activities are carried out in United States dollars and South African rands, which is the functional currency of the respective financial statements of each group entity. The risk arising from movements in foreign exchange rates is limited as the Group has minimal transactions in foreign currencies which mainly relates to administrative expenses in Singapore dollars, loans to joint ventures in Japanese yen and amounts due to related companies in South African rands and Great Britain pounds as well as bank balances in South African rands.
The Group has access to a foreign exchange facility which enables it to enter into forward foreign exchange contracts. Management reviews and monitors currency risk exposure and determines whether any hedging is considered necessary.
The objective of the foreign exchange exposure management policy is to ensure that all foreign exchange exposures are identified as early as possible and that the identified exposures are actively managed to reduce risk. All exposures are to reflect the underlying foreign currency commitments arising from trade and/or foreign currency finance. Under no circumstances are speculative positions, not supported by normal trade flows, permitted.
F-35
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (Continued)
At the end of the reporting period, the significant carrying amounts of monetary assets and monetary liabilities denominated in currencies other than the respective Group entities' functional currencies are as follows:
|
Liabilities | Assets | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||||||
Singapore dollars |
(2 | ) | (3 | ) | (2 | ) | 201 | 91 | 71 | ||||||||||
United States dollars |
(186 | ) | (1,903 | ) | (1,291 | ) | 2,093 | 2,183 | 1,947 | ||||||||||
South African rands |
(19,268 | ) | (12,469 | ) | (28,158 | ) | 119 | 36,003 | 29,737 | ||||||||||
Japanese yen |
(11 | ) | (5 | ) | | 11,132 | 10,739 | 10,499 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Foreign currency sensitivity
The following table details the sensitivity to a 10% increase and decrease in the relevant foreign currencies against the functional currency of each group entity. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates.
If the relevant foreign currency strengthens by 10% against the functional currency of the entity, profit or loss will increase/(decrease) by:
|
Impact on profit or loss | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2017 | 2016 | 2015 | |||||||
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Singapore dollars |
20 | 9 | 7 | |||||||
United States dollars |
191 | 28 | 66 | |||||||
South African rands |
(1,915 | ) | 2,354 | 158 | ||||||
Japanese yen |
1,112 | 1,075 | 1,050 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
If the relevant foreign currency weakens by 10% against the functional currency of the entity, profit or loss will increase/(decrease) by:
|
Impact on profit or loss | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2017 | 2016 | 2015 | |||||||
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Singapore dollars |
(20 | ) | (9 | ) | (7 | ) | ||||
United States dollars |
(191 | ) | (28 | ) | (66 | ) | ||||
South African rands |
1,915 | (2,354 | ) | (114 | ) | |||||
Japanese yen |
(1,112 | ) | (1,075 | ) | (1,050 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
(d) Liquidity risk management
Liquidity
risk refers to the risk that the Group is unable to pay its creditors due to insufficient funds. The Group maintains and monitors a level of cash deemed adequate by management at all times
to finance its obligations as and when they fall due.
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate borrowing facilities are maintained. The management may from time to time at their discretion raise or borrow monies for the purposes of the Group as they deem fit.
F-36
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (Continued)
Non-derivative financial liabilities
The following tables detail the remaining contractual maturity for non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the financial liability on the combined statements of financial position.
|
Weighted
average effective interest rate |
On
demand or within 1 year |
Within
2 to 5 years |
After
5 years |
Adjustment | Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
% p.a.
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||||||
Group |
|||||||||||||||||||
2017 |
|
|
|
|
|
|
|||||||||||||
Non-interest bearing |
| 38,854 | 6,534 | | | 45,388 | |||||||||||||
Variable interest rate instruments |
3.83 | 90,128 | 23,035 | | (4,409 | ) | 108,754 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
|
128,982 | 29,569 | | (4,409 | ) | 154,142 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
2016 |
|||||||||||||||||||
Non-interest bearing |
| 45,034 | 67 | | | 45,101 | |||||||||||||
Fixed interest rate instruments |
10.50 | 4,248 | | | | 4,248 | |||||||||||||
Variable interest rate instruments |
3.21 | 74,243 | 82,001 | 1,649 | (8,096 | ) | 149,797 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
|
123,525 | 82,068 | 1,649 | (8,096 | ) | 199,146 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
2015 |
|||||||||||||||||||
Non-interest bearing |
| 51,719 | 149 | | | 51,868 | |||||||||||||
Variable interest rate instruments |
2.69 | 96,263 | 8,387 | | (2,655 | ) | 101,995 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
|
147,982 | 8,536 | | (2,655 | ) | 153,863 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
The maximum amount that the Group could be forced to settle under the financial guarantee if the full guaranteed amount is claimed by the counterparty to the guarantee is disclosed in Note 36. The Group considers that it is more than likely that no amount will be payable under the arrangement.
Derivative financial instruments
The following table details the liquidity analysis for derivative financial instruments. The table has been drawn up based on the undiscounted gross inflows and (outflows) on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined
F-37
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (Continued)
by reference to the projected interest rates as illustrated by the yield curves existing at the end of reporting period.
|
On
demand or within 1 year |
Within
2 to 5 years |
Adjustment | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||
Group |
|||||||||||||
2017 |
|
|
|
|
|||||||||
Gross settled: |
|||||||||||||
Forward freight agreements |
|||||||||||||
Gross inflow |
17 | | | 17 | |||||||||
Gross outflow |
(138 | ) | | | (138 | ) | |||||||
| | | | | | | | | | | | | |
|
(121 | ) | | | (121 | ) | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Bunker swaps |
|||||||||||||
Gross inflow |
106 | | | 106 | |||||||||
| | | | | | | | | | | | | |
|
(15 | ) | | | (15 | ) | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
2016 |
|||||||||||||
Gross settled: |
|||||||||||||
Forward freight agreements |
|||||||||||||
Gross inflow |
4 | | | 4 | |||||||||
Gross outflow |
(450 | ) | | | (450 | ) | |||||||
| | | | | | | | | | | | | |
|
(446 | ) | | | (446 | ) | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Bunker swaps |
|||||||||||||
Gross inflow |
221 | | | 221 | |||||||||
| | | | | | | | | | | | | |
|
(225 | ) | | | (225 | ) | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
2015 |
|||||||||||||
Gross settled: |
|||||||||||||
Forward freight agreements |
|||||||||||||
Gross inflow |
300 | | | 300 | |||||||||
| | | | | | | | | | | | | |
Bunker swaps |
|||||||||||||
Gross outflow |
(2,964 | ) | | | (2,964 | ) | |||||||
| | | | | | | | | | | | | |
|
(2,664 | ) | | | (2,664 | ) | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(e) Shipping market price risk management
The Group is exposed to the fluctuations in market conditions in the shipping industry which in turn affects the Group's profitability. Management continually assess shipping markets using their experience and detailed research. Risks are managed by fixing tonnage on longer term time charters, contracts of affreightment and entering into forward freight agreements. The carrying amount of the derivative financial instruments is disclosed in Note 11.
Shipping market price sensitivity
The sensitivity analyses below have been determined based on the exposure to shipping market price risk at the end of the reporting period.
F-38
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (Continued)
In respect of derivative financial instruments, if the shipping market prices had been 10% higher/lower while other variables were held constant:
(f) Commodity price risk management
The Group uses bunker swaps to manage exposure to commodity price risk where the positions are not naturally economically hedged through the combination of holding inventory, forward sales contracts and forward purchase contracts. Management continually assess commodity price through their experience and detailed research. The carrying amount of the derivative financial instruments is disclosed in Note 11.
Commodity price sensitivity
The sensitivity analyses below have been determined based on the exposure to commodity price risk at the end of the reporting period.
In respect of derivative financial instruments, if the commodity prices had been 10% higher/lower while other variables were held constant:
(g) Fair value measurement of financial assets and financial liabilities
The carrying amounts of cash and cash equivalents, trade and other current receivables and payables, and other liabilities approximate their respective fair values due to the relatively short-term maturity of these financial instruments. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to financial statements.
Financial instruments measured at fair value on a recurring basis
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Financial Assets |
||||||||||
Forward freight agreements |
17 | 4 | 300 | |||||||
Bunker swaps |
106 | 221 | | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Financial Liabilities |
||||||||||
Forward freight agreements |
138 | 450 | | |||||||
Bunker swaps |
| | 2,964 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
All the financial instruments relate to the forward freight agreements and bunker swap agreements and have been classified as Level 2 financial instruments, which indicates that the fair value of the instruments were determined based on discounted cash flow with reference to observable inputs for equivalent instruments, discounted at a rate that reflects the credit risk of various counterparties. Further details are disclosed in Note 11.
There were no transfers between Level 1 and 2 in the period.
F-39
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (Continued)
Fair Value of Financial Instruments
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Level 2 and 3 fair values were determined by applying either a combination of, or one of the following valuation techniques:
The fair value measurement for income approach valuation is based on significant inputs that are not observable in the market. Key inputs used in the valuation include discount rates and future profit assumptions based on historical performance but adjusted for expected growth. Management reassess the earnings or yield multiples at least annually based on their assessment of the macro- and micro-economic environment.
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||
2017 |
|||||||||||||
Financial assets |
|
|
|
|
|||||||||
Financial assets designated at fair value through profit or loss |
| 123 | | 123 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Financial liabilities |
|||||||||||||
Derivative financial instruments |
| 138 | | 138 | |||||||||
2016 |
|
|
|
|
|||||||||
Financial assets |
|||||||||||||
Financial assets designated at fair value through profit or loss |
| 225 | | 225 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Financial liabilities |
|
|
|
|
|||||||||
Derivative financial instruments |
| 450 | | 450 | |||||||||
2015 |
|||||||||||||
Financial assets |
|||||||||||||
Financial assets designated at fair value through profit or loss |
| 300 | | 300 | |||||||||
Financial liabilities |
|
|
|
|
|||||||||
Derivative financial instruments |
| 2,964 | | 2,964 |
(iii) Capital management policies and objectives
The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt to equity balance. The capital structure of the Group consists of debt and equity, which comprises of share capital and reserves.
F-40
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (Continued)
The Group also reviews the capital structure on a semi-annual basis. As a part of this review, the management considers the cost of capital and the risks associated with each class of capital. The management also ensures that the Group maintains gearing ratios within a set range to comply with the loan covenant imposed by a bank.
The Group's overall strategy remains unchanged from prior year.
5 HOLDING COMPANY AND RELATED PARTIES TRANSACTIONS
The Group is wholly-owned by Grindrod Limited, incorporated in South Africa and listed on the Johannesburg Stock Exchange, which is also the ultimate holding company.
Many of the Group's transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is reflected in these financial statements. The balances are unsecured, interest-free and repayable on demand unless otherwise stated.
During the year, group entities entered into the following transactions with related parties:
(i) Grindrod Limited companies
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Freight revenue from related parties |
939 | 1,017 | 15 | |||||||
Fuel and port expenses to related parties |
(55,895 | ) | (46,477 | ) | (64,311 | ) | ||||
Bunker swaps from related companies |
182 | | | |||||||
Guarantee fees from related parties |
325 | 486 | 694 | |||||||
Guarantee fees to related parties |
(451 | ) | (514 | ) | (805 | ) | ||||
Interest expense on loans from related parties |
(629 | ) | (312 | ) | | |||||
Interest income on amounts due from related parties |
1,199 | 909 | 485 | |||||||
Management fees to related parties |
(3,495 | ) | (2,956 | ) | (3,195 | ) | ||||
Overhead recovery to related party (included in administrative expenses) |
(202 | ) | (967 | ) | (5,495 | ) | ||||
Sale of fuel to related parties |
| | 20 | |||||||
Dividend paid to related party |
(1,674 | ) | | (4,135 | ) | |||||
Ship purchase |
| | (18,593 | ) | ||||||
Other expenses to related parties |
(1,268 | ) | (2,216 | ) | (2,154 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
(ii) Joint ventures
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Interest income |
4,346 | 2,728 | 153 | |||||||
Technical management fee income |
1,625 | 1,427 | 810 | |||||||
Charter hire and other related revenue |
4,376 | 3,624 | 3,840 | |||||||
Charter hire and other related expenses |
(50,741 | ) | (33,643 | ) | (21,967 | ) | ||||
Receipts on behalf of a joint venture |
| | 1,387 | |||||||
Payments on behalf of a joint venture |
(585 | ) | (2 | ) | (550 | ) | ||||
Management fee income |
350 | 350 | 405 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Refer to Note 36 for information on the guarantees provided by the Group for loans within joint venture structures.
F-41
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
5 HOLDING COMPANY AND RELATED PARTIES TRANSACTIONS (Continued)
(iii) Compensation of key management personnel
The remuneration of directors, who are also the members of key management during the year is presented below.
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Short-term benefits |
6,026 | 3,511 | 3,568 | |||||||
Share-based payments |
459 | | 343 | |||||||
Total director's remuneration |
5,850 | 3,511 | 3,911 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The remuneration of directors is determined by the remuneration committee of Grindrod Limited having regard to the performance of individuals and market trends.
6 CASH AND BANK BALANCES
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Cash on hand |
347 | 551 | 524 | |||||||
Cash at bank |
46,175 | 67,160 | 74,961 | |||||||
| | | | | | | | | | |
|
46,522 | 67,711 | 75,485 | |||||||
Less: |
||||||||||
Bank overdrafts |
(4,028 | ) | | (323 | ) | |||||
Restricted cash |
(5,183 | ) | (5,241 | ) | (5,132 | ) | ||||
| | | | | | | | | | |
|
37,311 | 62,470 | 70,030 | |||||||
Add: Cash and cash equivalents included in a disposal group held for sale (Note 39) |
7,934 | | | |||||||
| | | | | | | | | | |
Cash and cash equivalents in the statements of cash flows |
45,245 | 62,470 | 70,030 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Restricted cash included in the cash at bank of the Group is an amount of US$5,183,000 (2016: US$5,241,000 and 2015: US$5,132,000) pledged to certain banks to secure loans and other banking facilities (Note 18) of the Group.
7 TRADE RECEIVABLES
|
|
2017 |
|
|
2016 | 2015 |
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
US$'000
|
|
|
US$'000
|
US$'000
|
|
||||||||||
Trade receivables |
17,249 | 15,659 | 23,419 | ||||||||||||||
Less: Allowance for doubtful debts |
| (5 | ) | (192 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | |
Allowance for doubtful debts |
(25 | ) | (5 | ) | (192 | ) | |||||||||||
Included in assets of a disposal group held for sale (Note 39) |
25 | | | ||||||||||||||
| | | | | | | | | | | | | | | | | |
|
17,249 | 15,654 | 23,227 | ||||||||||||||
Trade receivables due from the pools |
1,676 | 2,454 | 2,559 | ||||||||||||||
Forward freight agreements |
605 | 736 | 68 | ||||||||||||||
Included in assets of a disposal group held for sale (Note 39) |
(6,131 | ) | | | |||||||||||||
| | | | | | | | | | | | | | | | | |
|
13,399 | 18,844 | 25,854 | ||||||||||||||
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Trade receivables are classified as loans and receivables, and their carrying value approximates fair value.
The credit period is 1 to 30 days (2016: 1 to 30 days). No interest is charged on the outstanding invoice.
Included in the Group's trade receivable balance are debtors with a carrying amount of US$4,243,000 (2016:US$5,387,000 and 2015: US$8,437,000) which are past due at the end of reporting period for which
F-42
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
7 TRADE RECEIVABLES (Continued)
the Group have not provided for, as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group do not hold any collateral over these balances.
Trade receivables are contracted directly with the third parties. The trade receivables due from the pools relate to revenue that will be collect by the pool manager and distributed in accordance with the underlying pool agreements.
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of reporting period. The credit risk is limited due to the customer base being large and unrelated. Accordingly, the management believes that there is no further credit allowance required in excess of the allowance for doubtful debts.
The table below is an analysis of trade receivables as at 31 December:
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Not past due and not impaired (i) |
9,156 | 13,457 | 17,417 | |||||||
Past due but not impaired (ii) |
4,243 | 5,387 | 8,437 | |||||||
| | | | | | | | | | |
|
13,399 | 18,844 | 25,854 | |||||||
Impaired receivablesindividually assessed (iii) |
| 5 | 192 | |||||||
Less: Allowance for impairment |
| (5 | ) | (192 | ) | |||||
| | | | | | | | | | |
Total trade receivables, net |
13,399 | 18,844 | 25,854 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
1 day to 30 days |
2,509 | 2,101 | 2,659 | |||||||
31 days to 60 days |
511 | 1,454 | 3,549 | |||||||
61 days to 90 days |
209 | 242 | 1,512 | |||||||
More than 90 days |
1,014 | 1,590 | 717 | |||||||
| | | | | | | | | | |
|
4,243 | 5,387 | 8,437 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The balances relate to receivables from long standing customers with no clear indicators of past credit default experience.
Movement in the allowance for doubtful debts:
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Balance at beginning of the year |
5 | 192 | 43 | |||||||
Increase /(Reversal) in allowance for doubtful debts |
18 | (3 | ) | 149 | ||||||
Amounts written off during the year as uncollectible |
| (184 | ) | | ||||||
Effect of foreign exchange differences |
2 | | | |||||||
| | | | | | | | | | |
|
25 | 5 | 192 | |||||||
Included in assets of a disposal group classified as held for sale (Note 39) |
(25 | ) | | | ||||||
| | | | | | | | | | |
Balance at end of year |
| 5 | 192 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Allowance for doubtful debts are recognised against trade receivables based on estimated irrecoverable amounts from charter hire income, determined by reference to past default experience.
F-43
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
8 OTHER RECEIVABLES AND PREPAYMENTS
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Current: |
||||||||||
Deposits |
293 | 289 | 296 | |||||||
Prepayments |
2,328 | 3,409 | 2,621 | |||||||
Voyages in progress |
12,367 | 13,935 | 13,240 | |||||||
Other receivables |
6,791 | 4,891 | 5,504 | |||||||
| | | | | | | | | | |
|
21,779 | 22,524 | 21,661 | |||||||
Included in assets of a disposal group held for sale (Note 39) |
(4,592 | ) | | | ||||||
| | | | | | | | | | |
|
17,187 | 22,524 | 21,661 | |||||||
| | | | | | | | | | |
Non-current assets |
||||||||||
Other receivables |
187 | 168 | | |||||||
Included in assets of a disposal group held for sale (Note 39) |
(115 | ) | | | ||||||
| | | | | | | | | | |
|
72 | 168 | | |||||||
| | | | | | | | | | |
|
17,259 | 22,692 | 21,661 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
9 DUE FROM RELATED PARTIES
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Due from related parties (Note 5) |
||||||||||
non-interest bearingtrade |
22 | | | |||||||
interest bearingnon-trade |
15,215 | 14,395 | 8,110 | |||||||
Due from joint ventures (Note 5) |
||||||||||
non-interest bearingnon-trade |
2,597 | 2,319 | 2,057 | |||||||
interest bearingnon-trade |
26,888 | 22,868 | | |||||||
| | | | | | | | | | |
|
44,722 | 39,582 | 10,167 | |||||||
Included in assets of a disposal group held for sale (Note 39) |
(17,724 | ) | | | ||||||
| | | | | | | | | | |
|
26,998 | 39,582 | 10,167 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Amounts due from related parties are classified as loans and receivables and their carrying value approximate fair value. They are unsecured and repayable on demand.
Interest is charged on the amounts due from joint ventures of US$26,888,000 (2016:US$22,868,000). The rate of interest being charged is 15.0% per annum for 2017 and 2016.
Interest is charged on amounts due from related parties of US$15,215,000 (2016: US$14,395,000 and 2015: US$8,110,000) at 8.22% (2016: 7.98% and 2015: 5.95%) per annum.
The Group have not made any allowance as the management is of the view that these receivables are recoverable.
10 LOANS TO JOINT VENTURES
US$13,765,000 (2016: US$13,370,000 and 2015: US$13,037,000) of the loans to joint ventures relate to payments made for instalments due for ships under construction in accordance with the terms of ship building contracts. The loans are repayable over a period of 10 to 17 years from date of respective ship delivery. These loans are unsecured and bear interest at rates ranging from 1.03% to 2.91% (2016: 1.03% to 2.61% and 2015: 1.13% to 1.42%) per annum during the year. These loans approximate to their fair value as the loan is arranged at floating rates.
F-44
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
10 LOANS TO JOINT VENTURES (Continued)
US$22,383,000 (2016: US$21,960,000 and 2015: US$21,522,000) of loans to joint ventures are unsecured and bear interest at a rate of 2% (2016: 2% and 2015: Nil%) per annum during the year. The loans are expected to be repaid within 12 months from the end of each reporting periods. The carrying value of the loans at year end approximates the fair value.
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Loans to joint ventures analysed between: |
||||||||||
Assets |
|
|
|
|||||||
Current assets |
22,400 | 15 | 2,639 | |||||||
Provision for losses on joint ventures |
(4,220 | ) | | | ||||||
| | | | | | | | | | |
|
18,180 | 15 | 2,639 | |||||||
| | | | | | | | | | |
Non-current assets |
13,748 | 35,315 | 31,920 | |||||||
Provision for losses on joint ventures |
(6,447 | ) | | | ||||||
| | | | | | | | | | |
|
7,301 | 35,315 | 31,920 | |||||||
| | | | | | | | | | |
Total |
25,481 | 35,330 | 34,559 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Provisions for losses on joint venture arose from the recognition of the Group's share of losses in joint venture that are in excess of the group's cost of investment in joint ventures (Note 15). As a result, the provision of losses on joint venture are then applied to loans of the respective joint ventures, representing the other components of the group's interest in these joint ventures.
11 DERIVATIVE FINANCIAL INSTRUMENTS
Forward freight agreements and bunker swapsanalysed between:
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Assets |
||||||||||
Current assets |
123 | 225 | 300 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Liabilities |
||||||||||
Current liabilities |
(138 | ) | (450 | ) | (2,964 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The Group has entered into a number of forward freight agreements covering certain open positions of its capesize and handysize ships. These are entered into in the normal course of business in order to hedge against open positions in the fleet from contracts of affreightment and exposure on earnings for the handysize ships
F-45
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
11 DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
trading in a pool on the spot market. At 31 December 2017, there are 7 (2016: 4) outstanding forward freight agreements, maturing as follows:
F-46
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
11 DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
The Group has entered into a number of bunker swaps, as follows:
BSI-Ave denotes "Baltic Supramax Index (Average)"
BHSI-Ave denotes "Baltic Handysize Index (Average)"
MOPS 380 denotes "Mean of Platts Singapore 380"
Rott 3.5% Brg denotes "3.5% Fuel Oil Barges FOB Rotterdam"
12 INVENTORIES
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
US$'000
|
|
|
US$'000
|
|
|
US$'000
|
|
||||||||||||
Bunkers and other consumables at cost |
10,156 | 11,617 | 8,463 | ||||||||||||||||||
|
| ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Ships reclassified from ships, property, plant and equipment as inventories (Note 13) (a) |
16,988 | 13,351 | 12,765 | ||||||||||||||||||
Sale of ships recognised as inventories (a) |
(16,988 | ) | (13,351 | ) | (12,765 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Included in assets of a disposal group held for sale (Note 39) |
(1,078 |
) |
|
|
|||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
|
9,078 | 11,617 | 8,463 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
On 9 February 2015 and 5 August 2016, the Group entered into Memorandums of Agreement with a third party for the sale of ships at purchase consideration of US$12,858,000 and US$12,275,000 respectively. The ships were delivered to the third party on 4 June 2015 and 31 October 2016.
F-47
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
12 INVENTORIES (Continued)
Ships reclassified from Ships, property, plant and equipment as inventories is reconciled as follows:
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Cost |
39,256 | 18,403 | 26,853 | |||||||
Accumulated depreciation |
(11,744 | ) | (819 | ) | (4,280 | ) | ||||
Impairment |
(10,524 | ) | (4,233 | ) | (9,808 | ) | ||||
| | | | | | | | | | |
Carrying amount |
16,988 | 13,351 | 12,765 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-48
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
13 SHIPS, PROPERTY, PLANT AND EQUIPMENT
|
Office
equipment, furniture and fittings and motor vehicles |
Plant and
equipment |
Plant and
equipment under construction |
Ships |
Dry-
docking |
Construction
in progress |
Freehold
land and buildings |
Leasehold
improvements |
Total | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||||||||||||
Cost: |
||||||||||||||||||||||||||||
Balance at 1 January 2015 |
8,425 | 4,114 | | 492,534 | 10,549 | 773 | 329 | 275 | 516,999 | |||||||||||||||||||
Acquired through acquisition of assets and business (Note 39) |
122 | | | | | 12,250 | | 223 | 12,595 | |||||||||||||||||||
Additions |
2,021 | 553 | 187 | 377 | 5,948 | 2,948 | | 145 | 12,179 | |||||||||||||||||||
Disposals |
| (180 | ) | | | (3,518 | ) | | | (3 | ) | (3,701 | ) | |||||||||||||||
Price adjustment |
| | | | (65 | ) | | | | (65 | ) | |||||||||||||||||
Reclassification to inventories (Note 12) |
| | | (26,588 | ) | (265 | ) | | | | (26,853 | ) | ||||||||||||||||
Effect of foreign currency exchange differences |
(2,359 | ) | | (34 | ) | (635 | ) | 180 | | (85 | ) | (169 | ) | (3,102 | ) | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2015 |
8,209 | 4,487 | 153 | 465,688 | 12,829 | 15,971 | 244 | 471 | 508,052 | |||||||||||||||||||
Additions |
574 | 25 | 60 | | 3,818 | 24,993 | | 85 | 29,555 | |||||||||||||||||||
Disposals |
(163 | ) | (689 | ) | | | (1,858 | ) | | | | (2,710 | ) | |||||||||||||||
Transfer |
| 2,600 | | 37,250 | 341 | (40,191 | ) | | | | ||||||||||||||||||
Reclassification to inventories (Note 12) |
| | | (17,918 | ) | (485 | ) | | | | (18,403 | ) | ||||||||||||||||
Effect of foreign currency exchange differences |
1,056 | | 26 | 984 | 316 | | 34 | 97 | 2,513 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2016 |
9,676 | 6,423 | 239 | 486,004 | 14,961 | 773 | 278 | 653 | 519,007 | |||||||||||||||||||
Additions |
1,181 | | | 339 | 4,880 | | | 31 | 6,431 | |||||||||||||||||||
Disposals |
(340 | ) | (218 | ) | | | (3,183 | ) | | | (35 | ) | (3,776 | ) | ||||||||||||||
Transfer |
245 | | (245 | ) | | | | | | | ||||||||||||||||||
Reclassified to disposal group held for sale (Note 39) |
(5,876 | ) | | | (27,419 | ) | (1,983 | ) | | | (734 | ) | (36,012 | ) | ||||||||||||||
Reclassification to inventories (Note 12) |
| | | (37,490 | ) | (1,766 | ) | | | | (39,256 | ) | ||||||||||||||||
Effect of foreign currency exchange differences |
1,008 | | 6 | | 168 | | 29 | 85 | 1,296 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2017 |
5,894 | 6,205 | | 421,434 | 13,077 | 773 | 307 | | 447,690 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated depreciation: |
||||||||||||||||||||||||||||
Balance at 1 January 2015 |
6,940 | 3,046 | | 82,597 | 4,426 | | | 78 | 97,087 | |||||||||||||||||||
Depreciation |
523 | 640 | | 21,341 | 4,055 | | | 43 | 26,602 | |||||||||||||||||||
Disposals |
| (180 | ) | | | (3,518 | ) | | | (1 | ) | (3,699 | ) | |||||||||||||||
Reclassification to inventories (Note 12) |
| | | (4,242 | ) | (38 | ) | | | | (4,280 | ) | ||||||||||||||||
Effect of foreign currency exchange differences |
(1,694 | ) | | | 2 | 172 | | | (60 | ) | (1,580 | ) | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2015 |
5,769 | 3,506 | | 99,698 | 5,097 | | | 60 | 114,130 | |||||||||||||||||||
Depreciation |
599 | 1,026 | | 14,746 | 4,035 | | | 88 | 20,494 | |||||||||||||||||||
Disposals |
(119 | ) | (680 | ) | | | (1,858 | ) | | | 10 | (2,647 | ) | |||||||||||||||
Reclassification to inventories (Note 12) |
| | | (819 | ) | | | | | (819 | ) | |||||||||||||||||
Effect of foreign currency exchange differences |
736 | | | 7 | 279 | | | 41 | 1,063 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2016 |
6,985 | 3,852 | | 113,632 | 7,553 | | | 199 | 132,221 | |||||||||||||||||||
Depreciation |
706 | 814 | | 13,416 | 3,745 | | | 91 | 18,772 | |||||||||||||||||||
Disposals |
(218 | ) | (218 | ) | | | (3,183 | ) | | | (33 | ) | (3,652 | ) | ||||||||||||||
Reclassified to disposal group held for sale (Note 39) |
(2,901 | ) | | | (12,119 | ) | (969 | ) | | | (300 | ) | (16,289 | ) | ||||||||||||||
Reclassification to inventories (Note 12) |
| | | (10,948 | ) | (796 | ) | | | | (11,744 | ) | ||||||||||||||||
Effect of foreign currency exchange differences |
691 | | | 13 | 175 | | | 43 | 922 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2017 |
5,263 | 4,448 | | 103,994 | 6,678 | | | | 120,230 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-49
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
13 SHIPS, PROPERTY, PLANT AND EQUIPMENT (Continued)
|
Office
equipment, furniture and fittings and motor vehicles |
Plant and
equipment |
Plant and
equipment under construction |
Ships |
Dry-
docking |
Construction
in progress |
Freehold
land and buildings |
Leasehold
improvements |
Total | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||||||||||||
Impairment: |
||||||||||||||||||||||||||||
Balance at 1 January 2015 |
| | | 16,195 | | 310 | | | 16,505 | |||||||||||||||||||
Impairment losses recognised in profit or loss |
| | | 67,800 | | | | | 67,800 | |||||||||||||||||||
Reclassification to inventories (Note 12) |
| | | (9,808 | ) | | | | | (9,808 | ) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2015 |
| | | 74,187 | | 310 | | | 74,497 | |||||||||||||||||||
Impairment losses recognised in profit or loss |
| | | 12,625 | | | | | 12,625 | |||||||||||||||||||
Reclassification to inventories (Note 12) |
| | | (4,233 | ) | | | | | (4,233 | ) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2016 |
| | | 82,579 | | 310 | | | 82,889 | |||||||||||||||||||
Impairment losses recognised in profit or loss |
| | | 13,116 | 3,387 | | | | 16,503 | |||||||||||||||||||
Reclassification to inventories (Note 12) |
| | | (10,524 | ) | | | | | (10,524 | ) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2017 |
| | | 72,553 | 3,387 | 310 | | | 88,868 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Carrying Amount: |
||||||||||||||||||||||||||||
At 31 December 2017 |
631 | 1,757 | | 232,269 | 3,165 | 463 | 307 | | 238,592 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At 31 December 2016 |
2,691 | 2,571 | 239 | 289,793 | 7,408 | 463 | 278 | 454 | 303,897 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At 31 December 2015 |
2,440 | 981 | 153 | 291,803 | 7,732 | 15,661 | 244 | 411 | 319,425 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
In 2015, there was a price adjustment of US$65,000 to the dry-dock expenditure incurred in 2014. Price adjustment arose from the difference in the estimated drydock expenditure in 2014 and finalization of the drydock expenditure from the shipyard in 2015.
Certain ships are pledged to secure bank borrowings as disclosed in Note 18.
F-50
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
14 SUBSIDIARIES
Details of the Group's subsidiaries at the end of the reporting period are as follows:
|
|
|
Proportion of ownership
interest and voting power held by the Group |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Country of
incorporation |
||||||||||||
Name of subsidiary
|
Principal activity | 2017 | 2016 | 2015 | ||||||||||
|
|
|
%
|
%
|
%
|
|||||||||
Unicorn Bunker Services Proprietary Limited |
Bunker owning and operating | South Africa | 100 | % | 100 | % | 100 | % | ||||||
Comshipco Schiffahrts Agentur GmbH |
Ship agents and operators | Germany | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Calulo Shipping Services Proprietary Limited |
Ship operating | South Africa | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk Owning Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk Carriers Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk 430 Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk 462 Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk 475 Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk 511 Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk 512 Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk 603 Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk 609 Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk 611 Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
IVS Bulk 612 Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
Grindrod Shipping Services UK Limited |
To provide shipping and shipping related services | United Kingdom | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Atlantic Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Baltic Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Ionia Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Tanker Operations (434) Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Ross Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
Nyathi Limited |
Ship Owning and Operating | Isle of Man | 100 | % | 100 | % | 100 | % |
F-51
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
14 SUBSIDIARIES (Continued)
|
|
|
Proportion of ownership
interest and voting power held by the Group |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Country of
incorporation |
||||||||||||
Name of subsidiary
|
Principal activity | 2017 | 2016 | 2015 | ||||||||||
|
|
|
%
|
%
|
%
|
|||||||||
Unicorn Caspian Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Marmara Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Scotia Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Malacca Pte. Ltd. |
Ship Owning and Operating | Singapore | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Bulk Carriers Ltd |
Dormant | British Virgin Islands | 100 | % | 100 | % | 100 | % | ||||||
Unicorn Tankers International Ltd |
Dormant | British Virgin Islands | 100 | % | 100 | % | 100 | % | ||||||
Grindrod Maritime LLC (formerly known as York Maritime Holdings, V, LLC)^ |
Ship Owning and Operating | Marshall Islands | 100 | % | 100 | % | 100 | % |
15 INTEREST IN JOINT VENTURES
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Cost of investment in joint ventures |
80,499 | 80,499 | 66,764 | |||||||
Share of post-acquisition loss, net of dividends received |
(16,203 | ) | (13,924 | ) | (5,619 | ) | ||||
| | | | | | | | | | |
Carrying amount |
64,296 | 66,575 | 61,145 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The Group's share of losses in joint ventures that are in excess of the group's cost of investment of $10,667,000 (2016: $NIL and 2015: $NIL) are accounted for as provision for losses on joint ventures (Note 10).
F-52
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
15 INTEREST IN JOINT VENTURES (Continued)
Details
of the joint ventures are as follows:
|
|
|
Proportion of ownership
interest and voting power held by the Group |
Cost of investment in joint
ventures |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Country of
incorporation |
|||||||||||||||||||||
Name of joint venture
|
Principal activity | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||
Handyventure Singapore Pte. Ltd. (a) |
Ship owning and operating | Singapore | | | 50.0 | % | | ||||||||||||||||
Tri-View Shipping Pte. Ltd. (c) |
Ship owning and operating | Singapore | 51 | % | 51.0 | % | 51.0 | % | 132 | 132 | 132 | ||||||||||||
IM Shipping Pte. Ltd. (c) |
Ship owning and operating | Singapore | 51 | % | 51.0 | % | 51.0 | % | 25 | 25 | 25 | ||||||||||||
Island Bulk Carriers Pte. Ltd. (c) |
Ship owning and operating | Singapore | 65 | % | 65.0 | % | 65.0 | % | * | * | * | ||||||||||||
IVS Bulk Pte. Ltd. (b) (c) |
Ship owning and operating | Singapore | 33.5 | % | 33.5 | % | 33.5 | % | 66,440 | 66,440 | 52,705 | ||||||||||||
Petrochemical Shipping Limited |
Ship owning and operating | Isle of Man | 50 | % | 50.0 | % | 50 | % | 13,902 | 13,902 | 13,902 | ||||||||||||
Leopard Tankers Pte. Ltd. |
Ship owning and operating | Singapore | 50 | % | 50.0 | % | 50 | % | * | * | * | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
|
80,499 | 80,499 | 66,764 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
The
above joint ventures are accounted for using the equity method in these combined financial statements.
In 2017, the total share of joint venture companies' loss after taxation amounts to US$12,946,000 (2016: US$3,472,000 and 2015: US$18,748,000).
Summarised financial information in respect of the Group's joint ventures are set out below. The summarised financial information below represents amounts shown in the joint venture's financial statements prepared in accordance with IFRSs, adjusted by the Group for equity accounting purposes.
F-53
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
15 INTEREST IN JOINT VENTURES (Continued)
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Tri-View Shipping Pte. Ltd. |
||||||||||
Current assets |
2,771 | 4,086 | 5,079 | |||||||
Non-current assets |
11,258 | 14,812 | 15,964 | |||||||
Current liabilities |
(1,397 | ) | (1,381 | ) | (12,345 | ) | ||||
Non-current liabilities |
(7,966 | ) | (9,245 | ) | | |||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above amounts of assets and liabilities include the following:
Cash and cash equivalents |
2,525 | 3,932 | 4,954 | |||||||
Current financial liabilities (excluding trade and other payable and provisions) |
(1,302 | ) | (1,298 | ) | (12,021 | ) | ||||
Non-current financial liabilities (excluding trade and other payables and provisions) |
(7,966 | ) | (9,245 | ) | | |||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Revenue |
2,495 | 2,772 | 3,065 | |||||||
Gross profit/(loss) |
15 | (195 | ) | (357 | ) | |||||
Loss for the year, representing total comprehensive loss for the year |
(3,606 | ) | (426 | ) | (5,096 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above loss for the year include the following:
Depreciation and amortisation |
(772 | ) | (1,152 | ) | (1,510 | ) | ||||
Impairment loss |
(3,274 | ) | | (4,885 | ) | |||||
Interest expense |
(283 | ) | (208 | ) | (161 | ) | ||||
Income tax expense |
(11 | ) | | | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in the combined financial statements:
Net assets of the joint venture |
4,666 | 8,272 | 8,698 | |||||||
Proportion of the Group's ownership interest in the joint venture |
51 | % | 51 | % | 51 | % | ||||
Other adjustments |
(31 | ) | (283 | ) | (303 | ) | ||||
| | | | | | | | | | |
Carrying amount of the Group's interest in the joint venture |
2,349 | 3,936 | 4,133 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-54
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
15 INTEREST IN JOINT VENTURES (Continued)
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
IM Shipping Pte. Ltd. |
||||||||||
Current assets |
1,386 |
1,550 |
1,895 |
|||||||
Non-current assets |
21,250 | 39,080 | 48,798 | |||||||
Current liabilities |
(3,618 | ) | (3,410 | ) | (3,392 | ) | ||||
Non-current liabilities |
(31,660 | ) | (33,666 | ) | (35,659 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above amounts of assets and liabilities include the following:
Cash and cash equivalents |
705 | 1,295 | 1,335 | |||||||
Current financial liabilities (excluding trade and other payables and provisions) |
(3,326 | ) | (3,147 | ) | (3,145 | ) | ||||
Non-current financial liabilities (excluding trade and other payables and provisions) |
(31,660 | ) | (33,666 | ) | (35,659 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Revenue |
7,363 | 6,429 | 7,433 | |||||||
Gross profit/ (loss) |
2,030 | (364 | ) | 335 | ||||||
Loss for the year, representing total comprehensive loss for the year |
(16,196 | ) | (8,088 | ) | (5,647 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above loss for the year include the following:
Depreciation and amortisation |
(1,821 | ) | (3,096 | ) | (3,532 | ) | ||||
Impairment loss |
(16,508 | ) | (7,050 | ) | (5,782 | ) | ||||
Interest expense |
(335 | ) | (308 | ) | (392 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in the combined financial statements:
Net (liabilities) assets of the joint venture |
(12,642 | ) | 3,554 | 11,642 | ||||||
Proportion of the Group's ownership interest in the joint venture |
51 | % | 51 | % | 51 | % | ||||
Provision for losses on joint venture (Note 10) |
6,447 | | | |||||||
Other adjustments |
| (4,485 | ) | (8,891 | ) | |||||
| | | | | | | | | | |
Carrying amount of the Group's interest in the joint venture |
| (2,672 | ) | (2,954 | ) | |||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-55
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
15 INTEREST IN JOINT VENTURES (Continued)
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Island Bulk Carriers Pte. Ltd. |
||||||||||
Current assets |
1,602 |
2,042 |
3,460 |
|||||||
Current liabilities |
(1,781 | ) | (1,460 | ) | (1,240 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above amounts of assets and liabilities include the following:
Cash and cash equivalents |
5 | 515 | 1,501 | |||||||
Current financial liabilities (excluding trade and other payables and provisions) |
(585 | ) | (2 | ) | | |||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Revenue |
22,594 | 15,075 | 18,905 | |||||||
Gross (loss) profit |
(681 | ) | (751 | ) | 2,243 | |||||
(Loss) profit for the year, representing total comprehensive loss for the year |
(761 | ) | (838 | ) | 2,149 | |||||
Dividend income from the joint venture during the year |
| 520 | 1,422 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in the combined financial statements:
Net (liabilities) assets of the joint venture |
(179 | ) | 582 | 2,220 | ||||||
Proportion of the Group's ownership interest in the joint venture |
65 | % | 65 | % | 65 | % | ||||
| | | | | | | | | | |
Carrying amount of the Group's interest in the joint venture |
(116 | ) | 378 | 1,443 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-56
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
15 INTEREST IN JOINT VENTURES (Continued)
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
|
|||||||
IVS Bulk Pte. Ltd. |
||||||||||
Current assets |
36,572 |
58,051 |
4,894 |
|||||||
Non-current assets |
277,651 | 245,414 | 216,731 | |||||||
Current liabilities |
(38,035 | ) | (33,302 | ) | (7,748 | ) | ||||
Non-current liabilities |
(114,400 | ) | (112,518 | ) | (80,358 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above amounts of assets and liabilities include the following:
Cash and cash equivalents |
30,451 | 32,182 | 2,506 | |||||||
Current financial liabilities (excluding trade and other payables and provisions) |
(36,722 | ) | (32,327 | ) | (6,858 | ) | ||||
Non-current financial liabilities (excluding trade and other payables and provisions) |
(114,400 | ) | (112,518 | ) | (80,358 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Revenue |
39,816 | 24,082 | 11,106 | |||||||
Gross profit (loss) |
7,930 | (2,326 | ) | (1,663 | ) | |||||
Profit (loss) for the year, representing total comprehensive profit/ (loss) for the year |
4,143 | (16,874 | ) | (29,815 | ) | |||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above profit (loss) for the year include the following:
Depreciation and amortisation |
(11,937 |
) |
(9,069 |
) |
(4,711 |
) |
||||
Impairment loss |
| (6,840 | ) | (25,017 | ) | |||||
Interest income |
12 | 27 | | |||||||
Interest expense |
(9,938 | ) | (6,802 | ) | (2,815 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in the combined financial statements:
Net assets of the joint venture |
161,788 | 157,645 | 133,519 | |||||||
Proportion of the Group's ownership interest in the joint venture |
33.5 | % | 33.5 | % | 33.5 | % | ||||
Goodwill |
3,575 | 3,575 | 3,575 | |||||||
Other adjustments |
(6,406 | ) | (6,406 | ) | (6,406 | ) | ||||
| | | | | | | | | | |
Carrying amount of the Group's interest in the joint venture |
51,368 | 49,980 | 41,898 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-57
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
15 INTEREST IN JOINT VENTURES (Continued)
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Petrochemical Shipping Limited |
||||||||||
Current assets |
4,810 |
4,070 |
5,370 |
|||||||
Non-current assets |
28,000 | 38,822 | 40,931 | |||||||
Current liabilities |
(11,327 | ) | (12,757 | ) | (1,856 | ) | ||||
Non-current liabilities |
(94 | ) | (102 | ) | (14,347 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above amounts of assets and liabilities include the following:
Cash and cash equivalents |
4,077 | 3,357 | 3,513 | |||||||
Current financial liabilities (excluding trade and other payables and provisions) |
(10,897 | ) | (12,288 | ) | (1,275 | ) | ||||
Non-current financial liabilities (excluding trade and other payables and provisions) |
| | (14,245 | ) | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Revenue |
8,297 | 8,773 | 8,546 | |||||||
Gross profit/ (loss) |
828 | 317 | (113 | ) | ||||||
Loss for the year, representing total comprehensive loss for the year |
(8,644 | ) | (65 | ) | (3,246 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above loss for the year include the following:
Depreciation and amortisation |
(1,960 | ) | (2,581 | ) | (3,014 | ) | ||||
Impairment loss |
(8,862 | ) | | (2,366 | ) | |||||
Interest income |
38 | 23 | 7 | |||||||
Interest expense |
(488 | ) | (551 | ) | (572 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in the combined financial statements:
Net assets of the joint venture |
21,389 | 30,033 | 30,098 | |||||||
Proportion of the Group's ownership interest in the joint venture |
50 | % | 50 | % | 50 | % | ||||
Other adjustments |
| (2,613 | ) | (4,670 | ) | |||||
| | | | | | | | | | |
Carrying amount of the Group's interest in the joint venture |
10,695 | 12,404 | 10,379 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-58
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
15 INTEREST IN JOINT VENTURES (Continued)
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Leopard Tankers Pte. Ltd. |
||||||||||
Current assets |
10,810 |
12,716 |
16,519 |
|||||||
Non-current assets |
108,000 | 125,302 | 131,557 | |||||||
Current liabilities |
(127,249 | ) | (11,820 | ) | (8,153 | ) | ||||
Non-current liabilities |
| (121,378 | ) | (127,791 | ) | |||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above amounts of assets and liabilities include the following:
Cash and cash equivalents |
6,229 | 8,119 | 8,287 | |||||||
Current financial liabilities (excluding trade and other payables and provisions) |
(125,611 | ) | (10,825 | ) | (7,983 | ) | ||||
Non-current financial liabilities (excluding trade and other payables and provisions) |
| (121,378 | ) | (127,791 | ) | |||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Revenue |
19,222 | 21,401 | 32,811 | |||||||
Gross profit |
5,364 | 5,792 | 14,473 | |||||||
(Loss)/ Profit for the year, representing total comprehensive income for the year |
(13,258 | ) | 1,315 | 10,857 | ||||||
Dividend income from the joint venture during the year |
| 4,313 | | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The above profit for the year include the following:
Depreciation and amortisation |
(5,000 | ) | (6,254 | ) | (6,257 | ) | ||||
Impairment loss |
(14,491 | ) | | | ||||||
Interest expense |
(4,302 | ) | (4,192 | ) | (3,219 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in the combined financial statements:
Net (liabilities) assets of the joint venture |
(8,439 | ) | 4,820 | 12,132 | ||||||
Proportion of the Group's ownership interest in the joint venture |
50 | % | 50 | % | 50 | % | ||||
Provision for losses on joint venture (Note 10) |
4,220 | | | |||||||
Other adjustments |
| 139 | 180 | |||||||
| | | | | | | | | | |
Carrying amount of the Group's interest in the joint venture |
| 2,549 | 6,246 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-59
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
16 INTANGIBLE ASSETS
|
Total | |||
---|---|---|---|---|
|
US$'000
|
|||
Cost: |
||||
Balance at 1 January 2015 |
9,775 | |||
Additions |
58 | |||
Acquisition of business (Note 42.2) |
561 | |||
Effect of foreign currency exchange differences |
(2,143 | ) | ||
| | | | |
Balance at 31 December 2015 |
8,251 | |||
Additions |
7 | |||
Disposals |
(3 | ) | ||
Reclassification of prepayments |
919 | |||
Effect of foreign currency exchange differences |
1,085 | |||
| | | | |
Balance at 31 December 2016 |
10,259 | |||
Additions |
19 | |||
Reclassified to assets held for sale (Note 39) |
(2,951 | ) | ||
Effect of foreign currency exchange differences |
1,075 | |||
| | | | |
Balance at 31 December 2017 |
8,402 | |||
| | | | |
Accumulated amortisation: |
||||
Balance at 1 January 2015 |
1,780 | |||
Amortisation |
1,101 | |||
Effect of foreign currency exchange differences |
(658 | ) | ||
| | | | |
Balance at 31 December 2015 |
2,223 | |||
Amortisation |
1,057 | |||
Effect of foreign currency exchange differences |
389 | |||
| | | | |
Balance at 31 December 2016 |
3,669 | |||
Amortisation |
908 | |||
Reclassified to assets held for sale (Note 39) |
(612 | ) | ||
Effect of foreign currency exchange differences |
740 | |||
| | | | |
Balance at 31 December 2017 |
4,705 | |||
| | | | |
Impairment: |
||||
Balance at 1 January 2015, 2016 and 2017 |
| |||
Impairment losses recognised in profit or loss |
3,636 | |||
| | | | |
Balance at 31 December 2017 |
3,636 | |||
| | | | |
Carrying Amount: |
||||
At 31 December 2017 |
61 | |||
| | | | |
| | | | |
| | | | |
At 31 December 2016 |
6,590 | |||
| | | | |
| | | | |
| | | | |
At 31 December 2015 |
6,028 | |||
| | | | |
| | | | |
| | | | |
Intangible assets include club memberships, customer relationships, purchased lease contracts and software and licences. Club memberships are lifetime memberships and are not amortised. Customer relationships arose from the acquisition of business and are amortised over 7 years. Lease contracts relate to the purchase of the rights to lease a property on favourable terms to the market, are amortised over the lease term of between 11 and 20 years. Software and licenses arose from the installation of major information systems (including packaged software) and are amortised over 3 years, the period over which the benefit is expected to accrue.
An impairment of US$3,636,000 (2016: US$ Nil and 2015: US$ Nil) was recognised in respect of the customer relationships based on the value in use calculations. The impairment at 31 December 2017 arose from the unfavourable change in market conditions and following which, the management performed a
F-60
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
16 INTANGIBLE ASSETS (Continued)
reassessment and the recoverable amount of the customer relationship is less than the carrying amount, resulting in the impairment.
The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates pre-tax discount rates to be 15% (2016: 12% and 2015: 12%) which they believe reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts and are estimated to be 5.5% (2016: 5.8% and 2015: 5.8%). Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.
17 GOODWILL
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Cost: |
||||||||||
Balance at 1 January |
16,626 | 15,039 | 19,472 | |||||||
Effect of foreign currency exchange differences |
1,359 | 1,587 | (4,433 | ) | ||||||
| | | | | | | | | | |
At 31 December |
17,985 | 16,626 | 15,039 | |||||||
| | | | | | | | | | |
Accumulated impairment losses: |
||||||||||
Balance at 1 January |
604 | 604 | 604 | |||||||
Impairment |
8,483 | | | |||||||
Effect of foreign currency exchange differences |
479 | | | |||||||
| | | | | | | | | | |
Balance at 31 December |
9,566 | 604 | 604 | |||||||
| | | | | | | | | | |
Carrying amount: |
||||||||||
As 31 December |
8,419 | 16,022 | 14,435 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. Before recognition of impairment losses, the cost of goodwill had been allocated as follows:
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Cost: |
||||||||||
Island Trading and Shipping |
3,064 | 3,064 | 3,064 | |||||||
Unicorn Tankers, a division of Grindrod Shipping (South Africa) Pty Ltd |
14,040 | 12,707 | 11,150 | |||||||
Parcel Service |
277 | 251 | 221 | |||||||
Unicorn Tankers International |
604 | 604 | 604 | |||||||
| | | | | | | | | | |
|
17,985 | 16,626 | 15,039 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined based on value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.
F-61
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
17 GOODWILL (Continued)
The following CGUs have carrying amounts of goodwill that are considered significant in comparison with the Group's total goodwill balance:
Island Trading and Shipping
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next five years and extrapolates based on an estimated growth rate of Nil% (2016: Nil% and 2015: Nil%) per annum for the first year, 0% (2016: 2.1% and 2015: 2.1%) per annum for the second year and 0% (2016: 2.2% and 2015: 2.2%) per annum thereafter. This rate does not exceed the average long-term growth rate for the relevant markets.
The rate used to discount the forecast cash flows is 7.55% (2016: 7.55% and 2015: 7.55%).
Based on the assessment, management has recorded an impairment loss of US$2,364,000 for the financial year ended 31 December 2017 and this arose from the unfavourable change in market conditions and following which, the management performed a reassessment and the recoverable amount of the CGU is less than the carrying amount, resulting in the impairment. No class of asset other than goodwill was impaired.
Following the impairment loss recognised in Island Trading and Shipping, the recoverable amount was equal to the carrying amount. Therefore, any adverse movement in key assumption would lead to further impairment.
Unicorn Tankers, a division of Grindrod Shipping (South Africa) Pty Ltd
The Group prepares five-year period cash flow forecasts derived from the most recent financial budgets approved by management and the cash flows for the five-year period have been extrapolated using an estimated growth rate of 5.5% (2016: 5.8% and 2015: 5.8%) per annum. This rate does not exceed the average long-term growth rate for the relevant markets.
The rate used to discount the forecast cash flows is 15% (2016: 12% and 2015: 12%).
Based on the value in use calculations, an impairment of US$6,119,000 was required at 31 December 2017 (2016: US$Nil and 2015: US$Nil). The impairment at 31 December 2017 arose from the unfavourable change in market conditions and following which, the management performed a reassessment and the recoverable amount of the CGU is less than the carrying amount, resulting in the impairment.
Following the impairment loss recognised in Unicorn Tankers, a division of Grindrod Shipping (South Africa) Pty Ltd CGU, the recoverable amount was equal to the carrying amount. Therefore, any adverse movement in key assumption would lead to further impairment.
F-62
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
18 BANK LOANS
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Securedat amortised cost: |
||||||||||
Bank Loans |
108,754 | 112,545 | 101,672 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Analysed between: |
||||||||||
Current portion |
89,573 | 34,137 | 93,560 | |||||||
Less: included as part of a disposal group held for sale (Note 39) |
(1,609 | ) | | | ||||||
| | | | | | | | | | |
|
87,964 | 34,137 | 93,560 | |||||||
| | | | | | | | | | |
Non-current portion |
27,131 | 78,408 | 8,112 | |||||||
Less: included as part of a disposal group held for sale (Note 39) |
(6,341 | ) | | | ||||||
| | | | | | | | | | |
|
20,790 | 78,408 | 8,112 | |||||||
| | | | | | | | | | |
|
108,754 | 112,545 | 101,672 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Interest payable (included in bank loans) |
477 | 601 | 564 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Loans due after one year are estimated to be repayable as follows: |
||||||||||
Within 2 to 5 years |
20,790 | 76,821 | 8,112 | |||||||
After 5 years |
| 1,587 | | |||||||
| | | | | | | | | | |
|
20,790 | 78,408 | 8,112 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The bank loans are secured on cash and certain ships owned by the Group. The cash pledged and the carrying value of the ships under security charge as at 31 December 2017 is US$5,183,000 (2016: US$5,241,000 and 2015: US$5,131,000) and US$233,866,000 (2016: US$248,171,000 and 2015: US$248,872,000) respectively. In addition, the loan facility has charges over the subsidiaries' earnings, insurances, charter and charter guarantees and any requisition compensation. Certain of the bank loans are guaranteed by Grindrod Shipping Pte. Ltd. and/or the ultimate holding company.
The bank loans are arranged at London Interbank Offered Rate ("LIBOR") plus the respective margins. These bear a weighted average effective interest rate of 3.83% (2016: 3.11% and 2015: 2.69%) per annum.
At 31 December 2017, the Group had available US$5,000,000 (2016: US$6,425,000 and 2015: US$46,870,000) of undrawn committed borrowing facilities which are subjected to the Group meeting all conditions precedent to drawdown.
The Group has several bank loan facilities and regularly monitors the covenants stated in the loan agreements. There is no breach of loan covenants at 31 December 2017 or 31 December 2016. At 31 December 2015, the Group breached one of the covenants on certain long-term bank loans. Under the loan agreements, the breach of a covenant gives the bank a right to exercise remedies, including the right of immediate repayment, if the covenant is not rectified within the required period. Due to this breach of the covenant clause, the bank is contractually entitled to request for immediate repayment of the outstanding loan amount of US$63,177,000. Subsequent to the year-end, the banks granted the Group a waiver in respect of the breached covenant.
F-63
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
19 TRADE AND OTHER PAYABLES
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Trade payables |
6,206 | 5,479 | 2,936 | |||||||
Accrued expenses |
26,204 | 26 580 | 29,722 | |||||||
Advances received |
4,110 | 6,208 | 8,316 | |||||||
Others |
1,218 | 1,344 | 631 | |||||||
| | | | | | | | | | |
|
37,738 | 39,611 | 41,605 | |||||||
Non-current trade and other payables |
(1,167 | ) | (1,213 | ) | (687 | ) | ||||
| | | | | | | | | | |
|
36,571 | 38,398 | 40,918 | |||||||
Less: included as part of a disposal group held for sale (Note 39) |
(8,217 | ) | | | ||||||
| | | | | | | | | | |
Current trade and other payables |
28,354 | 38,398 | 40,918 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Trade and other payables are recognised at amortised cost and their carrying value approximates fair value. Charter hire is paid in advance in terms of the charter contracts. The remaining payment terms are predominately 30 days.
The Group's trade and other payables are predominantly non-interest bearing and unsecured.
20 PROVISIONS FOR ONEROUS CONTRACT
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Provision for onerous contracts |
1,270 | 8,697 | 4,876 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Provision for onerous contracts represents the present value of the future charter payments that the Group is presently obligated to make under non-cancellable onerous operating charter agreements and contracts of affreightment, less charter revenue expected to be earned on the charter. The estimate may vary as a result of changes to ship running costs and charter and freight revenue. The rate used to discount the future charter payments is 7.55% (2016: 7.55% and 2015: 7.55%).
21 DUE TO RELATED PARTIES
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Due to related partiestrade (Note 5) |
1,073 | 5,856 | 3,819 | |||||||
Due to related partiesnon-trade (Note 5) |
12,906 | 10,340 | 16,253 | |||||||
Due to joint venturesnon-trade (Note 5) |
3,965 | 2,686 | 825 | |||||||
| | | | | | | | | | |
At the end of the financial year |
17,944 | 18,882 | 20,897 | |||||||
Less: included as part of a disposal group held for sale (Note 39) |
(1,014 | ) | | | ||||||
| | | | | | | | | | |
|
16,930 | 18,882 | 20,897 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Amounts due to related parties are measured at amortised cost and their carrying values approximate the fair values.
F-64
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
22 LOANS FROM RELATED PARTIES
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Amortised cost: |
||||||||||
Loans from related partiesunsecured |
| 37,253 | | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Included in loan from related parties is the interest payable of US$ Nil (2016: US$253,000). Loans from related parties are unsecured, repayable on demand and bear an interest of LIBOR plus 3% margin. The loans were fully repaid in 2017. In 2016, the weighted average effective interest rate was 3.49% per annum.
23 SHARE CAPITAL AND PREMIUM
|
Share
capital |
Share
premium |
Total | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Issued and paid up: |
||||||||||
At 1 January 2015 |
417,599 | 19,905 | 437,504 | |||||||
Issue of ordinary shares |
* | 21,597 | 21,596 | |||||||
At 31 December 2015 and 2016 |
417,599 | 41,502 | 459,101 | |||||||
Issue of ordinary shares |
15,000 | | 15,000 | |||||||
| | | | | | | | | | |
At 31 December 2017 |
432,599 | 41,502 | 474,101 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The ordinary shares of Grindrod Shipping Pte. Ltd., comprising of 101,009 (2016: 101,008 and 2015: 101,008) issued and paid up ordinary shares, have no par value, carry one vote per share and carry a right to dividends as and when declared by the company. On the 11 December 2017, one ordinary share was issued to the ultimate holding company for US$15,000,000.
The ordinary shares of Grindrod Shipping (South Africa) Pty Ltd, comprising of 5,003 (2016: 5,003 and 2015: 5,002) issued and paid up ordinary shares, have a par value of ZAR1 each and carry one vote per share and carry a right to dividends as and when declared by the company.
24 SHARE OPTION RESERVE
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Balance at 1 January |
(460 | ) | (284 | ) | (450 | ) | ||||
Share-based payments expenses |
343 | 182 | 166 | |||||||
Forfeited |
(310 | ) | (221 | ) | | |||||
Acquired Grindrod Limited shares |
(506 | ) | (137 | ) | | |||||
| | | | | | | | | | |
Balance at 31 December |
(932 | ) | (460 | ) | (284 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The Group's ultimate holding company, Grindrod Limited, operates a share option scheme, in which certain directors of the company participate in. The financial effects of the share options granted to the relevant company's directors are accordingly recharged from the ultimate holding company to be recorded in the financial statements of the Group. Refer to Note 5 Related Party Transactions (iii) Compensation of key management personnel.
In terms of the Forfeitable Share Plan, the company purchases shares in the ultimate company at fair value and grants the shares to the employees, who are eligible for this plan. The participants are entitled to receive dividends paid and to vote in respect of the shares awarded. However, the forfeitable shares cannot be disposed of or otherwise encumbered and are also subject to a risk of forfeiture until the vesting date.
F-65
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
24 SHARE OPTION RESERVE (Continued)
The shares vest in three equal tranches at the end of years three, four and five after award date. For the vesting conditions to be met the participants are required to remain employed by the Group until the vesting date. There are no performance criteria in the vesting conditions. Employees terminating employment due to resignation or dismissal on grounds of misconduct, proven poor performance or proven dishonest or fraudulent conduct will be classified as bad leavers and will forfeit all unvested awards.
25 OTHER RESERVES
Hedging reserve
The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge recognised in other comprehensive income and accumulated in hedging reserve is reclassified to profit or loss when the hedged transaction impacts the profit or loss, or is included as a basis adjustment to the non-financial hedged item, consistent with the applicable accounting policy.
Translation reserve
Exchange differences relating to the translation from the functional currencies of the Group's foreign subsidiaries into United States dollars are brought to account by recognising those exchange differences in other comprehensive income and accumulating them in a separate component of equity under the header of translation reserve. Gains and losses on hedging instruments that are designated as hedges of net investments in foreign operations are also recognised in other comprehensive income and accumulated in a separate component of equity under the header of translation reserve.
Non-distributable reserve
The non-distributable reserve arises from the restructure of the Group and a buy back of the Broad Based Black Economic Empowerments ("BBBEE") shareholdings in June 2014. Grindrod Shipping (South Africa) Pty Ltd acquired the non-controlling interest of its subsidiaries from the minority shareholders. As the increase in shareholdings do not result in a change of control, the difference between consideration paid and the carrying value of net assets in equity was recognised as a non-distributable reserve.
26 REVENUE
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Charter hire |
128,355 | 97,322 | 116,488 | |||||||
Freight revenue |
257,614 | 256,801 | 301,222 | |||||||
| | | | | | | | | | |
Vessel revenue |
385,969 | 354,123 | 417,710 | |||||||
| | | | | | | | | | |
Sale of ships |
17,155 | 12,275 | 12,858 | |||||||
Sale of bunkers and other consumables |
572 | | 352 | |||||||
| | | | | | | | | | |
Ship sales |
17,727 | 12,275 | 13,210 | |||||||
| | | | | | | | | | |
Management fees |
5,252 | 4,178 | 2,016 | |||||||
Other |
574 | 956 | 1,503 | |||||||
| | | | | | | | | | |
Others |
5,826 | 5,134 | 3,519 | |||||||
| | | | | | | | | | |
|
409,522 | 371,532 | 434,439 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-66
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
27 COST OF SALES
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Charter hire expenses |
127,748 | 121,080 | 150,595 | |||||||
| | | | | | | | | | |
Pool distribution |
60,710 | 40,414 | 14,252 | |||||||
Fuel expenses |
59,108 | 56,632 | 84,187 | |||||||
Port expenses |
33,793 | 40,552 | 43,227 | |||||||
Other expenses |
12,228 | 2,916 | 5,506 | |||||||
Forward freight agreements |
1,085 | 213 | (1,612 | ) | ||||||
| | | | | | | | | | |
Voyage expenses |
166,924 | 140,727 | 145,560 | |||||||
| | | | | | | | | | |
Depreciation (Note 33) |
17,975 | 19,806 | 26,036 | |||||||
| | | | | | | | | | |
Crew expenses |
23,979 | 24,442 | 24,796 | |||||||
Repairs and maintenance |
5,081 | 5,011 | 5,900 | |||||||
Insurance |
3,194 | 3,544 | 4,442 | |||||||
Others |
8,583 | 9,914 | 10,001 | |||||||
| | | | | | | | | | |
Vessel operating costs |
40,837 | 42,911 | 45,139 | |||||||
| | | | | | | | | | |
Cost of sales on sale of ships |
16,988 | 13,351 | 12,765 | |||||||
Cost of sales on sale of bunkers and other consumables |
572 | | 146 | |||||||
| | | | | | | | | | |
Cost of ship sale |
17,560 | 13,351 | 12,911 | |||||||
| | | | | | | | | | |
Ship lease rentals |
12,295 | 13,261 | 12,914 | |||||||
Container expenses |
1,026 | 1,067 | 1,333 | |||||||
Freight expenses |
781 | 1,001 | 950 | |||||||
Cargo handling |
1,734 | 1,858 | 1,644 | |||||||
(Reversal of) Provision for onerous contracts (Note 20) |
(7,427 | ) | 3,821 | 3,353 | ||||||
Others |
7,955 | 6,852 | 7,142 | |||||||
| | | | | | | | | | |
Other expenses |
16,364 | 27,860 | 27,336 | |||||||
| | | | | | | | | | |
|
387,408 | 365,735 | 407,577 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
28 SEGMENT INFORMATION
The information reported to the Group's chief operating decision maker, who are directors of the Group, for the purpose of resource allocation and assessment of segment performance is provided based on the six operating segments within the two businesses of the group, which are also reportable segments of the Group:
The reportable segments of the group have been identified on a primary basis by the business segment which is representative of the internal reporting used for management purposes, including the chief operating decision maker, as well as the source and nature of business risks and returns.
F-67
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
28 SEGMENT INFORMATION (Continued)
Joint-ventures financial information are included within the segment information on a proportionate consolidation basis as the Group's chief operating decision maker reviews them together with the entities of the Group. Accordingly, joint-ventures' proportionate financial information are adjusted out to reconcile to the combined financial statements in the 'Adjustment' column.
Segment profit (i.e. Gross (loss)/profit) represents the profit earned by each segment without allocation of central administration costs and directors' salaries. This is the measure reported to the Group's chief operating decision maker for the purposes of resource allocation and assessment of segment performance.
Group activities that do not relate to the above two segments are accumulated in the 'Unallocated' segment financial information. Revenue reported in the segments represents revenue generated from external customers. There were no inter-segment sales in the year (2016: Nil and 2015: Nil).
For the purpose of monitoring segment performance and allocating resources between segments, the chief operating decision maker monitors the tangible, intangible and financial assets at the combined group level.
It is not practical to report revenue or non-current assets on a geographical basis due to the international nature of the shipping market.
For the year ended 31 December 2017, no customers accounted for 10% or more of our drybulk business revenues. For the years ended 31 December 2016 and 2015, one customer accounted for 10% or more of our drybulk business revenues in the amounts of approximately US$40.9 million and US$44.1 million respectively. For the years ended 31 December 2017 and 2016, four customers accounted for 10% or more of tanker business revenues in the amounts of approximately US$17.8 million, US$15.7 million, US$10.9 million and US$8.9 million respectively (2016: US$33.2 million, US$12.3 million, US$9.9 million and US$9.1 million respectively). For the year ended 31 December 2015, two customers accounted for 10% or more of tanker business revenues in the amounts of approximately US$55.9 million and US$13.2 million respectively.
The accounting policies of the segments are the same as the group's accounting policies as described in Note 2.
F-68
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
28 SEGMENT INFORMATION (Continued)
The following is an analysis of the Group's revenue, results and additions to non-current assets by segment:
|
|
|
|
|
Tanker Business |
|
|
|
|
||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Drybulk Carrier Business | Unallocated |
|
|
Combined | ||||||||||||||||||||||||||||||||
|
MR
Tanker |
Small
Tanker |
|
|
|
|
|||||||||||||||||||||||||||||||
2017
|
Handysize | Supramax | Others | Total | Others | Total | Total | Total | Adjustments | Total | |||||||||||||||||||||||||||
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||||||||||||||||||
Vessel revenue |
118,262 | 156,517 | 56,644 | 331,423 | 42,561 | 22,740 | 14,186 | 79,487 | 410,910 | (24,941 | ) | 385,969 | |||||||||||||||||||||||||
Ship sale revenue |
6,830 | | | 6,830 | 10,897 | | | 10,897 | 17,727 | | 17,727 | ||||||||||||||||||||||||||
Other |
1,639 | 911 | 1,068 | 3,618 | (151 | ) | | 958 | 807 | 4,425 | 1,401 | 5,826 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenue |
126,731 | 157,428 | 57,712 | 341,871 | 53,307 | 22,740 | 15,144 | 91,191 | 433,062 | (23,540 | ) | 409,522 | |||||||||||||||||||||||||
Voyage expenses |
(59,004 | ) | (76,497 | ) | (11,574 | ) | (147,075 | ) | (7,555 | ) | (3,725 | ) | | (11,280 | ) | (158,355 | ) | (8,569 | ) | (166,924 | ) | ||||||||||||||||
Vessel operating costs |
(26,546 | ) | (3,302 | ) | (1,020 | ) | (30,868 | ) | (13,267 | ) | (9,488 | ) | (3,072 | ) | (25,827 | ) | (56,695 | ) | 15,858 | (40,837 | ) | ||||||||||||||||
Charter hire |
(22,773 | ) | (73,336 | ) | (14,054 | ) | (110,163 | ) | (16,257 | ) | (2,148 | ) | | (18,405 | ) | (128,568 | ) | 820 | (127,748 | ) | |||||||||||||||||
Depreciation and amortisation |
(10,642 | ) | (2,648 | ) | (4 | ) | (13,294 | ) | (6,476 | ) | (2,324 | ) | (4,073 | ) | (12,873 | ) | (26,167 | ) | 8,192 | (17,975 | ) | ||||||||||||||||
Cost of ship sale |
(5,339 | ) | | | (5,339 | ) | (12,221 | ) | | | (12,221 | ) | (17,560 | ) | | (17,560 | ) | ||||||||||||||||||||
Other |
341 | (124 | ) | (14,957 | ) | (14,740 | ) | (756 | ) | (864 | ) | (278 | ) | (1,898 | ) | (16,638 | ) | 274 | (16,364 | ) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Costs of sales |
(123,963 | ) | (155,907 | ) | (41,609 | ) | (321,479 | ) | (56,532 | ) | (18,549 | ) | (7,423 | ) | (82,504 | ) | (403,983 | ) | 16,575 | (387,408 | ) | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit |
2,768 | 1,521 | 16,103 | 20,392 | (3,225 | ) | 4,191 | 7,721 | 8,687 | 29,079 | (6,965 | ) | 22,114 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating (loss) profit |
(20,039 | ) | (3,109 | ) | 15,948 | (7,200 | ) | (22,203 | ) | (9,372 | ) | 6,724 | (24,851 | ) | (4,481 | ) | (36,532 | ) | (8,724 | ) | (45,256 | ) | |||||||||||||||
Interest income |
2,052 | 2,048 | 1,562 | 5,662 | 320 | 215 | 376 | 911 | 6,573 | 591 | 7,164 | ||||||||||||||||||||||||||
Interest expense |
(5,158 | ) | (2,218 | ) | (53 | ) | (7,429 | ) | (2,583 | ) | (600 | ) | (1,361 | ) | (4,544 | ) | (11,973 | ) | 5,425 | (6,548 | ) | ||||||||||||||||
Share of losses of joint ventures |
| | | | | | | | | (12,946 | ) | (12,946 | ) | ||||||||||||||||||||||||
Taxation |
(250 | ) | (240 | ) | (2,410 | ) | (2,900 | ) | 316 | 510 | (1,693 | ) | (867 | ) | (3,767 | ) | 541 | (3,226 | ) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Loss) profit for the year |
(23,395 | ) | (3,519 | ) | 15,047 | (11,867 | ) | (24,150 | ) | (9,247 | ) | 4,046 | (29,351 | ) | (4,481 | ) | (45,699 | ) | (15,113 | ) | (60,812 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impairment loss on net assets of disposal group |
5,092 | 5,092 | 5,092 | 5,092 | |||||||||||||||||||||||||||||||||
Impairment loss on goodwill and intangible assets |
| | | | 3,902 | 5,853 | | 9,755 | 2,364 | 12,119 | | 12,119 | |||||||||||||||||||||||||
Impairment loss on ships |
14,174 | | | 14,174 | 13,149 | 4,857 | | 18,006 | | 32,180 | (15,677 | ) | 16,503 | ||||||||||||||||||||||||
Capital expenditure |
4,148 | 4,574 | 1,172 | 9,894 | 2,287 | 20 | 985 | 3,292 | | 13,186 | (6,756 | ) | 6,430 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-69
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
28 SEGMENT INFORMATION (Continued)
|
|
|
|
|
Tanker Business |
|
|
|
|
||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Drybulk Carrier Business | Unallocated |
|
|
Combined | ||||||||||||||||||||||||||||||||
|
MR
Tanker |
Small
Tanker |
|
|
|
|
|||||||||||||||||||||||||||||||
2016
|
Handysize | Supramax | Others | Total | Others | Total | Total | Total | Adjustments | Total | |||||||||||||||||||||||||||
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||||||||||||||||||
Vessel revenue |
97,239 | 116,171 | 76,643 | 290,053 | 48,672 | 22,561 | 15,721 | 86,954 | | 377,007 | (22,884 | ) | 354,123 | ||||||||||||||||||||||||
Ship sale revenue |
| | | | 12,277 | | | 12,277 | | 12,277 | (2 | ) | 12,275 | ||||||||||||||||||||||||
Other |
1,670 | 905 | 927 | 3,502 | (859 | ) | | 1,118 | 259 | | 3,761 | 1,373 | 5,134 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenue |
98,909 | 117,076 | 77,570 | 293,555 | 60,090 | 22,561 | 16,839 | 99,490 | | 393,045 | (21,513 | ) | 371,532 | ||||||||||||||||||||||||
Voyage expenses |
(53,362 | ) | (56,009 | ) | (20,657 | ) | (130,028 | ) | (5,019 | ) | (3,454 | ) | (113 | ) | (8,586 | ) | | (138,614 | ) | (2,133 | ) | (140,727 | ) | ||||||||||||||
Vessel operating costs |
(27,046 | ) | (2,482 | ) | 862 | (28,666 | ) | (13,768 | ) | (9,581 | ) | (3,979 | ) | (27,328 | ) | | (55,994 | ) | 13,083 | (42,911 | ) | ||||||||||||||||
Charter hire |
(16,579 | ) | (59,598 | ) | (22,500 | ) | (98,677 | ) | (17,682 | ) | (3,600 | ) | | (21,282 | ) | | (119,959 | ) | (1,121 | ) | (121,080 | ) | |||||||||||||||
Depreciation and amortisation |
(11,988 | ) | (1,860 | ) | (23 | ) | (13,871 | ) | (7,778 | ) | (1,369 | ) | (3,698 | ) | (12,845 | ) | | (26,716 | ) | 6,910 | (19,806 | ) | |||||||||||||||
Cost of ship sale |
| | | | (13,351 | ) | | | (13,351 | ) | | (13,351 | ) | | (13,351 | ) | |||||||||||||||||||||
Other |
(409 | ) | 1,436 | (26,943 | ) | (25,916 | ) | (1,030 | ) | (830 | ) | (609 | ) | (2,469 | ) | | (28,385 | ) | 525 | (27,860 | ) | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Costs of sales |
(109,384 | ) | (118,513 | ) | (69,261 | ) | (297,158 | ) | (58,628 | ) | (18,834 | ) | (8,399 | ) | (85,861 | ) | | (383,019 | ) | 17,284 | (365,735 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross (loss) profit |
(10,475 | ) | (1,437 | ) | 8,309 | (3,603 | ) | 1,462 | 3,727 | 8,439 | 13,628 | | 10,026 | (4,229 | ) | 5,797 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating (loss) profit |
(20,058 | ) | (8,869 | ) | (3,727 | ) | (32,654 | ) | (8,799 | ) | 1,801 | 7,164 | 166 | (2,804 | ) | (35,292 | ) | (1,457 | ) | (36,749 | ) | ||||||||||||||||
Interest income |
1,321 | 1,327 | 1,159 | 3,807 | 276 | 227 | 359 | 862 | | 4,669 | 591 | 5,260 | |||||||||||||||||||||||||
Interest expense |
(4,531 | ) | (1,397 | ) | (91 | ) | (6,019 | ) | (2,477 | ) | (498 | ) | (243 | ) | (3,218 | ) | | (9,237 | ) | 4,338 | (4,899 | ) | |||||||||||||||
Share of losses of joint ventures |
| | | | | | | | | | (3,472 | ) | (3,472 | ) | |||||||||||||||||||||||
Taxation |
(1,459 | ) | (1,498 | ) | (2,755 | ) | (5,712 | ) | 1,884 | 1,499 | (1,520 | ) | 1,863 | | (3,849 | ) | (3,849 | ) | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Loss)/profit for the year |
(24,727 | ) | (10,437 | ) | (5,414 | ) | (40,578 | ) | (9,116 | ) | 3,029 | 5,760 | (327 | ) | (2,804 | ) | (43,709 | ) | | (43,709 | ) | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impairment loss on ships |
4,425 | | | 4,425 | 8,200 | | | 8,200 | | 12,625 | | 12,625 | |||||||||||||||||||||||||
Capital expenditure |
8,005 | 18,024 | 540 | 26,569 | 26,979 | 2,455 | 263 | 29,697 | | 56,266 | (26,711 | ) | 29,555 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-70
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
28 SEGMENT INFORMATION (Continued)
|
|
|
|
Drybulk |
|
|
|
Tanker | Unallocated |
|
|
Combined | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
MR
Tanker |
Small
Tanker |
|
|
|
|||||||||||||||||||||||||||||
2015
|
Handysize | Supramax | Others | Total | Others | Total | Total | Total | Adjustments | Total | |||||||||||||||||||||||||||
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|||||||||||||||||||||||||
Vessel revenue |
100,775 | 145,927 | 94,218 | 340,920 | 70,380 | 26,498 | 13,365 | 110,243 | | 451,163 | (33,453 | ) | 417,710 | ||||||||||||||||||||||||
Ship sale revenue |
| | | | 262 | 12,947 | | 13,209 | | 13,209 | 1 | 13,210 | |||||||||||||||||||||||||
Other |
693 | 268 | 681 | 1,642 | (2,675 | ) | | 1,064 | (1,611 | ) | | 31 | 3,488 | 3,519 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenue |
101,468 | 146,195 | 94,899 | 342,562 | 67,967 | 39,445 | 14,429 | 121,841 | | 464,403 | (29,964 | ) | 434,439 | ||||||||||||||||||||||||
Voyage expenses |
(43,186 | ) | (66,386 | ) | (30,489 | ) | (140,061 | ) | (3,100 | ) | (2,832 | ) | (91 | ) | (6,023 | ) | | (146,084 | ) | 524 | (145,560 | ) | |||||||||||||||
Vessel operating costs |
(26,247 | ) | (320 | ) | (705 | ) | (27,272 | ) | (14,972 | ) | (10,995 | ) | (3,077 | ) | (29,044 | ) | | (56,316 | ) | 11,177 | (45,139 | ) | |||||||||||||||
Charter hire |
(25,598 | ) | (71,579 | ) | (26,503 | ) | (123,680 | ) | (18,900 | ) | (5,871 | ) | | (24,771 | ) | | (148,451 | ) | (2,144 | ) | (150,595 | ) | |||||||||||||||
Depreciation and amortisation |
(18,650 | ) | (427 | ) | (29 | ) | (19,106 | ) | (8,975 | ) | (3,730 | ) | (3,064 | ) | (15,769 | ) | | (34,875 | ) | 8,839 | (26,036 | ) | |||||||||||||||
Cost of ship sale |
(187 | ) | | | (187 | ) | (66 | ) | (12,918 | ) | | (12,984 | ) | | (13,171 | ) | 260 | (12,911 | ) | ||||||||||||||||||
Other |
84 | (350 | ) | (26,712 | ) | (26,978 | ) | (2,361 | ) | (977 | ) | (361 | ) | (3,699 | ) | | (30,677 | ) | 3,341 | (27,336 | ) | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Costs of sales |
(113,784 | ) | (139,062 | ) | (84,438 | ) | (337,284 | ) | (48,374 | ) | (37,323 | ) | (6,592 | ) | (92,289 | ) | | (429,573 | ) | 21,997 | (407,577 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross (loss)/profit |
(12,316 | ) | 7,133 | 10,461 | 5,278 | 19,593 | 2,122 | 7,837 | 29,552 | | 34,830 | (7,967 | ) | 26,862 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating (loss) profit |
(104,874 | ) | 2,682 | 463 | (101,729 | ) | 13,665 | 1,939 | 6,810 | 22,414 | (2,812 | ) | (82,126 | ) | 15,631 | (66,495 | ) | ||||||||||||||||||||
Interest income |
632 | 638 | 815 | 2,085 | 432 | 243 | 192 | 867 | | 2,952 | 149 | 3,101 | |||||||||||||||||||||||||
Interest expense |
(3,299 | ) | (627 | ) | (98 | ) | (4,024 | ) | (2,710 | ) | (458 | ) | (224 | ) | (3,392 | ) | | (7,416 | ) | 2,968 | (4,448 | ) | |||||||||||||||
Share of losses of joint ventures |
| | | | | | | | | | (18,748 | ) | (18,748 | ) | |||||||||||||||||||||||
Taxation |
(242 | ) | (245 | ) | (1,935 | ) | (2,422 | ) | (497 | ) | (538 | ) | (307 | ) | (1,342 | ) | | (3,764 | ) | (3,764 | ) | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Loss) profit for the year |
(107,783 | ) | 2,448 | (755 | ) | (106,090 | ) | 10,890 | 1,186 | 6,471 | (18,547 | ) | (2,812 | ) | (90,354 | ) | | (90,354 | ) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impairment loss on ships |
63,475 | | | 63,475 | | 4,324 | | 4,325 | | 67,800 | | 67,800 | |||||||||||||||||||||||||
Capital expenditure |
13,656 | 20,814 | 2,373 | 36,843 | 13,961 | 818 | 525 | 15,304 | | 52,148 | (27,373 | ) | 24,774 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-71
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
29 OTHER OPERATING INCOME
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Foreign exchange gain |
3,595 | 4,142 | 5,020 | |||||||
Other operating income |
1,101 | 1,545 | 1,122 | |||||||
| | | | | | | | | | |
|
4,696 | 5,687 | 6,142 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
30 OTHER OPERATING EXPENSES
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Impairment loss on ships (Note 13) |
16,503 | 12,625 | 67,800 | |||||||
Impairment loss on goodwill and intangibles |
12,119 | | | |||||||
Impairment loss on assets of disposal group (Note 39) |
5,092 | | | |||||||
Foreign exchange loss |
4,102 | 4,266 | 2,888 | |||||||
Other operating expenses |
1,382 | 1,202 | 1,141 | |||||||
| | | | | | | | | | |
|
39,198 | 18,093 | 71,829 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
31 INTEREST INCOME
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Interests on loans to joint ventures (Note 5) |
4,346 | 2,728 | 153 | |||||||
Guarantee fees from related parties (Note 5) |
325 | 486 | 694 | |||||||
Bank interests |
1,294 | 1,220 | 1,403 | |||||||
Other interests |
1,199 | 826 | 851 | |||||||
| | | | | | | | | | |
|
7,164 | 5,260 | 3,101 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
32 INTEREST EXPENSE
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Interest on loans from related parties (Note 5) |
629 | 312 | | |||||||
Guarantee fees to related parties (Note 5) |
451 | 514 | 805 | |||||||
Other finance cost |
168 | 239 | 578 | |||||||
Bank loan interests |
5,300 | 3,834 | 3,065 | |||||||
| | | | | | | | | | |
|
6,548 | 4,899 | 4,448 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-72
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
33 LOSS BEFORE TAXATION
Loss before taxation has been arrived at after charging (crediting):
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Depreciation of ships, dry-docking and plant and equipment (Note 27) |
17,975 | 19,806 | 26,036 | |||||||
Depreciation of other property, plant and equipment* |
797 | 688 | 566 | |||||||
Amortisation of intangible assets* |
908 | 1,057 | 1,101 | |||||||
| | | | | | | | | | |
Total depreciation and amortisation |
19,680 | 21,551 | 27,703 | |||||||
| | | | | | | | | | |
Allowance for doubtful debts |
18 | (3 | ) | 149 | ||||||
Cost of inventories recognised as expense (included in voyage expenses) |
55,347 | 51,997 | 74,131 | |||||||
Expense recognised in respect of equity-settled share-based payments |
(472 | ) | (176 | ) | 166 | |||||
Employee benefits expenses (including directors' remuneration and share based payments) |
19,349 | 15,691 | 15,213 | |||||||
Cost of defined benefit plan and defined contribution plans included in employee benefits expenses |
1,350 | 1,226 | 1,166 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
34 INCOME TAX EXPENSE
In December 2004, the Grindrod Shipping Pte. Ltd. was granted incentives under the Approved International Shipping Enterprise Incentive ("AIS") Scheme, with effect from 10 June 2004. The incentives to the company were extended in October 2014, with effect from 10 June 2014. As such, the shipping profits of Grindrod Shipping Pte. Ltd. are exempted from income tax under Section 13F of the Singapore Income Tax Act. The shipping profits of the subsidiaries incorporated in Singapore are exempted from income tax under Section 13A of the Singapore Income Tax Act.
The tax rate used for the 2017, 2016 and 2015 reconciliations above is the corporate tax rate of 17% payable by corporate entities in Singapore on taxable profits under tax law in that jurisdiction. The corporate taxation rates payable by the South African entities in terms of the law in South Africa is 28% (2016: 28% and 2015: 28%).
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Current tax |
||||||||||
In respect of the current year |
3,694 | 2,403 | 265 | |||||||
Withholding taxes |
| | (137 | ) | ||||||
In respect of prior years |
15 | 48 | 2 | |||||||
| | | | | | | | | | |
|
3,709 | 2,451 | 130 | |||||||
| | | | | | | | | | |
Deferred tax |
||||||||||
In respect of the current year |
(421 | ) | 1,382 | 3,633 | ||||||
In respect of prior years |
(62 | ) | 16 | 1 | ||||||
| | | | | | | | | | |
|
(483 | ) | 1,398 | 3,634 | ||||||
| | | | | | | | | | |
|
3,226 | 3,849 | 3,764 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-73
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
34 INCOME TAX EXPENSE (Continued)
The total charge for the year can be reconciled to the accounting loss as follows:
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Loss before tax |
(57,586 | ) | (39,860 | ) | (86,590 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Income tax benefit calculated at corporate rate |
(9,790 | ) | (6,776 | ) | (14,720 | ) | ||||
Adjusted for: |
||||||||||
Effect of income that is exempted from tax |
| (834 | ) | (659 | ) | |||||
Effect of expenses that are not deductible in determining taxable profit |
9,632 | 5,337 | 17,882 | |||||||
Effect of different tax rates of subsidiaries operating in other jurisdictions |
(851 | ) | 873 | 927 | ||||||
Effect of tax losses disallowed to be brought forward |
4,277 | 5,185 | 442 | |||||||
Effect of other income subjected to tax |
| | 26 | |||||||
Overprovision of tax in prior year |
(47 | ) | 64 | 3 | ||||||
Withholding tax |
5 | | (137 | ) | ||||||
| | | | | | | | | | |
|
3,226 | 3,849 | 3,764 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
At the end of the reporting period, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries and joint ventures for which deferred tax liabilities have not been recognised is US$603,000 (2016: US$241,000 and 2015: US$30,000). No liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.
Subject to the agreement by the tax authorities, at the end of the reporting period, the Group has unabsorbed tax losses of US$580,000 (2016: US$580,000 and 2015: US$580,000) available for offset against future non-exempt profits. No deferred tax assets have been recognised on such losses due to the unpredictability of future profit streams.
35 DIVIDENDS
On 31 March 2017, an interim dividend of US$334.60 per share, amounting to US$1,674,000 was declared and paid from Grindrod Shipping (South Africa) Pty Ltd to the ultimate holding company, Grindrod Limited.
On 11 March 2015, an interim one-tier exempt dividend of US$24.99 per share, amounting to US$2,524,000 was declared and paid from Grindrod Shipping Pte. Ltd. to the ultimate holding company, Grindrod Limited.
On 16 September 2015, an interim dividend of US$322.07 per share, amounting to US$1,611,000 (ZAR20,590,626) was declared and paid from Grindrod Shipping (South Africa) Pty Ltd to the ultimate holding company, Grindrod Limited.
36 CONTINGENT LIABILITIES
Tri-View Shipping Pte. Ltd. ("TVS"), entered into a facility agreement with TVS' related party, Mitsui & Co. Financial Services (Asia) Ltd ("Lender") on 31 March 2009 for a credit facility of JPY1.92 billion.
Mitsui & Co., Ltd ("Mitsui"), the joint venture partner holding 49% of the shares in TVS, provided a guarantee to the Lender for 100% of the loan amount ("Mitsui's Guarantee").
In consideration of Mitsui providing Mitsui's Guarantee, a guarantee facility agreement between Mitsui and the Group was signed on 29 May 2009. The Group shall provide a guarantee fee to Mitsui for 51% of any amounts to be paid by Mitsui under the Mitsui Guarantee.
F-74
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
36 CONTINGENT LIABILITIES (Continued)
At 31 December 2017, the outstanding amount relating to the above loan facility was US$4,099,000 (2016: US$5,370,000 and 2015: US$6,538,000).
The joint venture, IM Shipping Pte. Ltd. entered into respective Standard Ship Management Agreement with a third-party ship management company for the management of the ships of the joint venture.
The Group has provided guarantee for the performance by the joint venture of its liabilities and responsibilities under the agreement.
In 2016, the Group has provided guarantees for the performance of the subsidiaries owned by the joint venture for their liabilities and responsibilities under the shipbuilding contracts, amounting to US$13,118,000. The guarantees expired on the delivery of the last vessel in January 2017. Note 38 provides further details of the remaining commitments.
At 31 December 2017, the Group has provided financial support to joint ventures of US$63,222,000 (2016: US$5,292,000 and 2015: US$4,469,000), to enable the companies to meet its obligations as and when they fall due for at least 12 months from the date of signing of their respective financial statements for the financial year ended 31 December 2017, 2016 and 2015.
Leopard Tanker Pte. Ltd. ("Leopard Tanker") entered into a facility agreement with a financial institution for a credit facility of US$138.5 million. The Group has provided a guarantee of up to 50% of the amount loaned and an undertaking to the lender to ensure a minimum working capital balance of US$250,000 for each of the vessels held by Leopard Tanker.
At 31 December 2017, the outstanding amount relating to the above loan facility was US$77,599,000 (2016: US$89,037,000 and 2015: US$92,512,000). No provision has been recognised in relation to the guarantee as management does not view such payout to be probable under IAS 37.
37 LEASES AND SHIP CHARTERS
a) As Lessor
The Group has chartered out a number of ships under time charter party agreements which are classified as operating leases. These charters have an average term of one to seven years. Operating lease receipts are recognised in profit or loss during the year as part of revenue.
Note 26 provides details of charter hire revenue earned during the year.
Future minimum charter receipts receivable under non-cancellable operating leases as at 31 December are as follows:
Chartered to third parties
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Within 1 year |
5,183 | 11,420 | 3,755 | |||||||
Between two to five years |
17,717 | 18,828 | 3,835 | |||||||
After five years |
| 7,337 | | |||||||
| | | | | | | | | | |
|
22,900 | 37,585 | 7,590 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-75
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
37 LEASES AND SHIP CHARTERS (Continued)
b) As Lessee
The Group has entered into time charter party agreements, classified as operating leases, to charter ships. These charters have terms of five to 10 years with renewal options included in the contracts. Operating lease payments are recognised in profit or loss during the year as part of voyage expenses (classified into 'cost of sales').
Future minimum lease payments payable under the non-cancellable operating leases as at 31 December are as follows:
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Within 1 year |
80,350 | 80,205 | 86,208 | |||||||
Between two to five years |
94,177 | 143,034 | 177,925 | |||||||
After five years |
6,171 | 15,984 | 34,584 | |||||||
| | | | | | | | | | |
|
180,698 | 239,223 | 298,717 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Minimum lease payments under operating leases recognised as an expense in the year |
148,986 | 136,350 | 163,265 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Office leases |
||||||||||
Within 1 year |
5,596 | 5,129 | 5,169 | |||||||
Between two to five years |
19,413 | 15,333 | 4,307 | |||||||
After 5 years |
5,779 | 6,285 | 13 | |||||||
| | | | | | | | | | |
|
30,788 | 26,747 | 9,489 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Residential property leases |
||||||||||
Within 1 year |
236 | 269 | 286 | |||||||
Between two to five years |
86 | 48 | 91 | |||||||
| | | | | | | | | | |
|
322 | 317 | 377 | |||||||
| | | | | | | | | | |
Other leases |
||||||||||
Within one year |
159 | 61 | 181 | |||||||
Between two to five years |
46 | 1 | 7 | |||||||
| | | | | | | | | | |
|
205 | 62 | 188 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The Group has entered into 3 (2016: 3 and 2015: 3) office leases which have a remaining non-cancellable lease term ranging from 3 to 20 months (2016: 2 to 33 months and 2015: 2 to 45 months).
The Group has entered into 8 (2016: 8 and 2015: 8) residential property leases which have a remaining non-cancellable lease term ranging from 2 to 21 months (2016: 2 to 16 months and 2015: 1 to 20 months, respectively). 3 (2016: 3 and 2015: 3) of the residential leases are for directors' accommodation (Note 5).
38 COMMITMENTS
A joint venture within the Group has entered into shipbuilding contracts for the construction of nil (2016: 1 and 2015: 4) bulk carriers during the financial year. Under the terms of the agreements, the Group has committed to payments for these ships under construction. The following has been authorised:
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Due within one year |
| 4,555 | 27,280 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The expenditure will be financed out of cash resources from operations and bank loans.
F-76
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
39 ASSETS CLASSIFIED AS HELD FOR SALE
In connection with the Spin-Off (Note 1), the Parent will sell two of GSSA's businesses to related companies within the Grindrod Limited Group. The two businesses are namely, Ocean Africa Container Lines division ("OACL"), a division of GSSA and Unicorn Bunker Services (Pty Ltd) ("UBS"), a subsidiary of GSSA. The sale and purchase agreements were signed on 1 January 2018 and the consideration of the sales are US$20,985,000 (South African rands 260 million) for OACL and US$15,496,000 (South African rands 192 million) for UBS respectively. Accordingly, the assets and liabilities attributable to the two businesses have been classified as a disposal group held for sale and are presented separately in the statement of financial position as of 31 December 2017.
In accordance with IFRS 5, the non-current assets and disposal groups are required to be measured at the lower of their carrying amounts and fair value less cost to sell. Management has assessed the fair value less cost to sell of these non-current assets and disposal groups on the date that they were classified as held for sale and recorded an impairment loss of US$5,092,000 in relation to OACL and US$ nil in relation to UBS.
F-77
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
39 ASSETS CLASSIFIED AS HELD FOR SALE (Continued)
The classes of assets and liabilities comprising the disposal group classified as held for sale are as follows:
|
2017 | |||
---|---|---|---|---|
|
US$'000 | |||
Assets |
||||
Cash and bank balances |
7,934 | |||
Trade receivables |
6,106 | |||
Other receivables and prepaymentscurrent |
4,592 | |||
Due from related parties |
17,724 | |||
Inventories |
1,078 | |||
Taxation |
301 | |||
Other receivables and prepaymentsnon-current |
115 | |||
Ships, property, plant and equipment (Note A) |
16,895 | |||
Intangible assets (Note A) |
75 | |||
Deferred tax assets (Note B) |
134 | |||
| | | | |
Assets classified as held for sale |
54,954 | |||
| | | | |
Liabilities |
||||
Short term borrowings |
1,609 | |||
Trade and other payables |
8,217 | |||
Due to related parties |
1,014 | |||
Taxation |
142 | |||
Long-term borrowings |
6,341 | |||
Deferred tax liabilities (Note B) |
3,691 | |||
| | | | |
Liabilities directly associated with assets classified as held for sale |
21,014 | |||
| | | | |
Net assets of disposal group |
33,940 | |||
| | | | |
Note A: |
||||
Ships, property, plant and equipment |
||||
Carrying amount before classification as held for sale (Note 13) |
19,723 | |||
Impairment loss |
(2,828 | ) | ||
| | | | |
Carrying amount after impairment loss |
16,895 | |||
| | | | |
Intangible assets |
|
|||
Carrying amount before classification as held for sale (Note 16) |
2,339 | |||
Impairment loss |
(2,264 | ) | ||
| | | | |
Carrying amount after impairment loss |
75 | |||
| | | | |
Total impairment loss arising from disposal group (Note 30) |
5,092 | |||
| | | | |
Note B: |
||||
Deferred tax assets |
134 | |||
Deferred tax liabilities |
(3,691 | ) | ||
| | | | |
Net deferred tax liabilities (Note 40) |
(3,557 | ) | ||
| | | | |
F-78
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
40 DEFERRED TAX
The following are the major deferred tax liabilities and assets recognised by the group and the movements thereon, during the current and prior reporting periods:
Deferred taxation assets on unutilised tax losses have been utilised in the current year.
41 RETIREMENT BENEFIT OBLIGATION
The Group subsidises the medical aid contributions of certain retired employees and has an obligation to subsidise contributions of certain current employees when they reach retirement. In prior periods, the Group undertook to offer pensioners a voluntary benefit in lieu of their current medical subsidy in order to close out the liability on the statement of financial position. The proposed offer had three options, namely an annuity offer, a cash offer or to remain in the scheme. A number of employees chose the annuity and cash offer. The provision has been calculated on the remaining individuals in the scheme.
The risks typically faced by the Group as a result of the post-retirement medical aid are risks relating to inflation, longevity, future changes in legislation, future changes in tax environment, perceived inequality by non-eligible employees, administration of fund and enforcement of eligibility criteria and rules.
During November 2017, a valuation was performed by Alexander Forbes. Apart from paying costs of entitlement, the Group is not liable to pay additional contributions in the case the fund does not hold sufficient assets. In that case, the fund would take other measures to restore solvency.
F-79
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
41 RETIREMENT BENEFIT OBLIGATION (Continued)
The amounts recognised in the annual financial statements in this respect are as follows:
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
US$'000
|
|
|
US$'000
|
|
|
US$'000
|
|
||||||||||||
Recognised liability at beginning of the year |
2,065 | 1,972 | 2,625 | ||||||||||||||||||
Recognised in profit or loss in the current year |
63 |
170 |
62 |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Interest on obligation |
45 | 192 | 198 | ||||||||||||||||||
Current service cost |
43 | | 2 | ||||||||||||||||||
Other |
(25 | ) | (22 | ) | (138 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Recognised in other comprehensive income in the current year |
52 | (77 | ) | (715 | ) | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Actuarial gains |
(157 | ) | (339 | ) | (31 | ) | |||||||||||||||
Translation |
209 | 262 | (684 | ) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Present value of unfunded obligation recognised as a liability at end of year |
2,180 | 2,065 | 1,972 | ||||||||||||||||||
Less: current portion |
| | | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Long term portion |
2,180 | 2,065 | 1,972 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
The principal actuarial assumptions applied in the determination of fair values include: |
|||||||||||||||||||||
Health care cost inflation rate (p.a.) |
9.1 | % | 9.4 | % | 9.3 | % | |||||||||||||||
Discount rate (p.a.) |
10.5 | % | 10.0 | % | 9.5 | % | |||||||||||||||
Continuation at retirement |
79.5 | % | 84.0 | % | 75.0 | % |
The effect of an increase or decrease of 1% in the assumed medical cost trend rates are as follows:
|
2017
Increase (Decrease) |
2016
Increase (Decrease) |
2015
Increase (Decrease) |
|||
---|---|---|---|---|---|---|
Aggregate of the current service cost and interest cost |
10.7% (9.1%) | 11.4% (9.8%) | 12.6% (10.6%) | |||
Accrued liability at year-end |
10.2% (8.8%) | 11.1% (9.4%) | 12.0% (10.1%) |
The sensitivity analysis presented above may not be representative of the actual change in the obligation as it is unlikely that the above change in assumptions would occur in isolation of one another.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from the prior year. The average duration of the benefit obligation as at 31 December 2017 is 12 years (2016: 13 years and 2015: 13 years).
|
2017 | 2016 | 2015 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
|
US$'000
|
US$'000
|
US$'000
|
|||||||
Present Value of Funded Obligations |
| | | |||||||
Fair Value of Plan Assets |
| | | |||||||
Present value of unfunded obligations |
2,180 | 2,065 | 1,947 | |||||||
Present Value of Obligations in excess of Plan Assets |
2,180 | 2,065 | 1,947 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
42 ACQUISITIONS
42.1 Acquisition of assets: Grindrod Maritime LLC
On 3 August 2015, the Group entered into a Sale and Purchase Agreement with a third party for the acquisition of the share capital of Grindrod Maritime LLC (formerly known as "York Maritime Holdings V, LLC"), incorporated in the Marshall Islands, for a purchase consideration of US$12,250,000. The purchase was completed on 6 August 2015.
F-80
GRINDROD SHIPPING PTE. LTD. AND GRINDROD SHIPPING (SOUTH AFRICA) PTY LTD
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
42 ACQUISITIONS (Continued)
The assets purchased comprised ship construction in progress. The construction of the asset was completed and delivered on 29 March 2016.
This transaction was determined by management to be in substance, an acquisition of the underlying assets owned by the subsidiary rather than a business combination as defined in IFRS 3 Business Combinations .
42.2 Acquisition of businessGrindrod TerminalsMaydon Wharf
Management had entered into an agreement whereby Ocean Africa Container Lines, a division of Grindrod Shipping (South Africa) Proprietary Limited acquired Grindrod TerminalsMaydon Wharf, a division of Grindrod (South Africa) Proprietary Limited for US$937,560 (ZAR11,982,019) with effect from 1 November 2015. Both companies are wholly owned by Grindrod Limited. The assets and liabilities were transferred at their carrying amounts and the financial results of Grindrod TerminalsMaydon Wharf were consolidated from 1 November 2015. The operations of Grindrod TerminalsMaydon Wharf were incorporated into the existing Ocean Africa Container Lines, a division of Grindrod Shipping (South Africa) Proprietary Limited.
Details of the transaction is as follows:
The purchase consideration of US$937,560 was financed by way of a loan from a related party.
43 GOING CONCERN
The historical combined financial information presented has been prepared on the assumption that the Group as a whole will continue to operate as going concerns. The Board of Directors has no reason to believe that the Group will not continue to operate as a going concern.
44 EVENTS AFTER THE REPORTING PERIOD
Except for the subsequent events disclosed in Note 39, there have been no events after the balance sheet date that could materially affect the accounts as presented.
F-81
THE COMPANIES ACT, CAP. 50
PUBLIC COMPANY LIMITED BY SHARES
FORM OF CONSTITUTION
of
GRINDROD SHIPPING HOLDINGS LTD.
(Adopted by Special Resolution passed on [ · ])
1 NAME
The name of the Company is GRINDROD SHIPPING HOLDINGS LTD. .
2 REGISTERED OFFICE
The Registered Office of the Company will be situated in the Republic of Singapore.
3 BUSINESS OR ACTIVITY
Subject to the provisions of the Companies Act, Cap. 50 and any other written law and the Constitution, the Company has:
(a) full capacity to carry on or undertake any business or activity, do any act or enter into any transaction; and
(b) for the purposes of paragraph (a), full rights, powers and privileges.
4 LIABILITY OF MEMBERS
The Company is a company limited by shares and the liability of the members is limited.
5 SHARE CAPITAL
The Company shall have power to consolidate or subdivide the shares and to issue any additional capital as fully paid or partly paid shares and with any special or preferential rights or privileges or subject to any special terms or conditions, and either with or without any special designation, and also from time to time to alter, modify, commute, abrogate or deal with any such rights, privileges, terms, conditions or designations in accordance with the regulations for the time being of the Company.
PRELIMINARY
6 In this Constitution, if not inconsistent with the subject or context, the words standing in the first column of the Table next hereinafter contained shall bear the meanings set opposite to them respectively in the second column thereof: |
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Interpretation. |
WORDS |
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MEANINGS |
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the Act |
.. |
The Companies Act, Cap. 50 or any statutory modification, amendment or re-enactment thereof for the time being in force or any and every other act for the time being in force concerning companies and affecting the Company and any reference to any provision of the Act is to that provision as so modified, amended or re-enacted or contained in any such subsequent Companies Act. |
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Auditors |
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The auditors for the time being of the Company. |
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Affiliate |
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An affiliate of, or a person affiliated with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified, and affiliates shall be construed accordingly. |
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Applicable Laws |
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All laws, bye-laws, regulations, orders and/or official directions for the time being in force affecting the Company and its subsidiaries, including but not limited to the Act, and the listing rules of any stock exchange upon which the shares in the Company may be listed, Provided always that a waiver granted in connection to any such law shall be treated as due compliance with such relevant law. |
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book-entry security |
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A security, the documents evidencing title to which are deposited by a Depositor with a Depository and are registered in the name of a Depository or its nominee. |
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Chief Executive Officer |
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Any one or more persons, by whatever name described, who:
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the Company |
.. |
The abovenamed Company by whatever name from time to time called. |
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this Constitution |
.. |
The Constitution or other regulations of the Company for the time being in force. |
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Depositor |
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A person who has an account directly with a Depository, which account is credited with book-entry securities in the Company. |
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Depository |
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A securities depository whose name or whose nominees name is entered as a Member in the Register in respect of book-entry securities in the Company |
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Depository Register |
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A register maintained by a Depository in respect of book-entry securities in the Company |
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Director |
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Includes any person acting as a Director of the Company and includes any person duly appointed and acting for the time being as an Alternate Director. |
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Directors |
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The Directors for the time being of the Company or such number of them as have authority to act for the Company. |
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dividend |
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Includes bonus. |
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JSE |
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Johannesburg Stock Exchange, being the securities exchange operated by JSE Limited. |
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JSE Listings Requirements |
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The listings requirements issued by JSE, as amended from time to time. |
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Member |
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A Member of the Company, except that, where the Act requires, excludes the Company where it is a member by reason of its holding of its shares as treasury shares. |
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month |
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Calendar month. |
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Office |
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The Registered Office of the Company for the time being. |
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paid up |
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Includes credited as paid up. |
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Register |
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The Register of Members. |
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registered address or address |
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In relation to any member, his physical address for the service or delivery of notices or documents personally or by post, except where otherwise expressly provided in this Constitution. |
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Seal |
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The Common Seal of the Company or in appropriate cases the Official Seal or duplicate Common Seal. |
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Secretary |
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The Secretary or Secretaries appointed under this Constitution and shall include any person entitled to perform the duties of Secretary temporarily. |
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Singapore |
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The Republic of Singapore. |
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Statutes |
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The Act and every other act for the time being in force concerning companies and affecting the Company. |
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S$ |
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The lawful currency of Singapore. |
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writing and written |
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Includes except where expressly specified herein or the context otherwise requires, and subject to any limitations, conditions or restrictions contained in any Applicable Laws, any printing, lithography, typewriting and any other mode of representing or reproducing words, symbols and other information in a visible form, whether in a physical document or in an electronic communication or form or otherwise howsoever. |
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year |
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Calendar year. |
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Words denoting the singular number only shall include the plural and vice versa. Words denoting the masculine gender only shall include the feminine gender.
The expressions current address, electronic communication, ordinary resolution, special resolution and treasury shares shall have the meanings ascribed to them respectively in the Act.
Subject as aforesaid, any words or expressions defined in the Act and the Interpretation Act, Cap. 1 shall if not inconsistent with the subject or context, bear the same meanings in this Constitution.
Words denoting persons shall include corporations.
A reference in this Constitution to holders of shares or a class of shares shall, except where otherwise provided, exclude the Company in relation to shares held by it as treasury shares.
Any reference in this Constitution to any enactment is a reference to that enactment as for the time being amended or enacted.
Save as aforesaid, any word or expression used in the Act and the Interpretation Act, Cap. 1 shall, if not inconsistent with the subject or context, bear the same meaning in this Constitution.
The headnotes and marginal notes are inserted for convenience only and shall not affect the construction of this Constitution.
exchange upon which shares in the Company may be listed and provided always that:
(a) (subject to any direction to the contrary that may be given by the Company in General Meeting) any issue of shares for cash to members holding shares of any class shall be offered to such members in proportion as nearly as may be to the number of shares of such class then held by them;
(b) the rights attaching to shares of a class other than ordinary shares shall be expressed in the resolution creating the same; and
(c) to the extent that any shares of the Company are listed on the JSE, where the shareholders authorise the directors to issue unissued securities and/or grant options to subscribe for unissued securities, as the directors in their discretion deem fit, such corporate action has been approved by the JSE and are subject to the JSE Listings Requirements.
10A. (a) In the event of preference shares being issued, the total number of issued preference shares shall not at any time exceed the total number of the issued ordinary shares and preference shareholders shall have the same rights as ordinary shareholders as regards receiving of notices, reports and balance sheets and attending General Meetings of the Company.
(b) The Company has power to issue further preference capital ranking equally with, or in priority to, preference shares already issued. |
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11 The rights attached to shares issued upon special conditions shall be clearly defined in the Constitution. Without prejudice to any special right previously conferred on the holders of any existing shares or class of shares but subject to the Act and this Constitution, shares in the Company may be issued by the Directors and any such shares may be issued with such preferred, deferred, or other special rights or such restrictions, whether with regard to dividend, return of capital or otherwise as the Directors may determine. |
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Special Rights. |
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12 Subject to Applicable Laws, the holders of securities, other than ordinary shares, and any special shares created for purpose of black economic empowerment in terms of the Broad-Based Black Economic Empowerment Act No.53 of 2003 of South Africa, ( Preference Shareholders ) shall not be entitled to vote on any resolution taken by the Company, save in the following instances
(a) during any special period, as provided for in paragraph (c) of this Regulation, during which any dividend, any part of any dividend on such preference shares or any redemption payment thereon remains in arrears and unpaid;
(b) in regard to any resolution proposed for the winding-up of the Company or the reduction of its capital;
(c) the period referred to in paragraph (a) of this Regulation shall be a period not more than 6 months after the due date of the dividend or redemption payment in question or, where no due date is specified, after the end of the financial year of the Company in respect of which such dividend accrued or such redemption payment became due; and |
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Preference Shares voting |
(d) in regard to any resolution proposed to vary any rights attached to shares held by such Preference Shareholders. |
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13 In the instances that the Preference Shareholders are permitted to vote at meetings as set out in Regulation 12, their votes may not carry any special rights or privileges and they shall be entitled to one vote for each share that they hold, provided that their total voting right at such a meeting may not exceed 24.99% of the total voting rights of all shareholders at such meeting. |
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Limit on Preference Shares voting total |
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14 The Company shall not exercise any right in respect of treasury shares other than as provided by the Act. Subject thereto, the Company may deal with its treasury shares in the manner authorised by, or prescribed pursuant to, the Act. |
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Treasury Shares. |
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15 If at any time the share capital is divided into different classes, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of the Act, whether or not the Company is being wound up, be varied or abrogated with the consent in writing of the holders of at least three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate General Meeting of the holders of shares of that class and to every such special resolution the provisions of Section 184 of the Act shall with such adaptations as are necessary apply. To every such separate General Meeting the provisions of this Constitution relating to General Meetings shall mutatis mutandis apply. Provided Always That: |
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Variation of rights. |
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(a) the necessary quorum shall be such person or persons at least holding or representing by proxy or by attorney in aggregate no less than 15 per cent of the issued shares (excluding treasury shares) of the class; or |
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(b) where all the issued shares of the class are held by one person, the necessary quorum shall be one person.
Provided always that where the necessary majority for such a special resolution is not obtained at such General Meeting, consent in writing if obtained from the holders of three-quarters of the total number of issued shares of the class concerned within two months of such General Meeting shall be as valid and effectual as a special resolution carried at such General Meeting.
15A The repayment of preference capital other than redeemable preference capital, or any alteration of preference shareholders rights, may only be made pursuant to a special resolution of the preference shareholders concerned Provided always that where the necessary majority for such a special resolution is not obtained at the General Meeting, consent in writing if obtained from the holders of three-fourths of the preference shares concerned within two months of the General Meeting, shall be as valid and effectual as a special resolution carried at the General Meeting. |
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16 The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall, unless otherwise expressly provided by the terms of issue of the shares of that class or by this Constitution as are in force at the time of such issue, be |
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Creation or issue of further shares with |
deemed to be varied by the creation or issue of further shares ranking equally therewith. |
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special rights. |
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17 The Company may pay commissions or brokerage on any issue of shares at such rate or amount and in such manner as the Directors may deem fit. Such commission or brokerage may be satisfied by the payment of cash or the allotment of fully or partly paid shares or by a combination of cash and fully or partly paid shares. |
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Power to pay commission and brokerage. |
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18 If any shares of the Company are issued for the purpose of raising money to defray the expenses of the construction of any works or the provisions of any plant which cannot be made profitable for a long period, the Company may, subject to the conditions and restrictions mentioned in the Act pay interest on such of the shares (excluding treasury shares) as is for the time being paid up and may charge the same to capital as part of the cost of the construction or provision. |
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Power to charge interest on capital. |
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19 Except as required by law, no person shall be recognised by the Company as holding any share upon any trust and the Company shall not be bound by or compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as by this Constitution or by law otherwise provided) any other rights in respect of any share, except an absolute right to the entirety thereof in the registered holder. |
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Exclusion of equities. |
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20 If two or more persons are registered as joint holders of any share, any one of such persons may give effectual receipts for any dividend payable in respect of such share and the joint holders of a share shall, subject to the provisions of the Act, be severally as well as jointly liable for the payment of all instalments and calls and interest due in respect of such shares. Such joint holders shall be deemed to be one Member and the delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all such holders. |
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Joint holders. |
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21 No person shall be recognised by the Company as having title to a fractional part of a share or otherwise than as the sole or a joint holder of the entirety of such share. |
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Fractional part of a share. |
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22 If by the conditions of allotment of any shares the whole or any part of the amount of the issue price thereof shall be payable by instalments, every such instalment shall, when due, be paid to the Company by the person who for the time being shall be the registered holder of the share or his personal representatives, but this provision shall not affect the liability of any allottee who may have agreed to pay the same. |
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Payment of instalments. |
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23 The certificate of title to shares in the capital of the Company shall, if a Seal has been adopted, be issued under the Seal, and shall be in such form as the Directors shall from time to time prescribe and shall bear the autographic or facsimile signatures of at least one Director and the Secretary or a second Director or some other person appointed by the Directors, and shall specify the number and class of shares to which it relates and whether the shares are fully or partly paid up, and the amount (if any) unpaid thereon. The facsimile signatures may be reproduced by mechanical, electronic |
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Share certificates. |
transfer in respect of which the transferee is either the Depository or any other person (whom the Directors may determine that such signature as transferee shall be dispensed with) shall be effective although not signed or witnessed by or on behalf of the transferee. The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect thereof. Shares of different classes shall not be comprised in the same instrument of transfer. |
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28 All instruments of transfer which shall be registered shall be retained by the Company, but any instrument of transfer which the Directors may refuse to register shall (except in any case of fraud) be returned to the party presenting the same. |
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Retention of Transfers. |
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28A The Company shall be entitled to destroy all instruments of transfer which have been registered at any time after the expiration of six years from the date of registration thereof and all dividend mandates and notifications of change of address at any time after the expiration of six years from the date of recording thereof and all share certificates which have been cancelled at any time after the expiration of six years from the date of the cancellation thereof and it shall conclusively be presumed in favour of the Company that every entry in the Register of Members purporting to have been made on the basis of an instrument of transfer or other document so destroyed was duly and properly made and every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and every share certificate duly and properly cancelled and every other document hereinbefore mentioned so destroyed was a valid and effective document in accordance with the recorded particulars thereof in the books or records of the Company, Provided always that:
(a) the provisions aforesaid shall apply only to the destruction of a document in good faith and without notice of any claim (regardless of the parties thereto) to which the document might be relevant;
(b) nothing herein contained shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than as aforesaid or in any other circumstances which would not attach to the Company in the absence of this Regulation; and
(c) references herein to the destruction of any document include references to the disposal thereof in any manner. |
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29 No share shall in any circumstances be transferred to any infant or bankrupt or person who is mentally disordered. |
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Infant, bankrupt or mentally disordered. |
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29A There shall be paid to the Company in respect of the registration of any instrument of transfer or probate or letters of administration or certificate of marriage or death or stop notice or power of attorney or other document relating to or affecting the title to any shares or otherwise for making any entry in the Register of Members |
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affecting the title to any shares such fee not exceeding $2 as the Directors may from time to time require or prescribe. |
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30 There shall be no restriction on the transfer of fully paid up shares (except where required by law, the listing rules of any stock exchange upon which the shares of the Company may be listed or the rules and/or bye-laws governing any stock exchange upon which the shares of the Company may be listed) but the Directors may, in their absolute discretion, decline to register any transfer of shares upon which the Company has a lien and in the case of shares not fully paid up may refuse to register a transfer to a transferee of whom they do not approve but shall in such event, within one month after the date on which the transfer was lodged with the Company send to the transferor and transferee notice of the refusal. If the Directors refuse to register a transfer they shall within one month of the date of application for the transfer by notice in writing to the applicant state the facts which are considered to justify the refusal to register the transfer. |
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Directors power to decline to register. |
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31 The Directors may decline to register any instrument of transfer unless: |
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Instrument of transfer. |
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(a) such fee not exceeding S$2/- or such other sum as the Directors may from time to time require under the provisions of this Constitution, is paid to the Company in respect thereof; |
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(b)
the instrument of transfer is deposited at the Office or at such other place (if any) as the Directors may appoint accompanied by a certificate of payment of stamp duty (if any), the certificates of the shares to which the transfer relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer and, if the instrument of transfer is executed by some other person on his behalf, the authority of the person so to do;
(c) the instrument of transfer is in respect of only one class of shares; and |
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(d) the amount of proper duty (if any) with which each instrument of transfer is chargeable under any law for the time being in force relating to stamps is paid. |
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32 The Company shall provide a book to be called Register of Transfers which shall be kept under the control of the Directors, and in which shall be entered the particulars of every transfer of shares. |
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Register of Transfers. |
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33 The Register may be closed at such times and for such periods as the Directors may from time to time determine not exceeding in the whole thirty days in any year. |
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Closure of Register. |
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33A All transactions (including share transfers) shall comply with the listing rules of any stock exchange upon which the shares of the Company may be listed or the rules and/or bye-laws governing any stock exchange upon which the shares of the Company may be listed from time to time. |
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Compliance with applicable listing rules. |
generality of the foregoing) such shares may be issued with a preferential or qualified right to dividends and in the distribution of assets of the Company or otherwise. |
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54 Except so far as otherwise provided by the conditions of issue or by this Constitution all new shares shall be subject to the provisions of this Constitution with reference to allotments, payment of calls, liens, transfers, transmissions, forfeiture and otherwise. |
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New shares otherwise subject to provisions of this Constitution. |
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55 The Company may: |
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Power to consolidate, subdivide and convert shares. |
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(a) by special resolution consolidate and divide all or any of its shares; |
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(b) by special resolution subject to the Applicable Laws and this Constitution, subdivide its shares or any of them provided always that in such subdivision the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived and so that the resolution whereby any shares is sub-divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may, as compared with the others, have such preferred, deferred or other special rights, or be subject to any such restrictions, as the Company has power to attach to new shares; and |
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(c) by special resolution subject to the Applicable Laws and this Constitution, convert any class of shares into any other class of shares. |
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(d) by special resolution subject to the Applicable Laws and this Constitution, convert its share capital or any class of shares from one currency to another. |
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56 The Company may by special resolution reduce its share capital or any undistributable reserve in any manner and with and subject to any incident authorised and consent required by law. Without prejudice to the generality of the foregoing, upon cancellation of a share purchased or otherwise acquired by the Company pursuant to this Constitution and the Act, the number of issued shares of the Company shall be diminished by the number of the shares so cancelled, and, where any such cancelled share was purchased or acquired out of the capital of the Company, the amount of share capital of the Company shall be reduced accordingly. |
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Power to reduce capital. |
stand adjourned to the same day in the next week (or if that day is a public holiday, then to the next business day following that public holiday) at the same time and place or such other day, time or place as the Directors may by not less than ten days notice appoint. At such adjourned meeting, if within half an hour from the time appointed for such meeting (or such longer interval as the Chairman of the meeting may deem fit to allow) a quorum is not present, such meeting shall stand adjourned to the same day in the next week (or if that day is a public holiday, then to the next business day following that public holiday) at the same time and place or such other day, time or place as the Directors may by not less than ten days notice appoint. At the second adjourned meeting, any one or more members present in person or by proxy shall be a quorum. |
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66 Subject to any additional requirements as may be imposed by the Act, all resolutions of the Members shall be adopted by a simple majority vote of the Members present and voting. |
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Voting. |
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67 Subject to the provisions of the Act and provided that the shares of the Company are not listed on any stock exchange, a resolution in writing signed by one or more Members of the Company who represent (a) a majority (in the case of ordinary resolutions) or (b) at least 75% (in the case of a special resolution) of the total voting rights or all Members entitled to vote or being a corporation by its duly authorised representative shall have the same effect and validity as if it had been passed at a General Meeting duly convened, held and constituted, and may consist of several documents in the like form, each signed by one or more of such Members. |
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Resolutions in writing. |
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68 The Chairman of the Board of Directors shall preside as Chairman at every General Meeting. If there be no such Chairman or if at any Meeting he be not present within ten minutes after the time appointed for holding the Meeting or be unwilling to act, the Members present shall choose some Director to be Chairman of the Meeting or, if no Director be present or if all the Directors present decline to take the Chair, one of their number present, to be Chairman. |
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Chairman. |
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69 The Chairman may, with the consent of any Meeting at which a quorum is present (and shall if so directed by the Meeting) adjourn the Meeting from time to time (or sine die ) and from place to place, but no business shall be transacted at any adjourned Meeting except business which might lawfully have been transacted at the Meeting from which the adjournment took place. When a Meeting is adjourned for thirty days or more or sine die , notice of the adjourned Meeting shall be given as in the case of the original Meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned Meeting. |
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Adjournment. |
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69A If an amendment shall be proposed to any resolution under consideration but shall in good faith be ruled out of order by the chairman of the meeting, the proceedings on the substantive resolution shall not be invalidated by any error in such ruling. In the case of a resolution duly proposed as a Special Resolution, no amendment thereto (other than a mere clerical amendment to correct a patent error) may in any event be considered or voted upon. |
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Amendment to resolution. |
90 A Director need not be a Member and shall not be required to hold any share qualification unless and until otherwise determined by the Company in General Meeting but shall be entitled to attend and speak at General Meetings. |
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Qualification. |
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91 Subject to Section 169 of the Act, the remuneration of the Directors shall be determined from time to time by an ordinary resolution passed at a General Meeting, and (unless such resolution otherwise provides) shall be divisible among the Directors in such proportions and manner as they may agree and in default of agreement equally, except that in the latter event any Director who shall hold office for part only of the period in respect of which such remuneration is payable shall be entitled only to rank in such division for the proportion of remuneration related to the period during which he has held office. The remuneration of the Directors shall not be increased except pursuant to an ordinary resolution passed at a General Meeting where notice of the proposed increase shall have been given in the notice convening the General Meeting. |
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Remuneration of Directors. |
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92 The Directors shall be entitled to be repaid all travelling or such reasonable expenses as may be incurred in attending and returning from meetings of the Directors or of any committee of the Directors or General Meetings or otherwise howsoever in or about the business of the Company in the course of the performance of their duties as Directors. |
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Travelling Expenses. |
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93 (A) Any Director who is appointed to any executive office or serves on any committee or who otherwise performs or renders services, which in the opinion of the Directors are outside his ordinary duties as a Director, may, subject to Section 169 of the Act, be paid such extra remuneration by way of salary, commission or otherwise as the Directors may determine.
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Extra Remuneration. |
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93A The Directors shall have power to pay and agree to pay pensions or other retirement, superannuation, death or disability benefits to (or to any person in respect of) any Director for the time being holding any executive office and for the purpose of providing any such pensions or other benefits to contribute to any scheme or fund or to pay premiums. |
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94 (A) Other than the office of Auditor, a Director may hold any other office or place of profit under the Company and he or any firm of which he is a member may act in a professional capacity for the Company in conjunction with his office of Director for such period and on such terms (as to remuneration and otherwise) as the Directors may determine. No Director or intending Director shall be disqualified by his office from transacting or entering into any arrangement with the Company either as vendor, purchaser or otherwise nor shall such transaction or arrangement or any transaction or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be |
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Power of Directors to hold office of profit and to transact with Company. |
avoided nor shall any Director so transacting or being so interested be liable to account to the Company for any profit realised by any such transaction or arrangement by reason only of such Director holding that office or of the fiduciary relation thereby established. |
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(B) Every Director shall observe the provisions of Section 156 of the Act relating to the disclosure of the interests of the Directors in transactions or proposed transactions with the Company or of any office or property held by a Director which might create duties or interests in conflict with his duties or interests as a Director. A Director shall not be entitled to vote in respect of any transaction or arrangement in which he is interested and he shall not be taken into account in ascertaining whether a quorum is present. |
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Directors to observe Section 156 of the Act. |
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94A (A) A Director may be or become a director of or hold any office or place of profit (other than as Auditor) or be otherwise interested in any company in which the Company may be interested as vendor, purchaser, shareholder or otherwise and unless otherwise agreed shall not be accountable for any fees, remuneration or other benefits received by him as a director or officer of or by virtue of his interest in such other company. |
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Holding of office in other companies. |
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(B) The Directors may exercise the voting power conferred by the shares in any company held or owned by the Company in such manner and in all respects as the Directors think fit in the interests of the Company (including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors of such company or voting or providing for the payment of remuneration to the directors of such company) and any such Director may vote in favour of the exercise of such voting powers in the manner aforesaid notwithstanding that he may be or be about to be appointed a director of such other company. |
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Directors may exercise voting power conferred by Companys shares in another company. |
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95 (A) The Directors may from time to time appoint one or more of their body to be the holder of any executive office (including, where considered appropriate, the office of Chairman or Deputy Chairman) on such terms and for such period as they may (subject to the Applicable Laws) determine and, without prejudice to the terms of any contract entered into in any particular case, may at any time revoke any such appointment. |
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Appointment of Directors as holders of executive office. |
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(B) The appointment of any Director to the office of Chairman or Deputy Chairman shall automatically determine if he ceases to be a Director but without prejudice to any claim for damages for breach of any contract of service between him and the Company. |
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(C) The appointment of any Director to any other executive office shall not automatically determine if he ceases from any cause to be a Director, unless the contract or resolution under which he holds office shall expressly state otherwise, in which event such determination shall be without prejudice to any claim for damages for breach of any contract of service between him and the Company. |
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(D) The Directors may entrust to and confer upon any Directors holding any executive office any of the powers exercisable by them as Directors upon such terms and conditions and with such restrictions as they think fit, and either collaterally with or to the |
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formulated) of mental disorder for his detention or for the appointment of a guardian or for the appointment of a receiver or other person (by whatever name called) to exercise powers with respect to his property or affairs; |
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(f)
he is removed by the Company in General Meeting by an ordinary resolution pursuant to Regulation 105; or
(g) if he is disqualified from acting as a director in any jurisdiction for reasons other than on technical grounds. |
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101 At the first Annual General Meeting of the Company all the Directors for the time being, save for any Director holding office as Chief Executive Officer or chief financial officer, shall retire from office, and at each subsequent Annual General Meeting, one-third of the Directors for the time being (or, if their number is not a multiple of three, the number nearest to one-third) shall retire from office by rotation Provided that no Director holding office as Chief Executive Officer or chief financial officer shall be subject to retirement by rotation or be taken into account in determining the number of Directors to retire. |
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Retirement of Directors. |
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102 The Directors to retire in every year shall be those, subject to retirement by rotation, who have been longest in office since their last re-election or appointment and so that as between persons who became or were last re-elected Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by lot. A retiring Director shall be eligible for re-election. |
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Retiring Directors eligible for re-election. |
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103 The Company at the General Meeting at which a Director retires under any provision of this Constitution may by ordinary resolution fill the office being vacated by electing thereto the retiring Director or some other person eligible for appointment. In default, the retiring Director shall be deemed to have been re-elected except in any of the following cases: |
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Filling vacated office. |
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(a) where at such General Meeting it is expressly resolved not to fill such office or a resolution for the re-election of such Director is put to the General Meeting and lost; |
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(b) where such Director is disqualified under the Act from holding office as a Director or has given notice in writing to the Company that he is unwilling to be re-elected; or |
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(c) where the default is due to the moving of a resolution in contravention of the next following Regulation. |
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The retirement shall not have effect until the conclusion of the General Meeting except where a resolution is passed to elect some other person in the place of the retiring Director or a resolution for his re-election is put to the General Meeting and lost, and accordingly, a retiring Director who is re-elected or deemed to have been re-elected will continue in office without a break. |
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109 The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors and unless so fixed at any other number shall be such number of Directors comprising a majority of the Directors for the time being. A meeting of the Directors at which a quorum is present shall be competent to exercise all the powers and discretions for the time being exercisable by the Directors. |
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Quorum. |
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110 The continuing Directors may act notwithstanding any vacancies in their body. If and so long as the number of Directors is reduced below the minimum number fixed by or in accordance with this Constitution, any Member may summon a General Meeting for the purpose of appointing Directors. |
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Proceedings in case of vacancies. |
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111 The Directors may from time to time elect a Chairman and if desired a Deputy Chairman and determine the period for which he is or they are to hold office. The Deputy Chairman will perform the duties of the Chairman during the Chairmans absence for any reason. The Chairman and in his absence the Deputy Chairman shall preside as Chairman at meetings of the Directors but if no such Chairman or Deputy Chairman be elected or if at any meeting the Chairman and the Deputy Chairman be not present within five minutes after the time appointed for holding the same, the Directors present shall choose one of their number to be Chairman of such meeting. |
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Chairman of Directors. |
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112 A resolution in writing signed by a majority of the Directors for the time being and being not less than are sufficient to form a quorum shall be as effective as a resolution passed at a meeting of the Directors duly convened and held, and may consist of several documents in the like form each signed by one or more of the Directors. Provided that, where a Director has appointed an Alternate Director, the Director or (in lieu of the Director) his Alternate may sign. The expressions in writing and signed include approval by any such Director by telefax or any form of electronic communication approved by the Directors for such purpose from time to time incorporating, if the Directors deem necessary, the use of security and/or identification procedures and devices approved by the Directors. |
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Resolutions in writing. |
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113 (A) The Directors may delegate any of their powers to committees consisting of such member or members of their body and. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the Directors. |
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Power to appoint committees. |
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(B) The meetings and proceedings of any such committee consisting of two or more members shall be governed by the provisions of this Constitution regulating the meetings and proceedings of the Directors, so far as the same are applicable and are not superseded by any regulations made by the Directors under the last preceding Regulation. |
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Proceedings at committee meetings. |
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(C) All acts done by any meeting of Directors or of any such committee or by any person acting as Director or as a member of any such committee, shall as regards all persons dealing in good faith with the Company, notwithstanding that there was some defect in the appointment of any such Director or person acting as |
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Validity of acts of Directors in spite of some formal defect. |
thereof by the terms of issue of the shares, and subject thereto may also from time to time pay to the holders of any other class of shares interim dividends thereon of such amounts and on such dates as they may think fit. |
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125 No dividend or other moneys payable on or in respect of a share shall bear interest against the Company. |
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Dividends not to bear interest. |
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126 The Directors may deduct from any dividend or other moneys payable to any Member on or in respect of a share all sums of money (if any) presently payable by him to the Company on account of calls or in connection therewith. |
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Deduction for debts due to Company. |
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127 (A) The Directors may retain any dividend or other moneys payable on or in respect of a share on which the Company has a lien and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. |
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Retention of dividends on shares subject to lien or pending transmission; unclaimed dividends or other moneys. |
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(B) The Directors may retain the dividends payable on shares in respect of which any person is under the provisions as to the transmission of shares hereinbefore contained entitled to become a Member or which any person under those provisions is entitled to transfer until such person shall become a Member in respect of such shares or shall duly transfer the same. |
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(C) The payment by the Directors of any unclaimed dividends or other moneys payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof. All dividends and other moneys payable on or in respect of a share that are unclaimed after first becoming payable may be invested or otherwise made use of by the Directors for the benefit of the Company and any dividend or moneys unclaimed after a period of six years from the date they are first payable may be forfeited and if so shall revert to the Company but the Directors may at any time thereafter at their absolute discretion annul any such forfeiture and pay the moneys so forfeited to the person entitled thereto prior to the forfeiture. |
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128 The waiver in whole or in part of any dividend on any share by any document (whether or not under seal) shall be effective only if such document is signed by the Member (or the person entitled to the share in consequence of the death or bankruptcy of the holder) and delivered to the Company and if or to the extent that the same is accepted as such or acted upon by the Company. |
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Waiver of dividends. |
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129 The Company may, upon the recommendation of the Directors, by ordinary resolution direct payment of a dividend in whole or in part by the distribution of specific assets and in particular of paid up shares or debentures of any other company or in any one or more of such ways; and the Directors shall give effect to such Resolution |
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Payment of dividend in specie. |
and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may issue fractional certificates, may fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees as may seem expedient to the Directors. |
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130 (A) Whenever the Directors or the Company in General Meeting have resolved or proposed that a dividend (including an interim, final, special or other dividend) be paid or declared on the ordinary share capital of the Company, the Directors may further resolve that Members entitled to such dividend be entitled to elect to receive an allotment of ordinary shares credited as fully paid in lieu of cash in respect of the whole or such part of the dividend as the Directors many think fit. In such case, the following provisions shall apply: |
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(a) the basis of any such allotment shall be determined by the Directors; |
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(b) the Directors shall determine the manner in which Members shall be entitled to elect to receive an allotment of ordinary shares credited as fully paid in lieu of cash in respect of the whole or such part of any dividend in respect of which the Directors shall have passed such a resolution as aforesaid, and the Directors may make such arrangements as to the giving of notice to Members, providing for forms of election for completion by Members (whether in respect of a particular dividend or dividends or generally), determining the procedure for making such elections or revoking the same and the place at which and the latest date and time by which any forms of election or other documents by which elections are made or revoked must be lodged, and otherwise make all such arrangements and do all such things, as the Directors consider necessary or expedient in connection with the provisions of this Regulation; |
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(c) the right of election may be exercised in respect of the whole of that portion of the dividend in respect of which the right of election has been accorded Provided that the Directors may determine, either generally or in any specific case, that such right shall be exercisable in respect of the whole or any part of that portion; |
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(d) the dividend (or that part of the dividend in respect of which a right of election has been accorded) shall not be payable in cash on ordinary shares in respect whereof the share election has been duly exercised (the elected ordinary shares) and in lieu and in satisfaction thereof ordinary shares shall be allotted and credited as fully paid to the holders of the elected ordinary shares on the basis of allotment determined as aforesaid and for such purpose and notwithstanding the provisions of Regulation 135, the Directors shall capitalise and apply the amount standing to the credit of the Companys reserve accounts as the Directors may determine, such sum as may be required to |
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pay up in full the appropriate number of ordinary shares for allotment and distribution to and among the holders of the elected ordinary shares on such basis. |
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(B) (a) The ordinary shares allotted pursuant to the provisions of paragraph (A) of this Regulation shall rank pari passu in all respects with the ordinary shares then in issue save only as regards participation in the dividend which is the subject of the election referred to above (including the right to make the election referred to above) or any other distributions, bonuses or rights paid, made, declared or announced prior to or contemporaneous with the payment or declaration of the dividend which is the subject of the election referred to above, unless the Directors shall otherwise specify. |
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(b) The Directors may do all acts and things considered necessary or expedient to give effect to any capitalisation pursuant to the provisions of paragraph (A) of this Regulation, with full power to make such provisions as they think fit in the case of shares becoming distributable in fractions (including, notwithstanding any provision to the contrary in this Constitution, provisions whereby, in whole or in part, fractional entitlements are disregarded or rounded up or down). |
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(C) The Directors may, on any occasion when they resolve as provided in paragraph (A) of this Regulation, determine that rights of election under that paragraph shall not be made available to the persons who are registered as holders of ordinary shares in the Register, or in respect of ordinary shares the transfer of which is registered, after such date as the Directors may fix subject to such exceptions as the Directors may think fit, and in such event the provisions of this Regulation shall be read and construed subject to such determination. |
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(D) The Directors may, on any occasion when they resolve as provided in paragraph (A) of this Regulation, further determine that no allotment of shares or rights of election for shares under that paragraph shall be made available or made to Members whose registered addresses entered in the Register are outside Singapore, South Africa or the United States of America or to such other members or class of members as the Directors may in their sole discretion decide and in such event the only entitlement of the members aforesaid shall be to receive in cash the relevant dividend resolved or proposed to be paid or declared. |
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(E) Notwithstanding the foregoing provisions of this Regulation, if at any time after the Directors resolution to apply the provisions of paragraph (A) of this Regulation in relation to any dividend but prior to the allotment of ordinary shares pursuant thereto, the Directors shall consider that by reason of any event or circumstance (whether arising before or after such resolution) or by reason of any matter whatsoever it is no longer expedient or appropriate to implement that proposal, the Directors may at their absolute discretion and without assigning any reason therefor, |
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Company in proportion to their then holdings of shares; and/or |
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(b) capitalise any sum for the time being standing to the credit of any of the Companys reserve accounts or any sum standing to the credit of the profit and loss account or otherwise available for distribution, provided that such sum be not required for paying the dividends on any shares carrying a fixed cumulative preferential dividend and accordingly that the Directors be authorised and directed to appropriate the sum resolved to be capitalised to the Members holding shares in the Company in the proportions in which such sum would have been divisible amongst them had the same been applied or been applicable in paying dividends and to apply such sum on their behalf either in or towards paying up the amounts (if any) for the time being unpaid on any shares held by such Members respectively, or in paying up in full new shares or debentures of the Company, such shares or debentures to be allotted and distributed and credited as fully paid up to and amongst such Members in the proportion aforesaid or partly in one way and partly in the other. |
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136 Whenever such a Resolution as aforesaid shall have been passed, the Directors may do all acts and things considered necessary or expedient to give effect to any such bonus issue and/or capitalisation with full power to the Directors to make such provisions as they think fit for any fractional entitlements which would arise on the basis aforesaid (including provisions whereby fractional entitlements are disregarded or the benefit thereof accrues to the Company rather than to the Members concerned). The Directors may authorise any person to enter on behalf of all the Members interested into an agreement with the Company providing for any such bonus issue or capitalisation and matters incidental thereto and any agreement made under such authority shall be effective and binding on all such Members. |
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Power of Directors to give effect to bonus issues and/or capitalisations. |
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137 In addition and without prejudice to the powers provided for by Regulations 135 and 136, the Directors shall have power to issue shares for which no consideration is payable and/or to capitalise any undivided profits or other moneys of the Company not required for the payment or provision of any dividend on any shares entitled to cumulative or non-cumulative preferential dividends (including profits or other moneys carried and standing to any reserve or reserves) and to apply such profits or other moneys in paying up in full new shares, in each case on terms that such shares shall, upon issue, be held by or for the benefit of participants of the Grindrod Shipping Holdings Ltd. Forfeitable Share Incentive Plan 2017 (as amended from time to time) and/or any share incentive or option scheme or plan implemented by the Company and approved by a resolution of the Members in General Meeting, in such manner and on such terms as proposed by the Directors. |
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Power to issue free shares or capitalise reserves for employee share-based incentive plans. |
telephone or such other manner as may be convenient in the circumstances but the Company and its officers are under no obligation so to test or verify any such notice, document or communication. |
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(C) Without prejudice to the provisions of Regulation 148(A), but subject otherwise to the Applicable Laws, any notice or document (including, without limitation, any accounts, balance-sheet, financial statements or report) which is required or permitted to be given, sent or served under the Act or under this Constitution by the Company, or the Directors, to a member may be given, sent or served using electronic communications: |
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(a) to the current address of that person; or |
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(b) by making it available on a website prescribed by the Company from time to time, |
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in accordance with the provisions of this Constitution, the Applicable Laws and/or any other applicable regulations or procedures. |
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(D) If permitted by the prevailing listing rules of any stock exchange upon which shares in the Company may be listed, for the purpose of Regulation 148(C) above, a member shall be deemed to have agreed to receive such notice or document by way of such electronic communications and shall not have a right to elect to receive a physical copy of such notice or document. |
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(E) For the purposes of Regulation 148(C) above, if the Company is not permitted by the prevailing listing rules of any stock exchange upon which shares in the Company may be listed, to regard a member as having deemed to have agreed to receive such notice or document by way of such electronic communications in the manner prescribed under Regulation 148(D), a member shall, at the Directors discretion, be given an opportunity to elect within a specified period of time whether to receive such notice or document by way of electronic communications or as a physical copy, and a member shall be deemed to have consented to receive such notice or document by way of electronic communications if he was given such an opportunity and he failed to make an election within the specified time, and he shall not in such an event have a right to receive a physical copy of such notice or document. |
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(F) Where a notice or document is given, sent or served to a member by making it available on a website pursuant to Regulation 148(C)(b), the Company shall give separate notice to the member of the publication of the notice or document on that website and the manner in which the notice or document may be accessed by any one or more of the following means: |
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(a) by sending such separate notice to the member personally or through the post pursuant to Regulation 148(A); |
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(b) by sending such separate notice to the member using electronic communications to his current address pursuant to Regulation 148(C)(a); |
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(c) by way of advertisement in the daily press; and/or |
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(d) by way of announcement on any stock exchange upon which shares in the Company may be listed. |
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149 All notices and documents (including a share certificate) with respect to any shares to which persons are jointly entitled shall be given to whichever of such persons is named first on the Register and notice so given shall be sufficient notice to all the holders of such shares. |
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Service of notices in respect of joint holders. |
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150 Any Member with a registered address shall be entitled to have served upon him at such address any notice or document to which he is entitled under this Constitution. |
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Members shall be served at registered address. |
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151 A person entitled to a share in consequence of the death or bankruptcy of a Member or otherwise upon supplying to the Company such evidence as the Directors may reasonably require to show his title to the share, and upon supplying also an address for the service of notice, shall be entitled to have served upon him at such address any notice or document to which the Member but for his death or bankruptcy or otherwise would be entitled and such service shall for all purposes be deemed a sufficient service of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share. Save as aforesaid any notice or document delivered or sent by post to or left at the registered address of any Member or given, sent or served to any Member using electronic communications in pursuance of this Constitution shall (notwithstanding that such Member be then dead or bankrupt or in liquidation or otherwise not entitled to such share and whether or not the Company has notice of the same) be deemed to have been duly served or delivered in respect of any share registered in the name of such Member as sole or first-named joint holder. |
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Service of notices after death etc. on a Member. |
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152 (A) Any notice or document given in conformity with Regulation 148 shall be deemed to have been given at any of the following times as may be appropriate: |
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When service effected. |
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(a) when it is delivered personally to the Member, at the time when it is so delivered; |
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(b) when it is sent by prepaid mail to an address in Singapore or by prepaid air-mail to an address outside Singapore, on the day following that on which the notice or document was put into the post; |
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(c) when the notice or document is sent by telefax, on the day it is so sent; and |
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(d) when the notice or document is given, sent or served by electronic communications: |
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(i) to the current address of a person pursuant to Regulation 148(C)(a), it shall be deemed |
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to have been duly given, sent or served at the time of transmission of the electronic communication by the email server or facility operated by the Company or its service provider to the current address of such person (notwithstanding any delayed receipt, non-delivery or returned mail reply message or any other error message indicating that the electronic communication was delayed or not successfully sent), unless otherwise provided under the Act and/or any other applicable regulations or procedures; and; or |
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(ii) by making it available on a website pursuant to Regulation 148(C)(b), it shall be deemed to have been duly given, sent or served on the date on which the notice or document is first made available on the website, unless otherwise provided under the Act and/or any other applicable regulations or procedures. |
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(B) In proving such service, sending or transmission, it shall be sufficient to prove that the letter containing the notice or document was properly addressed and put into the post as a prepaid letter or air-mail letter as the case may be or that a telefax or the electronic communication was properly addressed and transmitted in the manner provided in the Act. |
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153 Any notice on behalf of the Company or of the Directors shall be deemed effectual if it purports to bear the signature of the Secretary or other duly authorised officer of the Company, whether such signature is printed or written. |
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Signature on notice. |
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154 When a given number of days notice or notice extending over any other period is required to be given the day of service shall not, unless it is otherwise provided or required by this Constitution or by the Act, be counted in such number of days or period. |
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Day of service not counted. |
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155 (A) Notice of every General Meeting shall be given in the manner hereinbefore authorised to: |
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Notice of General Meeting. |
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(a) every Member; |
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(b) every person entitled to a share in consequence of the death or bankruptcy or otherwise of a Member who but for the same would be entitled to receive notice of the Meeting; and |
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(c) the Auditors. |
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(B) No other person shall be entitled to receive notices of General Meetings. |
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156 The provisions of Regulations 148, 152, 153 and 154 shall apply mutatis mutandis to notices of meetings of Directors or any committee of Directors. |
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Notice of meetings of Directors or any committee of Directors. |
Company or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Company shall be invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person with whom any moneys, securities or effects shall be deposited or left or for any other loss, damage or misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto unless the same happen through his own negligence, wilful default, breach of duty or breach of trust. |
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SECRECY |
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159 No Member shall be entitled to require discovery of or any information respecting any detail of the Companys trade or any matter which may be in the nature of a trade secret, mystery of trade or secret process which may relate to the conduct of the business of the Company and which in the opinion of the Directors it will be inexpedient in the interest of the Members of the Company to communicate to the public save as may be authorised by law or required by the listing rules of any stock exchange upon which shares in the Company may be listed. |
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Secrecy. |
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PERSONAL DATA |
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160 (A) A Member who is a natural person is deemed to have consented to the collection, use and disclosure of his personal data (whether such personal data is provided by that Member or is collected through a third party) by the Company (or its agents or service providers) from time to time for any of the following purposes: |
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Personal data. |
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(a) implementation and administration of any corporate action by the Company (or its agents or service providers); |
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(b) internal analysis and/or market research by the Company (or its agents or service providers); |
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(c) investor relations communications by the Company (or its agents or service providers); |
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(d) administration by the Company (or its agents or service providers) of that members holding of shares in the capital of the Company; |
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(e) implementation and administration of any service provided by the Company (or its agents or service providers) to its members to receive notices of meetings, annual reports and other shareholder communications and/or for proxy appointment, whether by electronic means or otherwise; |
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(f) processing, administration and analysis by the Company (or its agents or service providers) of proxies and representatives appointed for any General Meeting (including any adjournment thereof) and the preparation and compilation of the attendance lists, minutes and other documents relating to any General Meeting (including any adjournment thereof); |
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(g) implementation and administration of, and compliance with, any provision of this Constitution; |
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(h) compliance with any applicable laws, listing rules, take-over rules, regulations and/or guidelines; and |
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(i) purposes which are reasonably related to any of the above purposes. |
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(B) Any Member who appoints a proxy and/or representative for any General Meeting and/or any adjournment thereof is deemed to have warranted that where such Member discloses the personal data of such proxy and/or representative to the Company (or its agents or service providers), that Member has obtained the prior consent of such proxy and/or representative for the collection, use and disclosure by the Company (or its agents or service providers) of the personal data of such proxy and/or representative for the purposes specified in Regulation 160(A)(f), and is deemed to have agreed to indemnify the Company in respect of any penalties, liabilities, claims, demands, losses and damages as a result of such members breach of warranty. |
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TABLE OF CONTENTS
1. INTRODUCTION
1.1 The purpose of the FSP is to provide selected Employees of the Employer Companies with the opportunity of receiving Shares in the Company.
1.2 The FSP will be used as a retention mechanism or as a tool to attract prospective Employees. The FSP will provide Participants with the opportunity to share in the success of the Company and provide alignment between these Participants and shareholders.
2. INTERPRETATION
2.1 In these Rules, unless inconsistent with the context, the following words and expressions shall have the following meanings:
2.1.1 |
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Act |
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the Companies Act (Cap. 50) of Singapore, as amended and any re-enactment or replacement thereof; |
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2.1.2 |
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Allocated |
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for purposes of setting the FSP limits referred to in Rule 5, shall mean one Share allocated per Forfeitable Share Awarded; |
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2.1.3 |
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Auditors |
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the auditors of the Company from time to time; |
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2.1.4 |
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Award |
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an award of a specified number of Forfeitable Shares to an Employee in |
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terms of Rule 4.6 on the basis that the Forfeitable Shares may be forfeited in the circumstances set out in the Award Letter and these Rules, and Awarded shall bear a similar meaning; |
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2.1.5 |
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Award Date |
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the date, specified in the Award Letter, on which an Award is made to an Employee and the Employee will be deemed to have automatically accepted the Award on this date, unless otherwise specified in the Rules; |
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2.1.6 |
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Award Letter |
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a letter containing the information specified in Rule 6.2 sent by the Company or its nominee, and on the recommendation of the Employer Company, to an Employee informing the Employee of the making of an Award to him; |
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2.1.7 |
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Business Day |
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any day on which the applicable stock exchange is open for the transaction of business; |
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2.1.8 |
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Capitalisation Issue |
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the issue of shares on capitalisation of the Companys profits and/or reserves; |
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2.1.9 |
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Change of Control |
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where a person (or persons acting together in concert), |
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Acquires or consolidates Control of the Company; |
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2.1.10 |
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Company |
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Grindrod Shipping Holdings Ltd (Registration Number 201731497H); |
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2.1.11 |
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Control |
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means: |
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a) the holding of shares or the aggregate of holdings of shares or other securities in the Company carrying 30% or more of the voting rights attributable to the share capital of the Company which are currently exercisable at a general meeting of the Company irrespective of whether such holding or holdings confers de facto control; or |
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b) the holding or control by a shareholder alone or pursuant to an agreement with other shareholders of more than 50% of the voting rights in the Company; or |
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(c) is entitled, directly or indirectly, to appoint a majority of Directors of the board of Directors of the Company, or to appoint or remove Directors having a majority of the votes exercisable at meetings of the board of Directors of the Company; |
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2.1.12 |
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Country Schedule |
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any schedule to these Rules that may be adopted |
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as directed by the RemCom, governing participation in the FSP by Participants employed by the Group in jurisdictions other than Singapore. Such Country Schedule shall form part of the Rules; |
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2.1.13 |
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Date of Termination of Employment |
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the date upon which a Participant is no longer permanently employed by, or ceases to hold salaried office in, any Employer Company; provided that, where a Participants employment is terminated without notice or on terms in lieu of notice, the Date of Termination of Employment shall be deemed to occur on the date on which the termination takes effect, and where such employment is terminated with notice, the Date of Termination of Employment shall be deemed to occur upon the date on which that notice expires; |
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2.1.14 |
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Directors |
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the directors of the Company from time to time; |
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2.1.15 |
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Employee |
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any person holding permanent salaried employment or office with any Employer Company, including any executive director, but excluding any non- executive director of a company in the |
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Group; |
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2.1.16 |
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Employer Company |
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a company in the Group which employs a Participant; |
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2.1.17 |
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Financial Year |
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the financial year of the Company currently running from 1 January to 31 December of each year; |
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2.1.18 |
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Forfeitable Shares |
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the Shares comprised in the Award, the vesting of which is subject to the fulfilment of the Vesting Condition as specified in the Award Letter; |
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2.1.19 |
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FSP |
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the Grindrod Shipping Holdings Ltd. Forfeitable Share Plan constituted by these Rules; |
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2.1.20 |
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Group |
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the Company and its Subsidiary/ies from time to time; |
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2.1.21 |
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JSE |
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the exchange operated by the JSE Limited (registration number 2005/022939/06), a public company duly registered and incorporated with limited liability in accordance with the company |
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laws of South Africa, licensed as an exchange under the Securities Services Act, No. 36 of 2004, of South Africa, as amended and any re-enactment or replacement thereof; |
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2.1.22 |
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Liquidation Date |
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the date on which any successful application for the winding up of the Company is lodged at the relevant court; |
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2.1.23 |
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Majority of Operations |
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all or the greater part of the assets or undertaking of the Company; |
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2.1.24 |
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Nasdaq |
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the NASDAQ Global Select Market; |
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2.1.25 |
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Participant |
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an Employee who has accepted or is deemed to have accepted an Award made to him in terms of the FSP and includes the executor of such Employees deceased estate where appropriate; |
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2.1.26 |
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Prohibited Period |
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a prohibited period, including a closed period, as may be applicable to the Company from time to time in accordance with the Securities and Futures Act (Cap. 289) of Singapore and any other relevant legislation or regulations in relation to dealing in securities or insider trading; |
2.1.27 |
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Recharge Policy |
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a policy or agreement in force from time to time between the Company and an Employer Company regulating the funding of the Settlement; |
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2.1.28 |
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RemCom |
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the compensation and nomination committee of the board of Directors, the members of which do not hold any executive office within the Group, charged with the administration of all or part of the FSP and, in the absence of such a RemCom, non-executive directors serving on the board of Directors; |
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2.1.29 |
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Retirement |
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in relation to a Participant, the normal retirement age as determined by the Company, or with the approval of the Directors, prior to the normal retirement age; |
2.1.30 |
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Rules |
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these Rules of the FSP, as amended from time to time; |
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2.1.31 |
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Settlement |
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registration in the name of, and delivery to, a Participant of the required number of Forfeitable Shares to which the Participant is entitled pursuant to the vesting of an Award in accordance with the Settlement method stipulated in Rule 6.4, and the words Settle and Settled shall bear a corresponding meaning; |
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2.1.32 |
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Settlement Date |
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the date on which Settlement shall occur; |
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2.1.33 |
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Share |
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an ordinary share in the capital of the Company; |
2.1.34 |
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Subsidiary |
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a company which is a subsidiary of the Company, within the meaning of the Act; |
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2.1.35 |
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Vesting Condition |
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the condition of continued employment with the Group for the duration of the Vesting Period, as specified in the Award Letter; |
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2.1.36 |
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Vesting Date |
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the date on which a Participant becomes unconditionally entitled to the Forfeitable Shares (free of any restrictions and further conditions that could result in forfeiture) on the fulfilment of the Vesting Condition as set out in the Award Letter and Vest, Vesting and Vested shall be construed accordingly; and |
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2.1.37 |
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Vesting Period |
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the period or periods commencing on the Award Date and ending on the date as specified in the Award Letter (both dates included) during which the Participant is required to fulfil the Vesting Condition. |
2.2 The headings in these Rules are inserted for reference purposes only and shall in no way govern or affect the interpretation hereof.
2.3 If any provision in a definition is a substantive provision conferring rights or imposing obligations on any party, effect shall be given to it as if it were a substantive provision.
2.4 Unless the context indicates otherwise, an expression that denotes any gender includes the others, a natural person includes a created entity (corporate or unincorporated) and the singular includes the plural, and vice versa in each case.
2.5 References in these Rules to any statutory provisions include a reference to those provisions as amended or replaced from time to time and include any regulations made under them.
3. THE FSP
These Rules shall govern all Awards made in terms of the FSP on or after the approval thereof by the shareholders of the Company, on recommendation of the board of directors.
4. OPERATION OF THE FSP
4.1 Basis upon which Awards are made
4.1.1 The basis upon which Awards of Forfeitable Shares are made includes the following:
4.1.1.1 Awards of Forfeitable Shares will be made on an ad hoc basis, as and when the RemCom in consultation with the chief executive officer of the Group decides that there is a merit in making the Award to a particular Employee based on retention risks identified or requirements identified in appointing new
Employees, but subject to the provisions of Rule 4.2 and 4.3. When the chief executive officer is eligible to receive an Award of Forfeitable Shares, he will be excluded from the decision to make such Award.
4.1.1.2 The number of Forfeitable Shares to be made to an Employee will primarily be based on the Employees annual salary, grade, and/or performance and/or market benchmarks and retention requirements.
4.1.1.3 Subsequent to the Vesting Date, the Forfeitable Shares will be Settled to the Participant and the Participant has all shareholder rights from the Settlement Date.
4.1.1.4 In all instances, Vesting of the Awards of Forfeitable Shares will be subject to the Vesting Condition for the applicable Vesting Period, unless otherwise stated in Rule 9.
4.2 The RemCom may from time to time, in its discretion on an ad-hoc basis:
4.2.1 call upon the Employer Companies to make recommendations to the RemCom as to which of their respective Employees they recommend retain the services of or attract the services of by the Award of Forfeitable Shares; and
4.2.2 approve the grant of Awards to the Employees.
4.3 The RemCom will have the final authority to decide:
4.3.1 which Employees will participate in the FSP in respect of each Award;
4.3.2 the aggregate quantum of Awards to be made to all Employees;
4.3.3 the Vesting Period and Vesting Date in respect of each Award; and
4.3.4 all other issues relating to the governance of the FSP.
4.4 If, and when, the RemCom approves the granting of an Award, the RemCom shall notify the Company and the Employer Company of each Employee who has been approved for participation in the FSP.
4.5 Each Employer Company of an Employee whose participation in the FSP has been approved shall, in writing, acknowledge to the RemCom participation of its respective Employees in the FSP.
4.6 The Company, or its nominee, shall issue an Award Letter to every Employee who has been approved for participation in the FSP as soon as is practically possible after receiving the RemComs notification in terms of Rule 4.4.
4.7 The Company or Employer Companies will, however, remain responsible to procure the Settlement of the benefits under the FSP to the Participants employed by them on the Settlement Date, or as may otherwise be regulated under the Recharge Policy.
5. FSP LIMITS
5.1 Overall company Limit
5.1.1 The aggregate number of Shares at any one time which may be Allocated and have not vested under the FSP shall not exceed 5% of the number of shares in issue (excluding treasury shares), as determined in reference to the day preceding the award.
5.1.2 The Directors must, where required, adjust the number of Shares available for the FSP stated in Rule 5.1.1 (without the prior approval of the Company in a general meeting) and the number of Shares subject to existing Awards to take account of a sub-division or consolidation of the Shares of the Company.
5.1.3 The limit on the number of Shares that may be Allocated as set out in Rule 5.1.1 and the ability of the RemCom to make an Award to an Employee, is subject to there being at the material time the requisite approval from the shareholders of the Company. The approval from the shareholders of the Company may be given at each annual general meeting of the Company and such approval, when given, is valid only until the date of the next annual general meeting or the date on which the next annual general meeting is required by law to be held.
6. MAKING AND SETTLEMENT OF AWARDS
6.1 Time when Awards may be made
6.1.1 Subject to Rule 3, the RemCom may, on recommendation and on behalf of any Employer Company, select any Employee for participation in the FSP, and make an Award to such Employee:
6.1.1.1 after the publication of the Companys annual results for the relevant financial year. However, the RemCom may, on behalf of an Employer Company, allow an Employee to join the FSP part way through a Financial Year of the Company by making an Award as soon as is practically possible after the interim results are published; and
6.1.1.2 on any day on which there are no restrictions on the making of Awards being restrictions imposed by a Prohibited Period, statute, order, regulation or directive.
6.1.2 In the event that there is an announcement, on any matter of an exceptional nature which involves unpublished price sensitive information, the making, settlement and vesting of Awards will occur after the aforesaid announcement is released.
6.2 Award Letter
6.2.1 The Award Letter shall be in writing and shall specify the terms of the Award including:
6.2.1.1 the name of the Employee;
6.2.1.2 the Award Date;
6.2.1.3 the number of Forfeitable Shares subject to an Award;
6.2.1.4 the Vesting Condition;
6.2.1.5 the Vesting Date and Vesting Period; and
6.2.1.6 any other relevant terms and conditions.
6.3 Award of Forfeitable Shares
6.3.1 An Award shall:
6.3.1.1 be personal to the Employee to whom it is addressed and may only be acted on by such Employee; and
6.3.1.2 indicate that the Award will be deemed to have been accepted automatically by the Employee on the Award Date unless the Employee specifically rejects the Award in writing to the Company within five Business Days of the Award Date.
6.4 Settlement of Awards
6.4.1 Any one of the following Settlement methods may be used, as directed by the RemCom:
6.4.1.1 The Company will, if so instructed by the RemCom, use treasury shares to effect Settlement to that Participant and where such Participants are employed by another Employer Company, it may recharge the related costs to the respective Employer Company in terms of the Recharge Policy; or
6.4.1.2 The Company will, if so instructed by the RemCom, issue Shares to the Participants, and where such Participants are
employed by another Employer Company, it may recharge the related costs to the respective Employer Company in terms of the Recharge Policy.
Any proposed allotment and issue of new Shares as contemplated in Rules 6.4.1.2 will be subject to there being in force at the relevant time the requisite shareholders approval under the Act for the grant of Awards and issue of Shares in relation thereto. Any issued new Shares shall be subject to all the provisions of the Act, Remcom charter, the applicable listing regulation and the Constitution of the Company (including all provisions thereof relating to the voting, dividend, transfer and other rights attached to such new Shares, including those rights which arise from a liquidation of the Company), and shall rank pari passu in all respects with the then existing issued Shares except for any dividend, right, allotment or other distribution, the record date for which being prior to the relevant date of issue of such new Shares.
6.4.2 The number of Forfeitable Shares delivered to the Participant in Settlement shall be that stipulated in the Award Letter irrespective of the cost to the Company or Employer Company.
7. PARTICIPANTS RIGHTS BEFORE THE VESTING DATE
Participants will not have any rights to voting or dividends prior to the Vesting Date in respect to Shares which have not been Settled.
8. VESTING OF AWARDS
8.1 Subject to Rules 9, 10 and 13.3, the Award will Vest on the date or dates specified in the Award Letter to be the Vesting Date, provided the Vesting Condition specified in the Award Letter has been fulfilled.
9. TERMINATION OF EMPLOYMENT AND DEATH
9.1 Resignation or dismissal
9.1.1 If a Participants employment with any Employer Company terminates before the Vesting Date by reason of:
(i) his resignation; or
(ii) dismissal on grounds of misconduct, proven poor performance or proven dishonest or fraudulent conduct (whether such cessation occurs as a result of notice given by him or otherwise or where he resigns to avoid dismissal on ground of misconduct, poor performance or proven dishonest or fraudulent conduct),
his Awards of Forfeitable Shares will be forfeited in its entirety and will lapse immediately on the Date of Termination of Employment. For the avoidance of doubt, any Awards of Forfeitable Shares which have already Vested will be unaffected by this provision.
9.1.2 For the purposes of this Rule 9, a Participant will not be treated as ceasing to be an Employee of an Employer Company if, on the same date on which he ceases to be an Employee of an Employer Company, he is employed by another company in the Group.
9.2 Retrenchment, ill-health, injury, disability and sale of Employer Company
9.2.1 If a Participants employment with any Employer Company terminates prior to the Vesting Date by reason of:
(i) retrenchment, as determined in accordance with the Employer Companys policy; or
(ii) ill-health, injury or disability, as determined to the satisfaction of the RemCom; or
(iii) the Participants Employer Company ceasing to be a member of the Group or the undertaking in which he is employed being transferred to a transferee which is not a member of the Group,
a portion of his Award of Forfeitable Shares shall Vest on the Date of Termination of Employment or as soon as reasonably possible thereafter. The portion of the Award which shall Vest will reflect the number of complete months served since the Award Date to the Date of Termination of Employment, over the total number of months in the Vesting Period.
9.3 To the extent that there is more than one Vesting Date and more than one Vesting Period in respect of a particular Award, the calculation set out in Rule 9.2.1 should be carried out in respect of each Vesting Period.
9.4 The portion of the Award that does not Vest will lapse on the Date of Termination of Employment.
9.5 For the avoidance of doubt, any Awards which have already Vested will be unaffected by this provision.
9.6 If a Participants employment with any Employer Company terminates prior to the Vesting Date by reason of death, his Award will Vest immediately.
9.7 If a Participants employment with any Employer Company terminates prior to the Vesting Date by reason of Retirement, the RemCom will determine the Vesting of his Award.
9.8 Other terminations and exceptional circumstances
9.8.1 Subject to the RemCom determining otherwise in its absolute discretion, if the Participant ceases to be in the employment of any Employer Company before the Vesting Date for any other reason, a portion of his Award shall Vest on the Date of Termination of Employment or as soon as reasonably practicable thereafter. The portion of the Award which shall Vest will be calculated in accordance with Rule 9.2.1.
9.8.2 The portion of the Award that does not Vest shall lapse on the Date of Termination of Employment.
9.8.3 For the avoidance of doubt, any Awards which have already Vested will be unaffected by this provision.
10. CHANGE OF CONTROL
10.1 Subject to Rule 10.2,:
10.1.1 in the event of a Change of Control of the Company occurring before the Vesting Date which directly results in:
10.1.1.1 the Shares ceasing to be listed on the Nasdaq and the JSE;
10.1.1.2 the Majority of Operations of the Company being merged with those of another company or companies; or
10.1.1.3 the FSP being terminated; or
10.1.2 if under any applicable laws, the court sanctions a compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the reconstruction of the Company or its amalgamation with another company or companies; or
10.1.3 if the shareholders pass a resolution for a members solvent voluntary winding up (other than for amalgamation or reconstruction);
The RemCom will, at its discretion early vest all unvested shares.
10.2 If there is an internal reconstruction or other event which does not involve:
10.2.1 any Change of Control; or
10.2.2 any change in the ultimate Control of the Company; or
10.2.3 a Change of Control which does not result directly in an event specified in Rules 10.1.1, 10.1.2 or 10.1.3; or
10.2.4 if any other event (other than the events set out in Rules 10.1.2 and 10.1.3) happens which may affect the Awards including the Shares ceasing to be listed on the JSE and the Nasdaq,
the Award held by a Participant shall not Vest as a consequence of that event and shall continue to be governed by the Rules of the FSP. However, the RemCom may take such action as it considers appropriate to protect the interests of Participants following the occurrence of such event, including converting Awards into awards in respect of shares in one or more other companies, provided the Participant is no worse off.
11. VARIATION IN SHARE CAPITAL
11.1 Capitalisation Issue, subdivision or consolidation of Shares, liquidation, etc
11.1.1 In the event of a:
(i) Capitalisation Issue; or
(ii) a subdivision of Shares; or
(iii) a consolidation of Shares; or
(iv) reduction (including any reduction arising by reason of the Company purchasing or acquiring its issued Shares); or
(v) the Company making distributions, including a distribution in specie , other than a dividend paid in the ordinary course of business out of the current years retained earnings,
Participants shall continue to participate in the FSP. The RemCom may make such adjustment to the number of Forfeitable Shares comprised
in the relevant Award or take such other action to place Participants in no worse a position than they were prior to the occurrence of the relevant event. Such adjustment should give the Participant an entitlement to an equivalent proportion of the equity capital of the Company as that to which he was entitled prior to the occurrence of the relevant event.
11.2 The issue of Shares or securities convertible into, or with rights to acquire or subscribe for Shares as consideration for an acquisition, for cash or for a vendor consideration placing will not be regarded as a circumstance that requires any adjustment to Awards.
11.3 Unless the RemCom considers an adjustment to be appropriate, the following events shall not normally be regarded as a circumstance requiring adjustment:
11.3.1 the cancellation of issued Shares purchased or acquired by the Company by way of a market purchase of such Shares undertaken by the Company on any applicable stock exchange during the period when a share purchase mandate granted by shareholders (including any renewal of such mandate) is in force;
11.3.2 an issue of Shares or other securities convertible into or with rights to acquire or subscribe for Shares to the employees of the Company or any Employer Company including Employees pursuant to a purchase or an option scheme approved by shareholders in general meeting of the Company, including this FSP or any other share-based incentive schemes implemented by the Company; and
11.3.3 any issue of Shares arising from the exercise of any warrants or the conversion of any convertible securities issued by the Company.
11.4 Notwithstanding the provisions of Rule 11.1 above, no such adjustment shall be made:
11.4.1 if as a result, the Participant receives a benefit that a shareholder does not receive;
11.4.2 if as a result, such adjustment will result in the number of Shares comprised in an Award, together with new Shares to be issued or issuable under the FSP, to exceed the limit referred to in Rule 5.1.1; and
11.4.3 unless the RemCom after considering all relevant circumstances considers it equitable to do so.
11.5 The Company shall notify the Participants of any adjustments which are made under Rule 11.1. Where necessary, in respect of any such adjustments, Auditors, acting as experts and not as arbitrators and whose decision shall be final and binding on all persons affected thereby, shall confirm to the Company in writing that these are calculated on a non- prejudicial basis.
11.6 If an order is made for the winding up of the Company on the basis of its insolvency, an Award of Forfeitable Shares shall ipso facto lapse as from the Liquidation Date.
12. FORFEITURE AND LAPSE OF AWARDS
12.1 Notwithstanding any other provision of the Rules, an Award shall lapse on the earliest of:
12.1.1 The RemCom determining that any further condition imposed under Rule 6.2, in relation to Forfeitable Shares, has not been satisfied in
respect of the Award and can no longer be satisfied;
12.1.2 Subject to Rule 9 and 10, the Date of Termination of Employment;
12.1.3 The Liquidation Date, in accordance with Rule 11.6; and
12.1.4 Any other date provided for under these Rules.
13. FURTHER CONDITIONS
13.1 In circumstances where the tax and/or regulatory requirements of a particular jurisdiction where a Participant works makes the delivery of Shares impossible or impractical, the Directors can direct that the Participants be paid a cash amount in lieu of Shares on the Vesting Date. A separate Country Schedule detailing the provisions in respect of such jurisdiction may be adopted in addition to, or instead of, paying a cash amount in lieu of Shares on the Vesting Date.
13.2 An Employer Company may withhold any amount required:
13.2.1 to meet any costs in respect of the Vesting of an Award of Forfeitable Shares for which the Participant is liable; or
13.2.2 for employees tax,
from the Participants remuneration or any other amount due by the Employer Company to the Participant. For the avoidance of doubt, all taxes (including income tax) arising from the grant and/or release of any Awards to any Participant under the FSP shall be borne by that Participant.
13.3 The Employer Company will delay the Settlement or Vesting of the Award, whichever is appropriate, to the Participant if the acquisition or disposal of the Shares would otherwise:
13.3.1 occur during a Prohibited Period; or
13.3.2 be in contravention of any code adopted by the Company relating to dealings in securities by Directors; or
13.3.3 be prohibited by insider trading legislation or any other legislation or regulations,
until such time as the Settlement or Vesting of the Award will no longer constitute such a contravention.
13.4 The rights of Participants under this FSP are determined exclusively by these Rules.
13.5 Except as otherwise provided in the Rules, the Participant has no right to any compensation, damages or any other sum or benefit by reason of the fact that:
13.5.1 he ceased to be a Participant in the FSP; or
13.5.2 any of his rights or expectations under this FSP were reduced or lost.
13.6 Where a Participant is transferred from one Employer Company to another Employer Company:
13.6.1 all Awards granted to such Participant by the first Employer Company shall remain in force on the same terms and conditions as set out in these Rules; and
13.6.2 the second Employer Company shall assume a pro-rata portion of the first Employer Companys obligations in respect of the relevant Awards in consideration for obtaining the Participants services from the first Employer Company.
13.7 Every Award shall be subject to the condition that no Settlement will be effected if such Settlement would be contrary to any law or enactment, or any rules or regulations of any legislative or non-legislative governing body for the time being in force in Singapore or any other relevant country having jurisdiction in relation thereto.
14. DISCLOSURE IN ANNUAL FINANCIAL STATEMENTS
The Company shall disclose in its annual financial statements the number of Shares that may be utilised for purposes of the FSP at the beginning of the accounting period and changes in such number during the accounting period and the balance of Shares available for utilisation for purposes of the FSP at the end of the accounting period.
15. AMENDMENTS AND TERMINATION
15.1 Subject to the provision of this Rule 15, the RemCom may at any time alter, vary or add to these terms and conditions as it thinks fit. Amendments to these terms and conditions may only affect Awards to Participants that have already been made if they are to the advantage of Participants.
15.2 Except as provided in Rule 15.3 the provisions relating to:
15.2.1 eligibility to participate in the FSP;
15.2.2 the number of Shares which may be utilised for the purpose of the FSP as envisaged in Rule 5.1;
15.2.3 the basis upon which Awards are made as stipulated in Rule 4.1.1;
15.2.4 the amount payable upon the grant, Settlement or Vesting of an Award;
15.2.5 the adjustment of Awards in the event of a variation of capital of the
Company or a Change of Control of the Company;
15.2.6 the procedure to be adopted in respect of the Vesting of Awards in the event of termination of employment as envisaged in Rule 9; and
15.2.7 the terms of this Rule 15.2,
may not be amended without the prior approval by ordinary resolution of shareholders of the Company present or by proxy, in general meeting, excluding all the votes attached to Forfeitable Shares and all Shares owned and controlled by persons who are existing Participants in the FSP and which have been acquired under the FSP.
15.3 Subject to Rule 15.2 the RemCom may make minor amendments for ease of the administration of the FSP, to comply with or take account of the provisions of any proposed or existing legislation or to obtain or maintain favourable, taxation or regulatory treatment of any Employer Company or any present or future Participant, including the adoption of a Country Schedule for the benefit of Employees of the Group working outside Singapore.
15.4 The FSP may be terminated at any time by and at the discretion of the RemCom or by ordinary resolution of shareholders at a general meeting of the Company subject to all relevant approvals which may be required, and if the FSP is so terminated, no further Awards shall be offered hereunder but Awards granted before such termination will continue to be valid and as described in the provisions of the FSP.
16. DOMICILIUM AND NOTICES
16.1 The parties choose domicilium citandi et executandi for all purposes arising from this FSP, including, without limitation, the giving of any notice, the payment of any sum, the delivery of Shares, the serving of any process, as
16.1.1 the Company, the company secretary and the RemCom: The address and telefax number of the registered office of the Company from time to time or such other address or telefax number, and marked for the attention of the RemCom, as may be notified by the Company to Participants in writing;
16.1.2 Employer Company: The address and telefax number of the Registered Office of the Employer Company from time to time or such other address or telefax number, and marked for the attention of the RemCom, as may be notified by the Employer Company to Participants in writing;
16.1.3 each Participant: The physical address, telefax number and electronic address from time to time reflected as being his address, telefax number and/or electronic address in the Employer Companys relevant system from time to time or the address and place of business at which he performs the whole or substantially the whole of the duties of his office or employment.
16.2 Any notice given and any delivery or payment made by any of the above persons to any other which:
16.2.1 is delivered by hand during the normal business hours of the addressee at the relevant address specified in Rule 16.1, shall be rebuttably presumed to have been received by the addressee at the time of delivery;
16.2.2 is delivered by courier during the normal business hours of the addressee at the relevant address specified in Rule 16.1, shall be rebuttably presumed to have been received by the addressee on the 3 rd (third day) after the date of the instruction to the courier to deliver to the addressee;
16.2.3 is posted by prepaid registered post to the addressee at the relevant address specified in Rule 16.1, shall be rebuttably presumed to have been received by the addressee on the 7 th (seventh) day after the date of posting.
16.3 Any notice given that is transmitted by electronic mail and/or facsimile to the addressee at the addressees electronic address and/or facsimile address (as the case may be) for the time being, shall be presumed, until the contrary is proved by the addressee, to have been received by the addressee on the date of successful transmission thereof.
17. DISPUTES
Any dispute arising under the FSP shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (SIAC) in accordance with the Arbitration Rules of the SIAC for the time being in force, which rules are deemed to be incorporated by reference in this Rule 17. The seat of the arbitration shall be Singapore. The tribunal shall consist of one (1) arbitrator. The language of the arbitration shall be English.
18. TERMS OF EMPLOYMENT UNAFFECTED
The FSP or any Award shall not form part of any contract of employment between the Company or any Employer Company and any Participant and the rights and obligations of any individual under the terms of office or employment with such company within the Group shall not be affected by his participation in the FSP or any right which he may have to participate in it or any rights to compensation or damages in consequence of the termination of such office or employment for any reason whatsoever.
19. DISCLAIMER OF LIABILITY
Notwithstanding any provisions herein contained, the Directors, the RemCom and the Company shall not under any circumstances be held liable for any costs, losses, expenses and damages (including any interest arising thereof), whatsoever and howsoever arising in any matter under or in connection with the FSP, including but not limited to, the lapsing or early expiry of any Awards pursuant to any provision of the FSP, the failure or refusal by the RemCom to exercise, or the exercise by the RemCom of any discretion under the FSP, any decision or determination of the RemCom made pursuant to any provision of the FSP, and/or the Companys delay or failure in allotting and issuing any Forfeitable Shares or procuring the Settlement otherwise of any Forfeitable Shares or in applying for or procuring the listing of and quotation for any Forfeitable Shares to be allotted pursuant to any Award on any stock exchanges on which the Shares are quoted or listed.
20. GOVERNING LAW
Singapore law governs the FSP unless the FSP so specifies the interpretation of other applicable laws then, in such case, those applicable laws shall govern.
This FSP was duly adopted at a shareholders meeting of Grindrod Shipping Holdings Ltd held at [insert] on [insert] , the Rules of the FSP having been made available for inspection for at least 14 (fourteen) days prior to the general meeting at the Companys registered office.
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Chairman of the General Meeting |
Execution Version
Date 26 August 2010
ISLAND VIEW SHIPPING INTERNATIONAL PTE. LTD.
as Borrower
- and -
THE BANKS AND FINANCIAL INSTITUTIONS
listed in Part A of Schedule 1
as Lenders
- and -
THE BANKS AND FINANCIAL INSTITUTIONS
listed in Part B of Schedule 1
as Swap Banks
- and -
STANDARD CHARTERED BANK (HONG KONG) LIMITED
as Agent
and as Security Trustee
LOAN AGREEMENT
relating to a term loan facility of US$50,000,000
Watson, Farley & Williams
Singapore
INDEX
Clause |
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|
Page |
|
|
|
|
1 |
INTERPRETATION |
|
1 |
|
|
|
|
2 |
FACILITY |
|
17 |
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3 |
POSITION OF THE LENDERS AND SWAP BANKS |
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18 |
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4 |
DRAWDOWN |
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18 |
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5 |
INTEREST |
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19 |
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6 |
INTEREST PERIODS |
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21 |
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7 |
DEFAULT INTEREST |
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22 |
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8 |
REPAYMENT AND PREPAYMENT |
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23 |
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9 |
CONDITIONS PRECEDENT |
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24 |
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10 |
REPRESENTATIONS AND WARRANTIES |
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25 |
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11 |
GENERAL UNDERTAKINGS |
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27 |
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12 |
CORPORATE UNDERTAKINGS |
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31 |
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13 |
INSURANCE |
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31 |
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14 |
SHIP COVENANTS |
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32 |
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15 |
SECURITY COVER |
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32 |
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16 |
PAYMENTS AND CALCULATIONS |
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34 |
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17 |
APPLICATION OF RECEIPTS |
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36 |
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18 |
APPLICATION OF EARNINGS; SWAP PAYMENTS |
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37 |
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19 |
EVENTS OF DEFAULT |
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37 |
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20 |
FEES AND EXPENSES |
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42 |
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21 |
INDEMNITIES |
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44 |
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22 |
NO SET-OFF OR TAX DEDUCTION |
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45 |
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23 |
ILLEGALITY, ETC |
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46 |
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24 |
INCREASED COSTS |
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47 |
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25 |
SET-OFF |
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49 |
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26 |
TRANSFERS AND CHANGES IN LENDING OFFICES |
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49 |
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27 |
VARIATIONS AND WAIVERS |
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53 |
THIS AGREEMENT is made on 26 August 2010
BETWEEN:
(1) ISLAND VIEW SHIPPING INTERNATIONAL PTE. LTD , as Borrower ;
(2) THE BANKS AND FINANCIAL INSTITUTIONS listed in Part A of Schedule 1, as Lenders ;
(3) THE BANKS AND FINANCIAL INSTITUTIONS listed in Part B of Schedule 1, as Swap Banks ;
(4) STANDARD CHARTERED BANK (HONG KONG) LIMITED , as Agent ; and
(5) STANDARD CHARTERED BANK (HONG KONG) LIMITED , as Security Trustee .
BACKGROUND
(A) The Lenders have agreed to make available to the Borrower a term loan facility of up to $50,000,000, for general corporate purposes.
(B) The Borrower may enter into interest rate swap transactions with the Swap Banks to hedge the Borrowers exposure under this Agreement to interest rate fluctuations.
(C) The Lenders and the Swap Banks have agreed to share in the security to be granted to the Security Trustee pursuant to this Agreement.
IT IS AGREED as follows:
1 INTERPRETATION
1.1 Definitions. Subject to Clause 1.5, in this Agreement:
Account Bank means Standard Chartered Bank acting in such capacity through its office at 1 Basinghall Avenue, London EC2V 5DD ;
Account Security Deed means a deed creating security in respect of each Earnings Account and the Borrower Account executed or to be executed by the relevant Owner and the Borrower respectively, each in favour of the Security Trustee in the Agreed Form;
Advance means the principal amount of each borrowing by the Borrower under this Agreement;
Affected Lender has the meaning given in Clause 5.7;
Agency and Trust Deed means the agency and trust deed dated the same date as this Agreement and entered into between the same parties in the Agreed Form;
Agent means Standard Chartered Bank (Hong Kong) Limited acting in such capacity through its office at 11/F, Standard Chartered Tower, 388 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong or any successor of it appointed under clause 5 of the Agency and Trust Deed;
Agreed Form means in relation to any document, that document in the form approved in writing by the Agent (acting on the instructions of all the Lenders) or as otherwise approved in accordance with any other approval procedure specified in any relevant provision of any Finance Document;
Approved Classification Society means Bureau Veritas, Nippon Kaji Kyokai, Det Norske Veritas, American Bureau of Shipping and Lloyds Register or any other member of the International Association of Classification Societies as all the Lenders may approve;
Approved Commercial Manager means, in relation to each Ship, Lauritzen Bulker A/S whose principal office is at 28 Sankt Annae Plads Copenhagen K Denmark or any other company which the Agent may, with the authorisation of the Majority Lenders, approve from time to time as the commercial manager of that Ship;
Approved Commercial Managers Side Letter means the side letter to be executed by the Approved Commercial manager in relation to the Insurances;
Approved Flag means, in relation to each Ship, the UK or Singapore flag or such other flag requested by the Borrower as all the Lenders may approve as the primary registry of that Ship;
Approved Managers means, collectively, the Approved Commercial Manager and the Approved Technical manager and Approved Manager shall mean any one of the them as the context may require;
Approved Ship means each ship owned by, and registered in the name of the relevant Owner, the details of which are set out in Schedule 7;
Approved Technical Manager means, in relation to each Ship, Grindord Shipping (South Africa) (Pty) Ltd, whose principal office if at 8 th Floor, Grindrod House, 108 Margaret Mncadi (Victoria Embankment) Durban, 4001, South Africa and/or Sandigan Ship Services, Inc, whose registered office is at 9/F Salustiano D Ty Tower, 104 paseo de Roxas, corner Perea Street, Legaspi Village, Makati City, 1229, Philippines or any other company which the Agent may, with the authorisation of the Majority Lenders, approve from time to time as the technical manager of that Ship;
Available Cash Flow means, in respect of any Relevant Period, Consolidated Profits before Interest and Tax of the Borrower Group after adding back:
(a) all depreciation and other amortisation of any member of the Borrower Group (including any amortisation of goodwill); and
(b) any decrease in the amount of Working Capital;
and deducting:
(i) any increase in the amount of Working Capital; and
(ii) any amount actually paid or due and payable in respect of taxes on the profits of any member of the Borrower Group;
Availability Period means the period commencing on the date of this Agreement and ending on the earliest of:
(a) 30 June 2011 (or such later date as the Agent may, with the authorisation of all Lenders, agree with the Borrower);
(b) the date on which the Total Commitments are fully borrowed, cancelled or terminated;
Balloon Instalment means an amount being 15% of the Loan;
Borrower means Island View Shipping International Pte. Ltd., a company incorporated under the laws of Singapore and having its registered office at 200 Cantonment Road, #06-04, Southpoint, Singapore 089763;
Borrower Account means an account in the name of the Borrower with the Account Bank in London with account number 01265416450 designated Island View Shipping International Pte. Ltd. - Borrower Account, or any other account (with that or another office of the Account Bank or with a bank or financial institution other than the Account Bank) which is designated by the Agent as the Borrower Account for the purposes of this Agreement;
Borrower Group means the group of companies which include the Borrower and its subsidiaries;
Business Day means a day on which banks are open in London, Singapore and Hong Kong and, in respect of a day on which a payment is required to be made under a Finance Document, also in New York City;
Commitment means, in relation to a Lender, the amount set opposite its name in Part A of Schedule 1, or, as the case may require, the amount specified in the relevant Transfer Certificate, as that amount may be reduced, cancelled or terminated in accordance with this Agreement (and Total Commitments means the aggregate of the Commitments of all the Lenders);
Confirmation and Early Termination means, in relation to any continuing Secured Transaction, have the meanings given in the relevant Master Agreement;
Consolidated Finance Charges means, in respect of any Relevant Period, the aggregate amount of the interest (including the interest element of leasing and hire purchase payments and capitalised interest), commission, fees, discounts and other finance payments payable by any member of the Borrower Group) including Net Hedging Expenses;
Consolidated Profits Before Interest and Tax means, in respect of any Relevant Period, the consolidated net income of the Borrower Group before:
(a) any provision on account of taxation;
(b) any interest, commission, discounts or other fees incurred or payable, received or receivable by any member of the Borrower Group in respect of Financial Indebtedness; and
(c) any items treated as exceptional or extraordinary items;
Contract Cover Summary means the summary to be provided by the Borrower pursuant to Clause 11.19 in substantially the same form as set out in Schedule 9;
Contractual Currency has the meaning given in Clause 21.4;
Contribution means, in relation to a Lender, the part of the Loan which is owing to that Lender;
Creditor Party means the Agent, the Security Trustee, any Lender and any Swap Bank each acting in such capacity for the purposes of this Agreement, whether as at the date of this Agreement or at any later time;
Debt Service for any Relevant Period, means the aggregate of:
(a) Consolidated Finance Charges; and
(b) the aggregate of scheduled and mandatory payments of any Financial Indebtedness falling due.
Debt Service Coverage Ratio for any Relevant Period means the ratio of (a) Available Cash Flow to (b) Debt Service for that Relevant Period ;
Deed of Covenant means, in relation to each Ship, a deed of covenant collateral to the Mortgage in respect of such Ship and creating charges over that Ship executed or to be executed by the Owner of such Ship in favour of the Security Trustee in the Agreed Form;
Dollars and $ means the lawful currency for the time being of the United States of America;
Drawdown Date means, in relation to an Advance, the date requested by the Borrower for the Advance to be made or, as the context requires, the date on which the Advance is actually made;
Drawdown Notice means a notice in the form set out in Schedule 2 (or in any other form which the Agent approves or reasonably requires);
Earnings means, in relation to each Ship, all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Borrower, an Owner or the Security Trustee and which arise out of the use or operation of the relevant Ship, including (but not limited to):
(a) except to the extent that they fall within paragraph (b):
(i) all freight, hire and passage moneys;
(ii) compensation payable to the Borrower, an Owner or the Security Trustee in the event of requisition of that Ship for hire;
(iii) remuneration for salvage and towage services;
(iv) demurrage and detention moneys;
(v) damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of that Ship; and
(vi) all moneys which are at any time payable under Insurances for that Ship in respect of loss of hire; and
(b) if and whenever that Ship is employed on terms whereby any moneys falling within paragraphs (a)(i) to (vi) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to that Ship;
Earnings Account means an account in the name of each Owner with the Account Bank in London designated as the Earnings Account for the relevant Owner or any other account (with that or another office of the Account Bank or with a bank or financial institution other than the Account Bank) which is designated by the Agent as the Earnings Account for that Owner for the purposes of this Agreement;
Environmental Claim means:
(a) any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law; or
(b) any material claim by any other person which relates to an Environmental Incident or to an alleged Environmental Incident,
and claim means a claim for damages, compensation, fines, penalties or any other payment of any kind whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset;
Environmental Incident means, in relation to each Ship:
(a) any release of Environmentally Sensitive Material from that Ship; or
(b) any incident in which Environmentally Sensitive Material is released from a vessel other than that Ship and which involves a collision between that Ship and such other vessel or some other incident of navigation or operation, in either case, in connection with which that Ship is actually or potentially liable to be arrested, attached, detained or injuncted and/or that Ship and/or the Borrower and/or any Owner and/or any operator or manager of that Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or
(c) any other incident in which Environmentally Sensitive Material is released otherwise than from that Ship and in connection with which that Ship is actually or potentially liable to be arrested and/or where the Borrower and/or any Owner and/or any operator or manager of that Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action;
Environmental Law means any law relating to pollution or protection of the environment, to the carriage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material;
Environmentally Sensitive Material means oil, oil products and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous;
Event of Default means any of the events or circumstances described in Clause 19.1;
Existing Financial Indebtedness means Financial Indebtedness existing at the date of this Agreement, the details of which are set out in Schedule 8;
Existing Security Interest means each Security Interest existing at the date of this Agreement, the details of which are set out in Schedule 8;
Fair Market Value means, in relation to each Ship and at any time, its fair market value determined at that time in accordance with Clause 15.5;
Fee Letter means each fee letter of even date herewith entered into by and among the Borrower and:
(a) the Lenders in relation to the up front fee payable to the account of the Lenders and which is referred to in Clause 20.1(a); and
(b) the Agent in relation to the agency fees payable to the Agent for its own account and which is referred to in Clause 20.1(c),
and Fee Letters shall mean both of them;
Final Maturity Date means the date falling 8 years after the first Drawdown Date;
Finance Documents means:
(a) this Agreement;
(b) the Agency and Trust Deed;
(c) the Guarantee;
(d) the Owner Guarantees;
(e) the Mortgages;
(f) the Deeds of Covenant;
(g) the General Assignments;
(h) the Account Security Deeds;
(i) the Negative Pledge;
(j) the Shares Pledges;
(k) the Fee Letters;
(l) the Manager Undertakings;
(m) Approved Commercial Managers Side Letter; and
(n) any other document (whether creating a Security Interest or not) which is executed at any time by the Borrower or any other person as security for, or to establish any form of subordination or priorities arrangement in relation to, any amount payable to the Lenders and/or the Swap Banks under this Agreement or any of the other documents referred to in this definition or as otherwise acknowledged by the Borrower as a document that falls within this definition;
Financial Indebtedness means, in relation to a person (the debtor ), a liability of the debtor:
(a) for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;
(b) under any loan stock, bond, note or other security issued by the debtor;
(c) under any acceptance credit, guarantee or letter of credit facility made available to the debtor;
(d) under any agreement having the commercial effect of a borrowing or raising of money by the debtor, including but not limited to, a financial lease, a deferred purchase consideration arrangement, and any charter under which the debtor is liable and/or obliged to pay the capital value over a period of time (together with
interest of the item being chartered) and/or assumes the residual value risk of the item being chartered;
(e) under any foreign exchange transaction, any interest or currency swap or any other kind of derivative transaction entered into by the debtor; or
(f) under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within paragraphs (a) to (e) if the references to the debtor referred to the other person;
General Assignment means, in relation to each Ship, an assignment of its Earnings, its Insurances, any Requisition Compensation relating to it executed or to be executed by the Owner of such Ship in favour of the Security Trustee in the Agreed Form;
Guarantee means a guarantee of the liabilities of the Borrower under this Agreement and the Master Agreement executed or to be executed by the Guarantor in favour of the Security Trustee in the Agreed Form;
Guarantor means Grindrod Shipping Limited, a company incorporated under the laws of the Isle of Man whose registered office is at PO Box 166, 4 th Floor, One Circular Road, Douglas, Isle of Man IM99 3NZ ;
Hot Lay Up means, in relation to a Ship, lay up of that Ship in an approved, safe and suitable anchorage whereby throughout the lay up period, the relevant Ship holds full classification and flag requirements without any overdue recommendations or conditions, crew levels of that Ship are not reduced below the level required by the safe manning certificate relating to that Ship and such Ship is in full and valid compliance with all ISM and ISPS requirements to be evidenced by a declaration issued by the Approved Classification Society relating to that Ship;
IFRS means international accounting standards within the meaning of the IAS Regulations 1606/2002 to the extent applicable to the relevant financial statements;
Insurances means, in relation to each Ship:
(a) all policies and contracts of insurance, including entries of that Ship in any protection and indemnity or war risks association, which are effected in respect of that Ship, its Earnings or otherwise in relation to it; and
(b) all rights and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium;
Interest Period means a period determined in accordance with Clause 6;
ISM Code means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation, as the same may be amended or supplemented from time to time (and the terms safety management system , Safety Management Certificate and Document of Compliance have the same meanings as are given to them in the ISM Code);
ISPS Code means the International Ship and Port Facility Security Code as adopted by the International Maritime Organisation, as the same may be amended or supplemented from time to time;
ISSC means a valid and current International Ship Security Certificate issued under the ISPS Code;
Latest Borrower Accounts means, at any date, the latest annual or half-year consolidated financial statements of the Borrower Group delivered, or which are required to be delivered, to the Agent pursuant to Clause 11.6;
Lay Up Declaration means a declaration issued by the Approved Classification Society confirming that:
(a) the relevant Ship is in an approved, safe and suitable anchorage;
(b) the relevant Ship holds full classification and flag requirements without any overdue recommendations or conditions;
(c) the crew levels of the relevant Ship are not reduced below the level required by the safe manning certificate relating to that Ship; and
(d) the relevant Ship is in full and valid compliance with all ISM and ISPS requirements;
Lender means a bank or financial institution listed in Part A of Schedule 1 and acting in such capacity through its branch indicated in Part A of Schedule 1 (or through another branch notified to the Borrower under Clause 26.14) or its transferee, successor or assign;
LIBOR means, for an Interest Period:
(a) the rate per annum equal to the offered quotation for deposits in Dollars for a period equal to the relevant Interest Period which appears on REUTERS BBA Page LIBOR 01 at or about 11.00 a.m. (London time) on the Quotation Date for that Interest Period (and, for the purposes of this Agreement, REUTERS BBA Page LIBOR 01 means the display designated as REUTERS BBA Page LIBOR 01 on the Reuters Service or such other page as may replace REUTERS BBA Page LIBOR 01 on that service for the purpose of displaying rates comparable to that rate or on such other service as may be nominated by the British Bankers Association for the purpose of displaying British Bankers Association Interest Settlement Rates for Dollars); or
(b) if no rate is quoted on REUTERS BBA Page LIBOR 01 (or if no rate is available on such page for a period equal to the relevant Interest Period) the rate per annum determined by the Agent to be the arithmetic mean (rounded upwards to 4 decimal places) of the rates per annum notified to the Agent by each Reference Bank (that provides a quote) at the rate at which deposits in Dollars are offered to that Reference Bank by leading banks in the London Interbank Market at or about 11.00 a.m. (London time) on the Quotation Date for that Interest Period for a period equal to that Interest Period and for delivery on the first Business Day of it;
Loan means the loan facility of up to $50,000,000 granted by the Lenders to the Borrower under this Agreement, as that amount may be reduced, cancelled or terminated in accordance with this Agreement or, as the context may require, the aggregate principal amount which has been advanced under this Agreement by way of loan and which is outstanding for the time being;
Major Casualty means, in relation to each Ship, any casualty to that Ship in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $500,000 or the equivalent in any other currency;
Majority Lenders means:
(a) before the first Advance has been made, Lenders the aggregate of whose Commitments total 66.67 per cent. of the Total Commitments; and
(b) after the first Advance has been made, Lenders the aggregate of whose Contributions total 66.67 per cent. of the Loan;
Management Agreement means, in relation to each Ship, the management agreement entered or to be entered into between an Approved Manager and the Owner or the Borrower (as the case may be) in form and substance acceptable to the Agent;
Manager Undertakings means each of the undertakings to be entered into by the Borrower, the Approved Commercial Manager and the Approved Technical Manager and Managers Undertaking shall mean any one of them as the context may require;
Margin means 2.95 per cent. per annum;
Master Agreement means each and any master agreement (on either the 1992 or 2002 ISDA (Multicurrency Crossborder) form) and the schedule thereto entered or to be entered into between the Borrower and a Swap Bank to hedge the Borrowers floating interest rate exposure under this Agreement to interest rate fluctuations and includes all Secured Transactions from time to time entered into and Confirmations from time to time exchanged under such master agreements;
Mortgage means, in relation to each Ship, a first priority or preferred mortgage on that Ship, executed or to be executed by the Owner of that Ship in favour of the Security Trustee in the Agreed Form;
Negative Pledge means the letter of undertaking executed on or about the date of this Agreement by the Guarantor in favour of the Security Trustee in respect of the shares in the Borrower in the Agreed Form;
Negotiation Period has the meaning given in Clause 5.10;
Net Hedging Expenses means, for any Relevant Period, the amounts payable (or, in respect of a future period, projected to be payable) during that period pursuant to any Master Agreement by the Borrower less the amounts payable (or, in respect of a future period, projected to be payable) during that period pursuant to any Master Agreement to the Borrower in each case excluding any payment in respect of costs of entering into or terminating a Master Agreement (and, for the avoidance of doubt, any Net Hedging Expenses may be a negative amount as well as a positive amount);
Net Interest Expense means, for any Relevant Period, the aggregate of all interest, fees (including, but not limited to, commitment fees), commissions, discounts and other costs, charges or expenses accruing due from any member of the Borrower Group during that Relevant Period in respect of Financial Indebtedness less interest income received by or accruing to any member of the Borrower Group during that period determined in accordance with IFRS and shown in the Latest Borrower Accounts;
Notifying Lender has the meaning given in Clause 23.1 or Clause 24.1 as the context requires;
Owner means, in relation to each Ship, the registered owner of such Ship, as set out in Column 2 of Schedule 7, or such other company incorporated in Singapore or such other country as may be approved by the Agent (acting on the instruction of the Majority Lenders) and notified to the Agent by the Borrower upon such incorporation;
Owner Guarantee means, in relation to each Owner, a guarantee of the liabilities of the Borrower under this Agreement and the Master Agreement executed or to be executed by such Owner in favour of the Security Trustee in the Agreed Form;
Payment Currency has the meaning given in Clause 21.4;
Permitted Financial Indebtedness means Existing Financial Indebtedness and any Financial Indebtedness which is or may be incurred by the Borrower which does not result in a breach of Clause 12.4 of this Agreement or clause 11.13 of the Guarantee and which has been notified by the Borrower to the Agent;
Permitted Security Interests means:
(a) Security Interests created by the Finance Documents;
(b) liens for unpaid masters and crews wages in accordance with usual maritime practice;
(c) in relation to each Ship, liens for salvage;
(d) in relation to each Ship, liens arising by operation of law for not more than 2 months prepaid hire under any charter in relation to that Ship not prohibited by this Agreement;
(e) in relation to each Ship, liens for masters disbursements incurred in the ordinary course of trading and any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of that Ship, provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested by the Owner of such Ship in good faith by appropriate steps) and subject, in the case of liens for repair or maintenance, to clause 7.12(g) of the Deed of Covenants relating to such Ship;
(f) any Security Interest created in favour of a plaintiff or defendant in any proceedings or arbitration as security for costs and expenses where the Borrower is actively prosecuting or defending such proceedings or arbitration in good faith; and
(g) Security Interests arising by operation of law in respect of taxes which are not overdue for payment or in respect of taxes being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made;
(h) Existing Security Interests;
(i) any Security Interest on any property or asset securing Permitted Financial Indebtedness, provided that details of such Security Interest are notified to the Agent upon such Security Interest being created; and
(j) any Security Interest for any Permitted Financial Indebtedness;
Pertinent Document means:
(a) any Finance Document;
(b) any policy or contract of insurance contemplated by or referred to in Clause 17 or any other provision of this Agreement or another Finance Document;
(c) any other document directly contemplated by or referred to in any Finance Document; and
(d) any document which has been or is at any time sent by or to a Servicing Bank in contemplation of or in connection with any Finance Document or any policy, contract or document falling within paragraphs (b) or (c);
Pertinent Jurisdiction , in relation to a company, means:
(a) England and Wales;
(b) the country under the laws of which the company is incorporated or formed;
(c) a country in which the companys central management and control is or has recently been exercised;
(d) a country in which the overall net income of the company is subject to corporation tax, income tax or any similar tax;
(e) a country in which assets of the company (other than securities issued by, or loans to, related companies) having a substantial value are situated, in which the company maintains a permanent place of business, or in which a Security Interest created by the company must or should be registered in order to ensure its validity or priority; and
(f) a country the courts of which have jurisdiction to make a winding up, administration or similar order in relation to the company, whether as main or territorial or ancillary proceedings, or which would have such jurisdiction if their assistance were requested by the courts of a country referred to in paragraphs (b) or (c);
Pertinent Matter means:
(a) any transaction or matter contemplated by, arising out of, or in connection with a Pertinent Document; or
(b) any statement relating to a Pertinent Document or to a transaction or matter falling within paragraph (a);
and covers any such transaction, matter or statement, whether entered into, arising or made at any time before the signing of this Agreement or on or at any time after that signing;
Potential Event of Default means an event or circumstance which, with the giving of any notice, the lapse of time, a determination of the Majority Lenders (as provided for in the terms of the Finance Documents) and/or the satisfaction of any other condition, would constitute an Event of Default;
Prohibited Person means any person with whom transactions are currently prohibited or restricted under the United States of America sanctions administered by the United States of America Department of Treasurys Office of Foreign Assets Control (OAFC), any other United States of America government sanction, export or procurement laws or any other sanctions or other such restrictions on business dealings imposed by a member state of the European Union, including a person on any list of restricted entities, persons or organizations published by the United States of America government, the United Nations or the European Union or any member state thereof;
Quotation Date means, in relation to any Interest Period (or any other period for which an interest rate is to be determined under any provision of a Finance Document), the day on which quotations would ordinarily be given by leading banks in the London Interbank Market for deposits in the currency in relation to which such rate is to be determined for delivery on the day which is 2 Business Days (in London) before the first day of that Interest Period or other period;
Reference Banks means, subject to Clause 26.16, the London branches of Standard Chartered Bank, Calyon, The Royal Bank of Scotland and Societe Generale;
Relevant Period means each period of twelve (12) months ending on or about the last day of the financial year of the Borrower and each period of twelve (12) months ending on or about the last day of each financial half-year of the Borrower;
Repayment Date means a date on which a repayment of the Loan is required to be made under Clause 8;
Requisition Compensation , in relation to each Ship, includes, all compensation or other moneys payable by reason of any act or event such as is referred to in paragraph (b) of the definition of Total Loss ;
Secured Liabilities means all liabilities which the Borrower, the Security Parties or any of them have, at the date of this Agreement or at any later time or times, under or in connection with any Finance Document or any Master Agreement or any judgment relating to any Finance Document or any Master Agreement; and for this purpose, there shall be disregarded any total or partial discharge of these liabilities, or variation of their terms, which is effected by, or in connection with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country;
Security Interest means:
(a) a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien or any other security interest of any kind;
(b) the security rights of a plaintiff under an action in rem ; and
(c) any arrangement entered into by a person (A) the effect of which is to place another person (B) in a position which is similar, in economic terms, to the position in which B would have been had he held a security interest over an asset of A; but this paragraph (c) does not apply to a right of set off or combination of accounts conferred by the standard terms of business of a bank or financial institution;
Security Party means the Guarantor, each Owner and any person (except a Creditor Party) who, as a surety or mortgagor, as a party to any subordination or priorities arrangement, or in any similar capacity, executes a document falling within the last paragraph of the definition of Finance Documents;
Security Period means the period commencing on the date of this Agreement and ending on the date on which the Agent notifies (such notice not to be unreasonably withheld or delayed) the Borrower, the Security Parties and the Creditor Parties that:
(a) all amounts which have become due for payment by the Borrower or any Security Party under the Finance Documents and the Master Agreements have been paid;
(b) no amount is owing or has accrued (without yet having become due for payment) under any Finance Document or any Master Agreement;
(c) neither the Borrower nor any Security Party has any future or contingent liability under Clause 20, 21 or 22 or any other provision of this Agreement, another Finance Document or any Master Agreement; and
(d) the Agent, the Security Trustee and the Majority Lenders do not consider that there is a significant risk that any payment or transaction under a Finance Document or a Master Agreement would be set aside, or would have to be reversed or adjusted, in any present or possible future bankruptcy of the Borrower or a Security Party or a any present or possible future proceeding relating to a Finance Document or a Master Agreement or any asset covered (or previously covered) by a Security Interest created by a Finance Document;
Secured Transaction means a Transaction which fulfils the following requirements:
(a) it is entered into by the Borrower with a Swap Bank pursuant to a Master Agreement;
(b) its purpose is the hedging of the Borrowers exposure under this Agreement to fluctuations in LIBOR arising from the funding of the Loan (or any part thereof) for a period expiring no later than the final Repayment Date; and
(c) it is designated by the Borrower, by delivery by the Borrower to the Agent upon entering into a Transaction of a notice of designation in the form set out in Schedule 5, as a Secured Transaction for the purposes of the Finance Documents;
Security Trustee means Standard Chartered Bank (Hong Kong) Limited, acting in such capacity through its office at 11/F, Standard Chartered Tower, 388 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong , or any successor of it appointed under clause 5 of the Agency and Trust Deed;
Servicing Bank means the Agent or the Security Trustee;
Shares Pledge means, in relation to each Owner, a pledge of the entire issued share capital in that Owner to be executed by the Borrower in favour of the Security Trustee as security for the Secured Liabilities in the Agreed Form;
Ship means each Approved Ship or Substitute Ship which is subject to a Mortgage;
Substitute Ship means any Approved Ship or any other ship of similar age, type and value to an Approved Ship which the Agent may, with the authorisation of all Lenders, approve for the purposes of this Agreement;
Swap Bank means a bank or financial institution listed in Part B of Schedule 1 and acting in such capacity through its branch indicated in Part B of Schedule 1 or its transferee, successor or assign;
Swap Exposure means, in relation to each Swap Bank, the amount certified by that Swap Bank to the Agent to be the aggregate net amount in Dollars which would be payable by the Borrower to that Swap Bank under (and calculated in accordance with) the applicable provisions of the relevant Master Agreement if an Early Termination Date had occurred on the relevant date in relation to all Secured Transactions entered into between the Borrower and that Swap Bank;
Tangible Net Worth means, for any Relevant Person, at any date of determination under this Agreement, the aggregate amount at such time (without double counting) of the following:
(a) the amounts paid up, or credited as paid up, on the issued share capital of that Relevant Person and its subsidiaries;
(b) any credit balance on the consolidated profit and loss account of that Relevant Person and its subsidiaries; and
(c) any amount standing to the credit of any other consolidated capital and revenue reserves of that Relevant Person and its subsidiaries including any share premium account and capital redemption reserve,
less the aggregate amount at such time (without double counting) of the following:
(a) any debit balance on the consolidated profit and loss account of that Relevant Person and its subsidiaries; and
(b) any reserves attributable to interests of minority shareholders in any subsidiary (whether direct or indirect) of that Relevant Person and its subsidiaries,
all as determined in accordance with the accounting principles applied in the preparation of that Relevant Persons latest financial statements but adjusted by:
(i) deducting any dividend or other distribution declared, recommended or made by the Relevant Person, and by its subsidiaries to shareholders and for the avoidance of doubt the term shareholders in this paragraph (i) shall be those that are not in any way, directly or indirectly, affiliated with such Relevant Person;
(ii) deducting any amount attributable to goodwill or any other intangible asset;
(iii) reflecting any variation required to be made to the asset value attributable to any ship owned by the Relevant Person and its subsidiaries in order to reflect the fair market value of any such ship;
(iv) excluding any amount attributable to deferred taxation;
(v) excluding any amount attributable to minority interests; and
(vi) eliminating inconsistencies (if any) between the accounting principles;
Total Loss means, in relation to each Ship:
(a) actual or constructive or compromised or agreed or arranged total loss of that Ship;
(b) requisition for title or other compulsory acquisition of that Ship (otherwise than by requisition for hire for a fixed period not exceeding 1 year without any right to an extension) unless it is within 1 month redelivered to the relevant Owners full control;
(c) capture, seizure, hijacking, theft, arrest, detention of that Ship or confiscation of that Ship by any government or by persons acting or purporting to act on behalf of any government unless the Ship be released and restored to the relevant Owner from such capture, seizure, arrest, detention or confiscation within 1 month after the occurrence thereof;
Total Loss Date means, in relation to each Ship:
(a) in the case of an actual loss of that Ship, the date on which it occurred or, if that is unknown, the date when that Ship was last heard of;
(b) in the case of a constructive, compromised, agreed or arranged total loss of that Ship, the earliest of:
(i) the date on which a notice of abandonment is given to the insurers; and
(ii) the date of any compromise, arrangement or agreement made by or on behalf of the Borrower and/or the relevant Owner with that Ships insurers in which the insurers agree to treat that Ship as a total loss; and
(c) in the case of any other type of total loss, on the date (or the most likely date) on which it reasonably appears to the Agent that the event constituting the total loss occurred;
Transaction has the meaning given in the relevant Master Agreement;
Transfer Certificate has the meaning given in Clause 26.2;
Trust Property has the meaning given in clause 3.1 of the Agency and Trust Deed;
Unicorn Facility means the US$50,000,000 term loan facility made available to Unicorn Tankers (International) Limited ( Unicorn ) pursuant to a loan agreement dated 29 June 2009 (and as amended and supplemented by a letter of amendment dated 12 August 2010) (the Unicorn Loan Agreement ) and made between (i) Unicorn (ii) the banks and financial institutions listed therein as lenders, (iii) the banks and financial institutions listed therein as swap banks and (iv) Standard Chartered Bank as agent and as security trustee; and
Working Capital means, in respect of any Relevant Period, the consolidated net current assets of the Borrower Group comprising stock and debtors (but excluding any cash) and deducting trade creditors and other current liabilities at the last day of such Relevant Period.
1.2 Construction of certain terms. In this Agreement:
administration notice a notice appointing an administrator, a notice of intended appointment and any other notice which is required by law (generally or in the case concerned) to be filed with the court or given to a person prior to, or in connection with, the appointment of an administrator;
approved means, for the purposes of Clause 13, approved in writing by the Agent;
asset includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment;
company includes any partnership, joint venture and unincorporated association;
consent includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;
contingent liability means a liability which is not certain to arise and/or the amount of which remains unascertained;
continuing means, in relation to any Potential Event of Default, a Potential Event of Default which has not been remedied to the satisfaction of the Agent or waived by the
Agent (acting upon instructions of the Majority Lenders) and, in relation to any Event of Default, an Event of Default which has not been waived by the Agent (acting upon instructions of Majority Lenders);
document includes a deed; also a letter or fax;
excess risks means, in relation to each Ship, the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of that Ship in consequence of its insured value being less than the value at which that Ship is assessed for the purpose of such claims;
expense means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;
law includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;
legal or administrative action means any legal proceeding or arbitration and any administrative or regulatory action or investigation;
liability includes every kind of debt or liability (present or future, certain or contingent), whether incurred as principal or surety or otherwise;
months shall be construed in accordance with Clause 1.3;
obligatory insurances means, in relation to each Ship, all insurances effected, or which the Borrower is obliged to effect, under Clause 13 or any other provision of this Agreement or another Finance Document;
parent company has the meaning given in Clause 1.4;
person includes any company; any state, political sub-division of a state and local or municipal authority; and any international organisation;
policy , in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;
protection and indemnity risks means the usual risks covered by a protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (01/11/02 or 01/11/03), clause 8 of the Institute Time Clauses (Hulls) (1/11/1995 or 1/10/83) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;
regulation includes any regulation, rule, official directive, request or guideline whether or not having the force of law of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;
subsidiary has the meaning given in Clause 1.4;
tax includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any political sub-division of a state or any local or municipal authority (including any such imposed in connection with exchange controls), and any connected penalty, interest or fine; and
war risks includes the risk of mines and all risks excluded by clause 23 of the Institute Time Clauses (Hulls)(1/10/83) or clause 24 of the Institute Time Clauses (Hulls)(1/11/1995).
1.3 Meaning of month. A period of 1 or more months ends on the day in the relevant calendar month numerically corresponding to the day of the calendar month on which the period started ( the numerically corresponding day ), but:
(a) on the Business Day following the numerically corresponding day if the numerically corresponding day is not a Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding the numerically corresponding day; or
(b) on the last Business Day in the relevant calendar month, if the period started on the last Business Day in a calendar month or if the last calendar month of the period has no numerically corresponding day;
and month and monthly shall be construed accordingly.
1.4 Meaning of subsidiary. A company (S) is a subsidiary of another company (P) if:
(a) a majority of the issued shares in S (or a majority of the issued shares in S which carry unlimited rights to capital and income distributions) are directly owned by P or are indirectly attributable to P; or
(b) P has direct or indirect control over a majority of the voting rights attaching to the issued shares of S; or
(c) P has the direct or indirect power to appoint or remove a majority of the directors of S; or
(d) P otherwise has the direct or indirect power to ensure that the affairs of S are conducted in accordance with the wishes of P;
and any company of which S is a subsidiary is a parent company of S.
1.5 General Interpretation. In this Agreement:
(a) references to, or to a provision of, a Finance Document or any other document are references to it as amended or supplemented, whether before the date of this Agreement or otherwise;
(b) references to, or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Agreement or otherwise;
(c) words denoting the singular number shall include the plural and vice versa;
(d) references to time shall mean Hong Kong time, unless stated otherwise; and
(e) Clauses 1.1 to 1.5 apply unless the contrary intention appears.
1.6 Headings. In interpreting a Finance Document or any provision of a Finance Document, all clause, sub-clause and other headings in that and any other Finance Document shall be entirely disregarded.
2 FACILITY
2.1 Amount of facility. Subject to the other provisions of this Agreement, the Lenders shall make available to the Borrower a term loan facility of up to $50,000,000.
2.2 Loan divided into Advances . The Loan shall be made available in up to 6 separate Advances.
2.3 Lenders participations in Advances. Subject to the other provisions of this Agreement, each Lender shall participate in each Advance in the proportion which, as at the relevant Drawdown Date, its Commitment bears to the Total Commitments.
2.4 Purpose of Advances. The Borrower undertakes with each Creditor Party to use the proceeds of each Advance for purposes stated in the preamble to this Agreement save that in the event such proceeds are for the purpose of acquiring shares in any company, the prior written consent (such consent not to be unreasonably withheld or delayed) of the Agent (acting on behalf of the Majority Lenders) shall be required .
3 POSITION OF THE LENDERS AND SWAP BANKS
3.1 Interests several. The rights of the Lenders and of the Swap Banks under this Agreement and under the Master Agreements are several.
3.2 Individual right of action. Each Lender and each Swap Bank shall be entitled to sue for any amount which has become due and payable by the Borrower to it under this Agreement or under a Master Agreement without joining any other Creditor Party as additional parties in the proceedings.
3.3 Proceedings requiring Majority Lender consent. Except as provided in Clause 3.2, no Lender and no Swap Bank may commence proceedings against the Borrower or any Security Party in connection with a Finance Document without the prior consent of the Majority Lenders.
3.4 Obligations several. The obligations of the Lenders under this Agreement and of the Swap Banks under the Master Agreements are several; and a failure of a Lender to perform its obligations under this Agreement or a failure of a Swap Bank to perform its obligations under the Master Agreement to which it is a party shall not result in:
(a) the obligations of the other Lenders and/or the other Swap Bank being increased; nor
(b) the Borrower, any Security Party, any other Lender or the other Swap Bank being discharged (in whole or in part) from its obligations under any Finance Document or any Master Agreement;
and in no circumstances shall a Lender or a Swap Bank have any responsibility for a failure of another Creditor Party to perform its obligations under this Agreement or a Master Agreement.
4 DRAWDOWN
4.1 Request for Advance. Subject to the following conditions, the Borrower may request that an Advance be made to it by ensuring that the Agent receives a completed Drawdown Notice not later than 11.00 a.m. 2 Business Days prior to the intended Drawdown Date.
4.2 Availability. The conditions referred to in Clause 4.1 are that:
(a) a Drawdown Date has to be a Business Day during the Availability Period;
(b) at the time of the relevant Drawdown Date the aggregate amount of all Advances shall not exceed 65 per cent. of the aggregate of the Fair Market Value of all Ships on the relevant Drawdown Date;
(c) the aggregate amount of the Advances shall not exceed the Total Commitments; and
(d) all applicable conditions precedent set out in Clause 9.1 shall have been fulfilled.
4.3 Notification to Lenders of receipt of a Drawdown Notice. The Agent shall promptly notify the Lenders that it has received a Drawdown Notice and shall inform each Lender of:
(a) the amount of the Advance and the relevant Drawdown Date;
(b) the amount of that Lenders participation in the Advance; and
(c) the duration of the first Interest Period applicable to it.
4.4 Drawdown Notice irrevocable. A Drawdown Notice must be signed by an authorised person on behalf of the Borrower; and once served, a Drawdown Notice cannot be revoked without the prior consent of the Agent, acting with the authorisation of the Majority Lenders.
4.5 Lenders to make available Contributions. Subject to the provisions of this Agreement, each Lender shall, on and with value on each Drawdown Date, make available to the Agent for the account of the Borrower the amount due from that Lender on that Drawdown Date under Clause 2.3.
4.6 Disbursement of Advance. Subject to the provisions of this Agreement, the Agent shall on each Drawdown Date pay to the Borrower the amounts which the Agent receives from the Lenders under Clause 4.5; and that payment to the Borrower shall be made:
(a) to the account which the Borrower specifies in the Drawdown Notice; and
(b) in the like funds as the Agent received the payments from the Lenders.
4.7 Disbursement of Advance to third party. The payment by the Agent under Clause 4.6 to a third party (if requested by the Borrower in a relevant Drawdown Notice) shall constitute the making of the Advance and the Borrower shall thereupon become indebted, as principal and direct obligor, to each Lender in an amount equal to that Lenders Contribution for that Advance.
5 INTEREST
5.1 Payment of normal interest. Subject to the provisions of this Agreement, interest on an Advance in respect of each Interest Period applicable to it shall be paid by the Borrower on the last day of that Interest Period.
5.2 Normal rate of interest. Subject to the provisions of this Agreement, the rate of interest on each Advance in respect of an Interest Period applicable to it shall be the aggregate of the Margin and LIBOR for that Interest Period.
5.3 Payment of accrued interest. In the case of an Interest Period longer than 6 months, accrued interest shall be paid every 6 months during that Interest Period and on the last day of that Interest Period.
5.4 Notification of Interest Periods and rates of normal interest. The Agent shall notify the Borrower and each Lender of each rate of interest as soon as reasonably practicable after each is determined.
5.5 Obligation of Reference Banks to quote. A Lender which is a Reference Bank shall use all reasonable efforts to supply any quotation required of it for the purposes of fixing a rate of interest under this Agreement.
5.6 Absence of quotations by Reference Banks. If any Reference Bank fails to supply a quotation, the Agent shall determine the relevant LIBOR on the basis of the quotations supplied by the other Reference Bank or Banks; but if 2 or more of the Reference Banks fail to provide a quotation, the relevant rate of interest shall be set in accordance with the following provisions of this Clause 5.
5.7 Market disruption. The following provisions of this Clause 5 apply if:
(a) no rate is quoted on REUTERS BBA Page LIBOR 01 and 2 or more of the Reference Banks do not, before 1.00 p.m. (London time) on the Quotation Date for an Interest Period, provide quotations to the Agent in order to fix LIBOR; or
(b) Lenders having Contributions together amounting to more than 35 per cent. of the Loan (or, if the first Advance has not yet been made, Commitments amounting to more than 35 per cent. of the Total Commitments) notify the Agent in writing before 1.00 p.m. (London time) that the aggregate of LIBOR fixed by the Agent for an Interest Period would not accurately reflect the cost to those Lenders of funding their respective Contributions (or any part of them) during the Interest Period in the London Interbank Market at or about 11.00 a.m. (London time) on the Quotation Date for the Interest Period (as determined in the absolute discretion of those Lenders) ; or
(c) the Agent is notified by a Lender in writing by 1.00 p.m. (London time) (the Affected Lender ) that for any reason it is unable to obtain Dollars in the London Interbank Market in order to fund its Contribution (or any part of it) during the Interest Period.
5.8 Notification of market disruption. The Agent shall promptly notify the Borrower and each of the Lenders stating the circumstances falling within Clause 5.7 which have caused its notice to be given.
5.9 Suspension of drawdown. If the Agent serves notice under Clause 5.8;
(a) in a case falling within Clauses 5.7(a) or (b), the Lenders obligations to make the Advance concerned;
(b) in a case falling within Clause 5.7(c), the Affected Lenders obligation to participate in the Advance concerned;
shall be suspended while the circumstances referred to in the Agents notice continue or until the Borrower, the Agent and the Lenders or (as the case may be) the Affected Lender agree an alternative interest rate or (as the case may be) an alternative basis for the Lenders or (as the case may be) the Affected Lender to fund or continue to fund their or its Contribution during the Interest Period concerned .
5.10 Negotiation of alternative rate of interest. If the Agents notice under Clause 5.8 is served after an Advance is made, the Borrower, the Agent and the Lenders or (as the case may be) the Affected Lender shall use reasonable endeavours to agree, within the 30 days after the date on which the Agent serves its notice under Clause 5.8 (the Negotiation Period ), an alternative interest rate or (as the case may be) an alternative basis for the Lenders or (as the case may be) the Affected Lender to fund or continue to fund their or its Contribution during the Interest Period concerned.
5.11 Application of agreed alternative rate of interest. Any alternative interest rate or an alternative basis which is agreed during the Negotiation Period shall take effect in accordance with the terms agreed.
5.12 Alternative rate of interest in absence of agreement . If an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the Agent shall, with the agreement of each Lender or (as the case may be) the Affected Lender, set an interest period and interest rate representing the cost of funding of the Lenders or (as the case may be) the Affected Lender in Dollars or in any available currency of their or its Contribution plus the Margin; and the procedure provided for by this Clause 5.12 shall be repeated if the relevant circumstances are continuing at the end of the interest period so set by the Agent.
5.13 Notice of prepayment. If the Borrower does not agree with an interest rate set by the Agent under Clause 5.12, the Borrower may give the Agent not less than 15 Business Days notice of its intention to prepay (without premium or penalty) at the end of the interest period set by the Agent.
5.14 Prepayment; termination of Commitments . A notice under Clause 5.13 shall be irrevocable; the Agent shall promptly notify the Lenders or (as the case may require) the Affected Lender of the Borrowers notice of intended prepayment (without premium or penalty); and:
(a) on the date on which the Agent serves that notice, the Total Commitments or (as the case may require) the Commitment of the Affected Lender shall be cancelled; and
(b) on the last Business Day of the interest period set by the Agent, the Borrower shall prepay (without premium or penalty), the Affected Lenders Contribution, together with accrued interest thereon at the rate used for the immediately preceding Interest Period plus the Margin.
6 INTEREST PERIODS
6.1 Commencement of Interest Periods. The first Interest Period applicable to an Advance shall commence on the applicable Drawdown Date and each subsequent Interest Period shall commence on the expiry of the preceding Interest Period.
6.2 Duration of normal Interest Periods. Subject to Clauses 6.3, each Interest Period shall be:
(a) 6 months; or
(b) in the case of the first Interest Period applicable to the second and any subsequent Advance, a period ending on the last day of the Interest Period then current, whereupon all of the Advances shall be consolidated and treated as a single Advance for the purposes of Clause 5 and this Clause 6; or
(c) such other period as the Agent may, with the consent of all the Lenders, agree with the Borrower.
6.3 Duration of Interest Periods for repayment instalments. In respect of an amount due to be repaid under Clause 8 on a particular Repayment Date, an Interest Period shall end on that Repayment Date.
7 DEFAULT INTEREST
7.1 Payment of default interest on overdue amounts. The Borrower shall pay interest in accordance with the following provisions of this Clause 7 on any amount payable by it under any Finance Document which the Agent, the Security Trustee or the other designated payee does not receive on or before the relevant date, that is:
(a) the date on which the Finance Documents provide that such amount is due for payment; or
(b) if a Finance Document provides that such amount is payable on demand, the date on which the demand is served; or
(c) if such amount has become immediately due and payable under Clause 19.4, the date on which it became immediately due and payable.
7.2 Default rate of interest. Interest shall accrue on an overdue amount from (and including) the relevant date until the date of actual payment (as well after as before judgment) at the rate per annum determined by the Agent to be 2 per cent. above:
(a) in the case of an overdue amount of principal, the higher of the rates set out at Clauses 7.3(a) and (b); or
(b) in the case of any other overdue amount, the rate set out at Clause 7.3(b).
7.3 Calculation of default rate of interest. The rates referred to in Clause 7.2 are:
(a) the rate applicable to the overdue principal amount immediately prior to the relevant date (but only for any unexpired part of any then current Interest Period applicable to it);
(b) the Margin plus, in respect of successive periods of any duration (including at call) up to 3 months which the Agent may select from time to time:
(i) LIBOR; or
(ii) if the Agent (after consultation with the Reference Banks) determines that Dollar deposits for any such period are not being made available to 2 or more Reference Bank by leading banks in the London Interbank Market in the ordinary course of business, a rate from time to time determined by the Agent by reference to the cost of funds to the Reference Banks from such other sources as the Agent (after consultation with the Reference Banks) may from time to time determine.
7.4 Notification of interest periods and default rates. The Agent shall promptly notify the Lenders and the Borrower of each interest rate determined by the Agent under Clause 7.3 and of each period selected by the Agent for the purposes of paragraph (b) of that Clause; but this shall not be taken to imply that the Borrower is liable to pay such interest only with effect from the date of the Agents notification.
7.5 Payment of accrued default interest. Subject to the other provisions of this Agreement, any interest due under this Clause shall be paid on the last day of the period by reference to which it was determined; and the payment shall be made to the Agent for the account of the Creditor Party to which the overdue amount is due.
7.6 Compounding of default interest. Any such interest which is not paid at the end of the period by reference to which it was determined shall thereupon be compounded.
7.7 Application to Master Agreements. For the avoidance of doubt, this Clause 7 does not apply to any amount payable under any Master Agreement in respect of any continuing Secured Transaction as to which the relevant provisions of that Master Agreement shall apply.
8 REPAYMENT AND PREPAYMENT
8.1 Amount of instalments. The Borrower shall repay the Loan by equal consecutive semi-annual instalments together with the Balloon Instalment .
8.2 Repayment Dates. The first repayment instalment shall be repaid on the Advance Date falling after the final date of the Availability Period and the last repayment instalment shall be repaid on the Final Maturity Date . The Balloon Instalment shall be paid simultaneously with the final repayment instalment on Final Maturity Date. For the avoidance of doubt, each repayment instalment shall be paid semi-annually except for last repayment instalment which shall be due on the Final Maturity Date.
For the purposes of Clause 8.2 Advance Date means the date of the first Drawdown Date and each date falling 6 months thereafter.
8.3 Final Maturity Date. On the Final Maturity Date, the Borrower shall additionally pay to the Agent for the account of the Creditor Parties all other sums then accrued or owing under any Finance Document.
8.4 Voluntary prepayment. Subject to the following conditions, the Borrower may prepay the whole or any part of the Loan.
8.5 Conditions for voluntary prepayment. The conditions referred to in Clause 8.4 are that:
(a) a partial prepayment shall be $1,000,000 or a higher integral multiple of $1,000,000 or if lower, the Loan;
(b) the Agent has received from the Borrower at least 14 Business Days prior written notice specifying the amount to be prepaid and the date on which the prepayment is to be made; and
(c) the Borrower has provided evidence satisfactory to the Agent that any consent required by the Borrower or any Security Party in connection with the prepayment has been obtained and remains in force, and that any requirement relevant to this Agreement which affects the Borrower or any Security Party has been complied with.
8.6 Effect of notice of prepayment. A prepayment notice may not be withdrawn or amended without the consent of the Agent, given with the authorisation of the Majority Lenders, and the amount specified in the prepayment notice shall become due and payable by the Borrower on the date for prepayment specified in the prepayment notice.
8.7 Notification of notice of prepayment. The Agent shall notify the Lenders promptly upon receiving a prepayment notice, and shall provide any Lender which so requests with a copy of any document delivered by the Borrower under Clause 8.5(c).
8.8 Mandatory prepayment on sale or Total Loss. Subject to Clause 14.2, the Borrower shall be obliged to cancel the relevant part of the Total Commitments and/or to prepay the relevant part of the Loan:
(a) if a Ship is sold, on or before the date on which the sale is completed by delivery of the Ship to the buyer; or
(b) if a Ship becomes a Total Loss, on the earlier of the date falling 90 days after the Total Loss Date and the date of receipt by the Security Trustee of the proceeds of insurance relating to such Total Loss,
and in this Clause 8.8, relevant part means:
(i) in the case of a Total Loss of a Ship, the greater of (i) the proceeds of insurances relating to such Total Loss and (ii) an amount equal to the minimum value for which the Owner of such Ship is obliged to insure that Ship in accordance with clause 6 of the Deed of Covenants to which it is a party;
(ii) in the case of a sale of a Ship, the greater of (i) the proceeds of such sale and (ii) an amount equal to the Fair Market Value of that Ship;
8.9 Mandatory prepayment on change of control. If at any time, without the prior written consent of the Majority Lenders, more than 40 per cent of the shares of the Guarantor are sold in the London Stock Exchange or the Singapore Stock Exchange in connection with an initial public offering (IPO) of the Guarantor, then, if so instructed by any Lender, the Agent shall:
(a) serve on the Borrower a notice stating that the Commitment of that Lender is cancelled; and
(b) serve on the Borrower a notice stating that the Contribution of that Lender, all accrued interest owing to that Lender and all other amounts accrued or owing under this Agreement to that Lender are due and payable no later than 10 Business Days after the date of that notice.
8.10 Amounts payable on prepayment. A prepayment shall be made together with accrued interest (and any other amount payable by the Borrower under Clause 21 or otherwise) in respect of the amount prepaid and, if the prepayment is not made on the last day of an applicable Interest Period, together with any sums payable under Clause 21.1(b) but without premium or penalty.
8.11 Application of partial prepayments. Each partial prepayment shall be applied towards the repayment instalments in inverse order of maturity.
8.12 No reborrowing. No amount prepaid may be reborrowed.
8.13 Unwinding of Secured Transactions. Unless otherwise agreed with the Swap Banks, on or prior to any repayment or prepayment under this Clause 8 or any other provision of this Agreement, the Borrower shall wholly or partially reverse, offset, unwind or otherwise terminate one or more of the continuing Secured Transactions so that the notional principal amount of the continuing Secured Transactions thereafter remaining does not and will not in the future (taking into account the scheduled amortisation) exceed the amount of the Loan as reducing from time to time thereafter pursuant to Clause 8.1.
9 CONDITIONS PRECEDENT
9.1 Documents, fees and no default. Each Lenders obligation to contribute to an Advance is subject to the following conditions precedent:
(a) that, on or before the service of the first Drawdown Notice, the Agent receives the documents described in Part A of Schedule 3 in form and substance satisfactory to the Agent and its lawyers;
(b) that, on or before each Drawdown Date, the Agent receives the documents described in Part B of Schedule 3 for each Relevant Ship (as defined in Schedule 3 Part B) and each relevant Owner in form and substance satisfactory to the Agent and its lawyers; and
(c) that both at the date of each Drawdown Notice and at each Drawdown Date:
(i) no Event of Default or Potential Event of Default has occurred and is continuing or would result from the borrowing of the relevant Advance;
(ii) the representations and warranties in Clause 10 and those of the Borrower or any Security Party which are set out in the other Finance Documents would be true and not misleading if repeated on each of those dates with reference to the circumstances then existing; and
(iii) none of the circumstances contemplated by Clause 5.7 has occurred and is continuing; and
(d) that, if the ratio set out in Clause 15.1 were applied immediately following the making of the Advance, the Borrower would not be obliged to provide additional security or prepay part of the Loan under that Clause; and
(e) that the Agent has received, and found to be acceptable to it, any further opinions, consents, agreements and documents in connection with the Finance Documents which the Agent may, with the authorisation of the Majority Lenders, reasonably request in good faith by notice to the Borrower no later than 3 Business Days prior to the relevant Drawdown Date; and
(f) that, on or before the service of each Drawdown Notice, the Lenders receive the fee referred to in Clause 20.1(a), and the Agent receives all accrued commitment fees and agency fees due and payable pursuant to Clause 20.1(b) and Clause 20.1(c) and has received payment of the expenses referred to in Clause 20.2.
9.2 Waiver of conditions precedent. If the Majority Lenders, at their discretion, permit an Advance to be borrowed before certain of the conditions referred to in Clause 9.1 are satisfied, the Borrower shall ensure that those conditions are satisfied within 5 Business Days after the relevant Drawdown Date (or such longer period as the Agent may, with the authorisation of the Majority Lenders, specify).
9.3 Conditions Subsequent. Each Lenders obligation to continue to make the Loan available to the Borrower is subject to the Agent having received the documents described in Part C of Schedule 3 in form and substance satisfactory to the Agent and its lawyers within the relevant time limits set out therein.
10 REPRESENTATIONS AND WARRANTIES
10.1 General. The Borrower represents and warrants to each Creditor Party as follows.
10.2 Status. It is duly incorporated and validly existing under the laws of Singapore.
10.3 Share capital and ownership. It has a share capital of 100,101 shares, all of which shares have been issued in registered form and fully paid to, and are legally and beneficially owned by and registered in the name of the Guarantor free of any Security Interest.
10.4 Corporate power. It has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:
(a) to execute the Finance Documents to which it is a party and the Master Agreements; and
(b) to borrow under this Agreement, to enter into Secured Transactions under the Master Agreements and to make all the payments contemplated by, and to comply with, the Finance Documents and the Master Agreements.
10.5 Consents in force. All the consents applicable to it referred to in Clause 10.4 remain in force and nothing has occurred which makes any of them liable to revocation.
10.6 Legal validity; effective Security Interests. The Finance Documents and the Master Agreements do now or, as the case may be, will, upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents):
(a) constitute its or, as the case may be, the relevant Security Partys legal, valid and binding obligations enforceable against it or, as the case may be, the relevant Security Party in accordance with their respective terms;
(b) are admissible in evidence; and
(c) create legal, valid and binding Security Interests enforceable in accordance with their respective terms over all the assets to which they, by their terms, relate;
subject to any relevant insolvency laws affecting creditors rights generally.
10.7 No third party Security Interests. Without limiting the generality of Clause 10.6 at the time of execution and delivery of each Finance Document:
(a) it and each Security Party will have the right to create all the Security Interests which each Finance Document purports to create; and
(b) no third party will have any Security Interest (except for Permitted Security Interests) or any other interest, right or claim over, in or in relation to any asset to which any Finance Document, by its terms, relates.
10.8 No conflicts. The execution by it of each Finance Document and each Master Agreement, the borrowing of the Loan, the entry into of Secured Transactions, and its compliance with each Finance Document and each Master Agreement will not involve or lead to a contravention of:
(a) any law or regulation; or
(b) its or any Security Partys constitutional documents; or
(c) any contractual or other obligation or restriction which is binding on it or any Security Party or any of their assets.
10.9 No withholding taxes. All payments which it is liable to make under the Finance Documents and the Master Agreements may be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.
10.10 No default. No Event of Default or Potential Event of Default has occurred and is continuing.
10.11 Information. All information which has been provided in writing by it or on its behalf to any Creditor Party in connection with any Finance Document satisfied the requirements of Clause 11.5; all audited and unaudited financial statements which have been so provided satisfied the requirements of Clause 11.7; and there has been no material
adverse change in its financial position or state of affairs from that disclosed in the latest of those financial statements.
10.12 No litigation. No legal or administrative action involving it or any Owner (including action relating to any alleged breach of the ISM Code or the ISPS Code) has been commenced or taken or, to its knowledge, is likely to be commenced or taken which, in either case, in the opinion of the Majority Lenders, would be likely to have a material adverse effect on its financial position or state affairs.
10.13 Taxes paid. It and each Owner has paid all due taxes applicable to, or imposed on or in relation to it, its business or the Ship owned by it.
10.14 No money laundering. Without prejudice to the generality of Clause 2.4, in relation to the borrowing of the Loan, the performance and discharge of its obligations and liabilities under the Finance Documents, and the transactions and other arrangements effected or contemplated by the Finance Documents, it confirms that it is acting for its own account and that the foregoing will not involve or lead to contravention of any law, official requirement or other regulatory measure or procedure implemented to combat money laundering (as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Communities).
10.15 ISM Code and ISPS Code compliance. All requirements of the ISM Code and the ISPS Code as they relate to the Borrower, any Owner, any Approved Manager and the Ships have been complied with.
10.16 Pari passu ranking. Its obligations under this Agreement and each of the Master Agreements rank at least pari passu with all of its other present and future unsecured and unsubordinated Financial Indebtedness with the exception of any obligations which are mandatorily preferred by any laws applicable to companies generally and not by contract.
10.17 Prohibited Person. No Ship is owned, either directly or indirectly by a Prohibited Person and no Prohibited Person has any interest of any nature whatsoever in the Borrower or in any Security Party.
10.18 Unlawful Activity. No asset owned by the Borrower or any Owner and which is the subject of any Security Interest under the Finance Documents has been derived from any unlawful activity.
10.19 Repetition . The representations and warranties in this Clause 10 are deemed to be repeated by the Borrower on the last day of each Interest Period with reference to the circumstances then existing.
11 GENERAL UNDERTAKINGS
11.1 General. The Borrower undertakes with each Creditor Party to comply with the following provisions of this Clause 11 at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.
11.2 Title; negative pledge. It:
(a) will procure that each Owner shall hold the legal title to, and own the entire beneficial interest in, each Ship owned by it, its Earnings and its Insurances, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents and except for Permitted Security Interests; and
(b) shall not, and shall procure that none of the Owners will, create or permit to arise any Security Interest over any Earnings Account, the Borrower Account or any other asset of
the Owners present or future except Security Interests created or permitted by the Finance Documents and except for Permitted Security Interests .
11.3 No disposal of assets. It will not and shall procure that no Owner shall transfer, lease or otherwise dispose of:
(a) all or a substantial part of its assets whether by one transaction or a number of transactions, whether related or not; or
(b) any material debt payable to it or any other right (present, future or contingent right) to receive a payment, including any right to damages or compensation,
but paragraph (a) does not relate to any charter of any Ship as to which Clause 14 and clause 7.12 of the relevant Deed of Covenant
11.4 `. It will not incur any liability or obligation except:
(a) liabilities and obligations under the Finance Documents to which it is a party;
(b) Permitted Financial Indebtedness;
(c) Financial Indebtedness owing to the Guarantor and subordinated to the Secured Liabilities on terms in all respects satisfactory to the Agent;
(d) liabilities and obligations reasonably incurred in the ordinary course of owning, operating and chartering ships and any related activities including the entering into of forward freight agreements, provided that such related activities are within the ordinary course of business of a prudent operator and are not speculative in nature; and
(e) Secured Transactions.
11.5 Information provided to be accurate. All financial and other information which is provided in writing by it or on its behalf under or in connection with any Finance Document will be true and not misleading and will not omit any material fact or consideration.
11.6 Provision of financial statements. It will send, or will procure that there is sent, to the Agent:
(a) as soon as possible, but in no event later than 180 days after the end of each financial year of the Borrower throughout the Security Period , the audited consolidated financial statements of the Borrower and the Guarantor for that financial year;
(b) as soon as possible, but in no event later than 90 days, from the end of June of each year throughout the Security Period, the unaudited consolidated semi-annual accounts of the Borrower and the Guarantor in a format approved by the Agent and which are certified as to their correctness by the chief financial officer or a director of the Borrower ; and
(c) together with each set of financial statements referred to in paragraphs (a) and (b), a compliance certificate signed by the chief financial officer of the Borrower (and, in the case of the annual audited accounts, by the auditors) in the form attached as Schedule 6 (or in such other form as the Agent may approve) evidencing compliance by it and the Guarantor with the financial covenants in Clause 12.4, respectively.
11.7 Form of financial statements. All financial statements (audited and unaudited) delivered under Clause 11.6 will:
(a) be prepared in accordance with all applicable laws and IFRS consistently applied;
(b) present fairly the financial position of the Borrower Group at the date of those accounts and of its profit for the period to which those accounts relate; and
(c) fully disclose or provide for all significant liabilities of the Borrower Group.
11.8 Member and creditor notices. It will send the Agent, at the same time as they are despatched, copies of all communications which are despatched by the Borrower to its shareholders or creditors or any class of them.
11.9 Consents. It will and shall procure that each Owner will maintain in force and promptly obtain or renew, and will promptly send certified copies to the Agent of, all consents required:
(a) for it and each Owner to perform its obligations under any Finance Document to which it is a party or any Master Agreement;
(b) for the validity or enforceability of any Finance Document or any Master Agreement; and
(c) for each Owner to continue to own and operate the Ship owned by it;
and it will and shall procure that each Owner will comply with the terms of all such consents.
11.10 Maintenance of Security Interests. It will and shall procure that each Owner will:
(a) at its own cost, do all that it reasonably can to ensure that any Finance Document validly creates the obligations and the Security Interests which it purports to create; and
(b) without limiting the generality of paragraph (a), at its own cost, promptly register, file, record or enrol any Finance Document with any court or authority in all Pertinent Jurisdictions, pay any stamp, registration or similar tax in all Pertinent Jurisdictions in respect of any Finance Document, give any notice or take any other step which, in the opinion of the Majority Lenders, is or has become necessary or desirable for any Finance Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which it creates.
11.11 Notification of litigation. It will and shall procure that each Owner will provide the Agent with details of any legal or administrative action involving the Borrower, any Security Party, any Approved Manager or the Earnings or the Insurances of any Ship as soon as such action is instituted or it becomes apparent to the Borrower that it is likely to be instituted, unless it is clear that the legal or administrative action cannot be considered material in the context of any Finance Document.
11.12 Centre of main interests. It will maintain its registered office in Singapore and it will not establish, or do anything as a result of which it would be deemed to have the centre of its main interests, in any country other than in England.
11.13 Notification of default. It will and shall procure that each Owner will notify the Agent as soon as it becomes aware of:
(a) the occurrence of an Event of Default or a Potential Event of Default; or
(b) any matter which indicates that an Event of Default or a Potential Event of Default may have occurred;
and will keep the Agent fully up-to-date with all developments.
11.14 Provision of further information. It will, as soon as practicable after receiving the request, provide the Agent with any additional financial or other information relating:
(a) to the Guarantor, the Borrower, any Owner, any Ship, the Earnings or the Insurances; or
(b) to any other matter relevant to, or to any provision of, a Finance Document or a Master Agreement;
which may be reasonably requested by the Agent or any Creditor Party at any time.
11.15 No amendment to Master Agreement. The Borrower agrees not to make any amendment or supplement to, waive or fail to enforce, the Master Agreement or any of its provisions unless otherwise agreed by the Agent.
11.16 Provision of copies and translation of documents. The Borrower will supply the Agent with a sufficient number of copies of the documents referred to above to provide 1 copy for each Creditor Party; and if the Agent so requires in respect of any of those documents, the Borrower will provide a certified English translation prepared by a translator approved by the Agent.
11.17 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 or any Security Party after the date of this Agreement; or
(c) a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges the Agent or any Lender (or, in the case of paragraph (c), 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 Agent or the Lender concerned supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or the Lender concerned (for itself or, in the case of the event described in paragraph (c), on behalf of any prospective new Lender) in order for the Agent, the Lender concerned or, in the case of the event described in paragraph (c), 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.
11.18 No Amendment to Borrowers Memorandum and Articles of Association. Without the prior written consent of the Agent (such consent not to be unreasonably withheld), the Borrower shall not effect and shall not permit the effect of any amendment or revocation of the Borrowers memorandum and articles of association.
11.19 Provision of Contract Cover Summary. The Borrower shall, as soon as possible but in any event no later than 28 February 2011 and on each date falling at 6 monthly intervals thereafter, deliver to the Agent (with copy to the Majority Lenders) the Contract Cover Summary.
11.20 Valuation of Ship. The Borrower shall, at least once every 12 months during the Security Period, provide the Agent with a valuation of each Ship prepared in accordance with Clause 15.5.
12 CORPORATE UNDERTAKINGS
12.1 General. The Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 12 at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.
12.2 Maintenance of status. It will maintain its separate corporate existence under the laws of Singapore.
12.3 Negative undertakings. It will not (save that paragraph (c) and (d) shall not apply to the Borrower) and shall procure that no Owner will:
(a) in the case of the Borrower, carry on any business other than the ownership, operation and chartering of ships and related logistical operations, and in the case of each Owner, carry on any business other than the ownership, operation, chartering or activities relating to the logistical operations of the Ship owned by it; or
(b) pay any dividend or make any other form of distribution or effect any form of redemption, purchase or return of share capital if any Event of Default or Potential Event of Default has occurred or will occur as a result of making such payment; or
(c) open or maintain any account with any bank or financial institution except accounts with the Agent and the Security Trustee for the purposes of the Finance Documents; or
(d) except for the onward lending of the Loan, provide any form of credit or financial assistance to:
(i) a person who is directly or indirectly interested in the Borrowers, or as the case may be, any Owners share or loan capital; or
(ii) any company in or with which such a person is directly or indirectly interested or connected;
or enter into any transaction with or involving such a person or company on terms which are, in any respect, less favourable to the Borrower, or as the case may be, the relevant Owner than those which it could obtain in a bargain made at arms length; or
(e) issue, allot or grant any person a right to any shares in its capital, or repurchase or reduce its issued share capital; or
(f) in the case of each Owner, acquire any shares or other securities other than US or UK Treasury bills and certificates of deposit issued by major North American or European banks, or enter into any transaction in a derivative;
(g) enter into any form of amalgamation, merger or de-merger or any form of reconstruction or reorganisation.
12.4 Financial Covenant. It will ensure that throughout the Security Period, the Debt Service Coverage Ratio in respect of each Relevant Period shall not be less than 1.3:1.
13 INSURANCE
13.1 General. The Borrower also undertakes with each Creditor Party to procure that each Owner complies with the provisions of clause 6 of the Deed of Covenant to which it is a party at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.
13.2 Mortgagees interest and additional perils insurances. The Security Trustee shall be entitled from time to time to effect, maintain and renew a mortgagees interest additional perils insurance and a mortgagees interest insurance so that the aggregate amount of such insurance for all Ships is in an amount equal to not less than 120 per cent. of the Loan at any relevant time, on such terms, through such insurers and generally in such manner as the Security Trustee may from time to time consider appropriate and the Borrower shall procure that each Owner (in relation to the Ship owned by it) shall upon demand fully indemnify the Security Trustee in respect of all premiums and other expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any such insurance or dealing with, or considering, any matter arising out of any such insurance.
14 SHIP COVENANTS
14.1 General. The Borrower also undertakes with each Creditor Party to procure that each Owner complies with the provisions of clause 7 of the Deed of Covenant to which it is a party at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.
14.2 Substitute Ship. The Borrower may at any time during the Security Period after the end of the Availability Period replace a Ship with a Substitute Ship provided that:
(a) the Agent receives the documents described in Part B of Schedule 3 in respect of the relevant Substitute Ship in form and substance satisfactory to the Agent and its lawyers;
(b) a survey report addressed to the Agent and the Lenders, stated to be for the purposes of this Agreement and dated not earlier that 30 days prior to the date of substitution from an independent marine surveyor selected by the Agent in respect of the physical condition of the relevant Substitute Ship;
(c) if the ratio set out in Clause 15.1 were applied immediately following the substitution, the Borrower would not be obliged to provide additional security or prepay part of the Loan under that Clause; and
(d) no Event of Default or Potential Event of Default has occurred at the date of such substitution or will occur as a result of such substitution.
14.3 Additional Corporate Action. At the same time as the Borrower delivers to the Security Trustee any document executed under Clause 14.2, the Borrower shall also deliver to the Security Trustee reasonable evidence that the Borrowers or as the case may be the relevant Owners execution of such documents has been duly authorised by it.
15 SECURITY COVER
15.1 Minimum required security cover. Clause 15.2 applies if the Agent notifies the Borrower that:
(a) the aggregate of the Fair Market Values of each Ship; plus
(b) the net realisable value of any additional security previously provided by the Borrower under this Clause 15;
is below 154 per cent. of the Loan.
15.2 Provision of additional security; prepayment. If the Agent (acting on the instructions of the Majority Lenders) serves a notice on the Borrower under Clause 15.1, the Borrower shall, within 1 month after the date on which the Agents notice is served, either:
(a) provide, or ensure that a third party provides, additional security which, in the opinion of the Majority Lenders, has a net realisable value at least equal to the shortfall and is documented in such terms as the Agent may, with the authorisation of the Majority Lenders, approve or require and for the avoidance of doubt any security over a cash amount equal to any shortfall, deposited to the Borrower Account shall be approved ; or
(b) prepay such part (at least) of the Loan as will eliminate the shortfall.
15.3 Meaning of additional security. In Clause 15.2(a), security means a Security Interest over an asset or assets (whether securing the Borrowers liabilities under the Finance Documents or a guarantee in respect of those liabilities), or a guarantee, letter of credit or other security (including but not limited to security, at the discretion of the Borrower, over a cash amount equal to any shortfall, deposited to the Borrower Account) in respect of the Borrowers liabilities under the Finance Documents, in each case approved by the Agent (acting with the authorisation of the Majority Lenders, who shall be free in the exercise of their discretion whether to withhold such authorisation or to grant it on such terms as they may think fit save as provided for in Clause 15.2(a)).
15.4 Requirement for additional documents. The Borrower shall not be deemed to have complied with Clause 15.2(a) until the Agent has received in connection with the additional security certified copies of documents and such legal opinions in terms acceptable to the Majority Lenders from such lawyers as they may select.
15.5 Valuation of Ships. The Fair Market Value of a Ship at any date is that shown by:
(a) a valuation prepared:
(i) as at a date not more than 14 days previously;
(ii) by H Clarkson & Company Ltd. or as shown on www.shipvalue.net or by any other independent and reputable sale and purchase shipbroker which the Agent (acting on the instructions of the Majority Lenders) has approved or appointed for the purpose; or
(b) if either the Majority Lenders or the Borrower disagree with the valuation of a Ship as shown on shipvalue.net or issued by H Clarkson & Company Ltd , the Majority Lenders or the Borrower shall have the right to request the Agent to obtain a valuation from any two of the following shipbrokers: Braemar Seascope Ltd, Galbraiths Ltd, Simpson Spence and Young Ltd, one of which shall be appointed by the Agent and one of which shall be appointed by the Borrower . The agreed valuation shall be the average of these two valuations provided that such valuations comply with the following conditions:
(i) with or without physical inspection of the relevant Ship (as the Agent may require);
(ii) on the basis of a sale for prompt delivery for cash on normal arms length commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment; and
(iii) after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale; or
(c) in the event that a valuation prepared in accordance with paragraph (a) is not available to the Agent due to prevailing market conditions, a valuation reasonably determined by the Agent.
15.6 Value of additional vessel security. The net realisable value of any additional security which is provided under Clause 15.2 and which consists of a Security Interest over a vessel shall be that shown by a valuation complying with the requirements of Clause 15.5.
15.7 Valuations binding. Any valuation under Clause 15.2, 15.5 or 15.6 shall be binding and conclusive as regards the Borrower, as shall be any valuation which the Majority Lenders make of any additional security which does not consist of or include a Security Interest.
15.8 Provision of information. The Borrower shall promptly provide the Agent and any shipbroker or expert acting under Clause 15.5 or 15.6 with any information which the Agent or the shipbroker or expert may reasonably request for the purposes of the valuation; and, if the Borrower fails to provide the information by the date specified in the request, the valuation may be made on any basis and assumptions which the shipbroker or the Majority Lenders (or the expert appointed by them) consider prudent.
15.9 Payment of valuation expenses. The Borrower shall, within 2 Business Days of demand, pay the Agent the amount of the fees and expenses of any shipbroker or expert instructed by the Agent under this Clause and all legal and other expenses incurred by any Creditor Party in connection with any matter arising out of this Clause .
15.10 Application of prepayment. Clause 8 shall apply in relation to any prepayment pursuant to Clause 15.2(b).
16 PAYMENTS AND CALCULATIONS
16.1 Currency and method of payments. All payments to be made by the Lenders or by the Borrower under a Finance Document shall be made to the Agent or to the Security Trustee, in the case of an amount payable to it:
(a) by not later than 11.00 a.m.(New York time) on the due date;
(b) in same day Dollar funds settled through the New York Clearing House Interbank Payments System (or in such other Dollar funds and/or settled in such other manner as the Agent shall specify as being customary at the time for the settlement of international transactions of the type contemplated by this Agreement);
(c) in the case of an amount payable by a Lender to the Agent or by the Borrower to the Agent or any Lender, to such account with such bank as the Agent may from time to time notify to the Borrower and the other Creditor Parties; and
(d) in the case of an amount payable to the Security Trustee, to such account as it may from time to time notify to the Borrower and the other Creditor Parties.
16.2 Payment on non-Business Day. If any payment by the Borrower under a Finance Document would otherwise fall due on a day which is not a Business Day:
(a) the due date shall be extended to the next succeeding Business Day; or
(b) if the next succeeding Business Day falls in the next calendar month, the due date shall be brought forward to the immediately preceding Business Day;
and interest shall be payable during any extension under paragraph (a) at the rate payable on the original due date.
16.3 Basis for calculation of periodic payments. All interest and commitment fee and any other payments under any Finance Document which are of an annual or periodic nature shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a year of 360 days.
16.4 Distribution of payments to Creditor Parties. Subject to Clauses 16.5, 16.6 and 16.7:
(a) any amount received by the Agent under a Finance Document for distribution or remittance to a Lender, a Swap Bank or the Security Trustee shall be made available by the Agent to that Lender, that Swap Bank or, as the case may be, the Security Trustee by payment, with funds having the same value as the funds received, to such account as that Lender, that Swap Bank or the Security Trustee may have notified to the Agent not less than 5 Business Days previously; and
(b) amounts to be applied in satisfying amounts of a particular category which are due to the Lenders and/or the Swap Banks generally shall be distributed by the Agent to each Lender and each Swap Bank pro rata to the amount in that category which is due to it.
16.5 Permitted deductions by Agent. Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent may, before making an amount available to a Lender or a Swap Bank, deduct and withhold from that amount any sum which is then due and payable to the Agent from that Lender or that Swap Bank under any Finance Document or any sum which the Agent is then entitled under any Finance Document to require that Lender or that Swap Bank to pay on demand.
16.6 Agent only obliged to pay when monies received. Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent shall not be obliged to make available to the Borrower, any Lender or any Swap Bank any sum which the Agent is expecting to receive for remittance or distribution to the Borrower, that Lender or that Swap Bank until the Agent has satisfied itself that it has received that sum.
16.7 Refund to Agent of monies not received. If and to the extent that the Agent makes available a sum to the Borrower, a Lender or a Swap Bank without first having received that sum, the Borrower or (as the case may be) the Lender or the Swap Bank concerned shall, on demand:
(a) refund the sum in full to the Agent; and
(b) pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding or other loss, liability or expense incurred by the Agent as a result of making the sum available before receiving it.
16.8 Agent may assume receipt. Clause 16.7 shall not affect any claim which the Agent has under the law of restitution, and applies irrespective of whether the Agent had any form of notice that it had not received the sum which it made available.
16.9 Creditor Party accounts. Each Creditor Party shall maintain accounts showing the amounts owing to it by the Borrower and each Security Party under the Finance Documents and/or the Master Agreements and all payments in respect of those amounts made by the Borrower and any Security Party.
16.10 Agents memorandum account. The Agent shall maintain a memorandum account showing the amounts advanced by the Lenders and all other sums owing to the Agent, the Security Trustee and each Lender from the Borrower and each Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrower and any Security Party.
16.11 Accounts prima facie evidence. If any accounts maintained under Clauses 16.9 and 16.10 show an amount to be owing by the Borrower or a Security Party to a Creditor Party, those accounts shall be prima facie evidence that that amount is owing by the Borrower or that Security Party to that Creditor Party.
17 APPLICATION OF RECEIPTS
17.1 Normal order of application. Except as any Finance Document may otherwise provide, any sums which are received or recovered by any Creditor Party under or by virtue of any Finance Document shall be applied:
(a) FIRST: in or towards satisfaction of any amounts then due and payable under the Finance Documents and the Master Agreements in the following order and proportions:
(i) first, in or towards satisfaction pro rata of all amounts then due and payable to the Creditor Parties under the Finance Documents and the Master Agreements other than those amounts referred to at paragraphs (ii) and (iii) (including, but without limitation, all amounts payable by the Borrower under Clauses 20, 21 and 22 or by the Borrower or any Security Party under any corresponding or similar provision in any other Finance Document or in any Master Agreement);
(ii) secondly, in or towards satisfaction pro rata of any and all amounts of interest or default interest payable to the Creditor Parties under the Finance Documents and the Master Agreements (and, for this purpose, the expression interest shall include any net amount which the Borrower shall have become liable to pay or deliver under section 2(e) (Obligations) of any Master Agreement but shall have failed to pay or deliver to the relevant Swap Bank at the time of application or distribution under this Clause 17); and
(iii) thirdly, in or towards satisfaction pro rata of the Loan and the Swap Exposure (in the case of the latter, calculated as at the actual Early Termination Date applying to each particular Secured Transaction, or if no such Early Termination Date shall have occurred, calculated as if an Early Termination Date occurred on the date of application or distribution hereunder);
(b) SECONDLY: in retention of an amount equal to any amount not then due and payable under any Finance Document or any Master Agreement but which the Agent, by notice to the Borrower, the Security Parties and the other Creditor Parties, states in its opinion will or may become due and payable in the future (such notice to be given within 30 days of the relevant receipt) and, upon those amounts becoming due and payable, in or towards satisfaction of them in accordance with the provisions of Clause 17.1(a); and
(c) THIRDLY: any surplus shall be paid to the Borrower or to any other person appearing to be lawfully entitled to it.
17.2 Variation of order of application. The Agent may, with the authorisation of each Lender and, of each Swap Bank, by notice to the Borrower, the Security Parties and the Creditor Parties provide for a different manner of application from that set out in Clause 17.1 either as regards a specified sum or sums or as regards sums in a specified category or categories.
17.3 Notice of variation of order of application. The Agent may give notices under Clause 17.2 from time to time; and such a notice may be stated to apply not only to sums which may be received or recovered in the future, but also to any sum which has been received or recovered on or after the third Business Day before the date on which the notice is served.
17.4 Appropriation rights overridden. This Clause 17 and any notice which the Agent gives under Clause 17.2 shall override any right of appropriation possessed, and any appropriation made, by the Borrower or any Security Party.
18 APPLICATION OF EARNINGS; SWAP PAYMENTS
18.1 Payment of Earnings and Swap Payments. The Borrower undertakes with each Creditor Party to ensure that, throughout the Security Period:
(a) subject only to the provisions of the General Assignments, all the Earnings of each Ship are paid to the Earnings Account of the Owner of that Ship; and
(b) all payments by each Swap Bank to the Borrower under each Secured Transaction are paid to the Borrower Account.
18.2 Application of Earnings. The Owners shall be permitted to withdraw amounts from their respective Earnings Account and the Borrower shall be permitted to withdraw amounts from the Borrower Account provided that no Potential Event of Default or Event of Default has occurred and is continuing.
18.3 Location of accounts. The Borrower shall promptly:
(a) comply and procure compliance from each Owner with any requirement of the Agent as to the location or re-location of any Earnings Account or the Borrower Account; and
(b) procure execution of any documents which the Agent specifies to create or maintain in favour of the Security Trustee a Security Interest over (and/or rights of set-off, consolidation or other rights in relation to) any Earnings Account and execute any such documents for the Borrower Account.
18.4 Debits for expenses etc. The Agent shall be entitled (but not obliged) from time to time to debit any Earnings Account or the Borrower Account (provided that prior written notice is given to the Borrower and the relevant Owner containing reasonable detail of the amounts to be so debited) in order to discharge any amount due and payable under Clause 20 or 21 to a Creditor Party or payment of which any Creditor Party has become entitled to demand under Clause 20 or 21.
18.5 Borrowers obligations unaffected. The provisions of this Clause 18 (as distinct from a distribution effected under Clause 18.5) do not affect:
(a) the liability of the Borrower to make payments of principal and interest on the due dates; or
(b) any other liability or obligation of the Borrower or any Security Party under any Finance Document.
19 EVENTS OF DEFAULT
19.1 Events of Default. An Event of Default occurs if:
(a) the Borrower or any Security Party fails to pay when due any sum payable under a Finance Document or under any document relati ng to a Finance Document unless payment is made within 3 Business Days of its due date; or
(b) any breach occurs of Clause 9.2, 11.2, 11.3, 12.2, 12.3, 12.4 or 15.2 or clause 11.14 of the Guarantee or clause 6.2 of any Deed of Covenant; or
(c) any breach by the Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach covered by paragraphs (a) or (b)) if, in the opinion of the Majority Lenders, such default is capable of remedy, and such default continues unremedied 10 Business Days (or such longer period as the Agent may, in its entire discretion permit) after written notice from the Agent to the Borrower requesting action to remedy the same; or
(d) (subject to any applicable grace period specified in the Finance Document) any breach by the Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach covered by paragraphs (a), (b) or (c)); or
(e) any representation, warranty or statement made by, or by an officer of, the Borrower or a Security Party in a Finance Document or in a Drawdown Notice or any other notice or document relating to a Finance Document is untrue or misleading when it is made or repeated and, in the opinion of the Lenders, such representation, warranty or statement is material ; or
(f) any of the following occurs in relation to any Financial Indebtedness of a Relevant Person:
(i) any such Financial Indebtedness of a Relevant Person is not paid when due or, if so payable, on demand; or
(ii) any such Financial Indebtedness of a Relevant Person becomes due and payable or capable of being declared due and payable prior to its stated maturity date as a consequence of any event of default; or
(iii) a lease, hire purchase agreement or charter creating any such Financial Indebtedness of a Relevant Person is terminated by the lessor or owner or becomes capable of being terminated as a consequence of any termination event; or
(iv) any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or other facility, or any swap or other derivative contract or transaction, relating to any such Financial Indebtedness of a Relevant Person ceases to be available or becomes capable of being terminated as a result of any event of default, or cash cover is required, or becomes capable of being required, in respect of such a facility as a result of any event of default; or
(v) any Security Interest securing any such Financial Indebtedness of a Relevant Person becomes enforceable;
Provided that no Event of Default will occur under this clause 19.1(f) if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (i) to (v) above is less than 3 per cent of the Relevant Persons Tangible Net Worth; or
(g) any of the following occurs in relation to a Relevant Person:
(i) a Relevant Person becomes unable to pay its debts as they fall due; or
(ii) any assets of a Relevant Person are subject to any form of execution, attachment, arrest, sequestration or distress, or any form of freezing order, in respect of a sum of, or sums at any one time aggregating, $100,000 or more or the equivalent in another currency; or
(iii) any administrative or other receiver is appointed over any asset of a Relevant Person; or
(iv) an administrator is appointed (whether by the court or otherwise) in respect of a Relevant Person; or
(v) any formal declaration of bankruptcy or any formal statement to the effect that a Relevant Person is insolvent or likely to become insolvent is made by a Relevant Person or by the directors of a Relevant Person or, in any proceedings, by a lawyer acting for a Relevant Person; or
(vi) a provisional liquidator is appointed in respect of a Relevant Person, a winding up order is made in relation to a Relevant Person or a winding up resolution is passed by a Relevant Person; or
(vii) a resolution is passed, an administration notice is given or filed, an application or petition to a court is made or presented or any other step is taken by (aa) a Relevant Person, (bb) the members or directors of a Relevant Person, (cc) a holder of Security Interests which together relate to all or substantially all of the assets of a Relevant Person, or (d) a government minister or public or regulatory authority of a Pertinent Jurisdiction for or with a view to the winding up of that or another Relevant Person or the appointment of a provisional liquidator or administrator in respect of that or another Relevant Person, or that or another Relevant Person ceasing or suspending business operations or payments to creditors, save that this paragraph does not apply to a fully solvent winding up of a Relevant Person other than the Borrower or the Guarantor which is, or is to be, effected for the purposes of an amalgamation or reconstruction previously approved by the Majority Lenders and effected not later than 3 months after the commencement of the winding up; or
(viii) an administration notice is given or filed, an application or petition to a court is made or presented or any other step is taken by a creditor of a Relevant Person (other than a holder of Security Interests which together relate to all or substantially all of the assets of a Relevant Person) for the winding up of a Relevant Person or the appointment of a provisional liquidator or administrator in respect of a Relevant Person in any Pertinent Jurisdiction, unless the proposed winding up, appointment of a provisional liquidator or administration is being contested in good faith, on substantial grounds and not with a view to some other insolvency law procedure being implemented instead and either (aa) the application or petition is dismissed or withdrawn within 30 days of being made or presented, or (bb) within 30 days of the administration notice being given or filed, or the other relevant steps being taken, other action is taken which will ensure that there will be no administration and (in both cases (aa) or (bb)) the Relevant Person will continue to carry on business in the ordinary way and without being the subject of any actual, interim or pending insolvency law procedure; or
(ix) a Relevant Person or its directors take any steps (whether by making or presenting an application or petition to a court, or submitting or presenting a document setting out a proposal or proposed terms, or otherwise) with a view to obtaining, in relation to that or another Relevant Person, any form of moratorium, suspension or deferral of payments, reorganisation of debt (or certain debt) or arrangement with all or a substantial proportion (by number or value) of creditors or of any class of them or any such moratorium, suspension or deferral of payments, reorganisation or arrangement is effected by court order, by the filing of documents with a court, by means of a contract or in any other way at all; or
(x) any meeting of the members or directors, or of any committee of the board or senior management, of a Relevant Person is held or summoned for the purpose of considering a resolution or proposal to authorise or take any action of a type described in paragraphs (iv) to (ix) or a step preparatory to such action, or (with or without such a meeting) the members, directors or such a committee resolve or agree that such an action or step should be taken or should be taken if certain conditions materialise or fail to materialise; or
(xi) in a Pertinent Jurisdiction other than England, any event occurs, any proceedings are opened or commenced or any step is taken which, in the opinion of the Majority Lenders is similar to any of the foregoing; or
(h) the Borrower ceases or suspends carrying on its business or a part of its business which, in the reasonable opinion of the Majority Lenders, is material in the context of this Agreement; or
(i) it becomes unlawful in any Pertinent Jurisdiction or impossible:
(i) for the Borrower or any Security Party to discharge any liability under a Finance Document or to comply with any other obligation which the Majority Lenders consider material under a Finance Document; or
(ii) for the Agent, the Security Trustee or the Lenders or the Swap Banks to exercise or enforce any right under, or to enforce any Security Interest created by, a Finance Document; or
(j) any official consent necessary to enable the Borrower or an Owner to own or operate any Ship owned by it or to enable the Borrower or any Security Party to comply with any provision which the Majority Lenders consider material of a Finance Document is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent is not fulfilled; or
(k) it appears to the Majority Lenders that, without their prior consent, a change has occurred or probably has occurred after the date of this Agreement in the ultimate beneficial ownership of any of the shares in the Borrower, any Owner or the Guarantor or in the ultimate control of the voting rights attaching to any of those shares (for the purposes of this Clause the sale of any of the shares of the Guarantor in the London Stock Exchange or the Singapore Stock Exchange in connection with an initial public offering (IPO) of the Guarantor shall be disregarded); or
(l) any provision which the Majority Lenders consider material of a Finance Document proves to have been or becomes invalid or unenforceable, or a Security Interest created by a Finance Document proves to have been or becomes invalid or unenforceable or such a Security Interest proves to have ranked after, or loses its priority to, another Security Interest or any other third party claim or interest; or
(m) the security constituted by a Finance Document is in any way imperilled or in jeopardy; or
(n) an Event of Default (as defined in section 14 of any Master Agreement) occurs; or
(o) any Secured Transaction is terminated, cancelled, suspended, rescinded or revoked or otherwise ceases to remain in full force and effect for any reason except with the consent of the Agent, acting with the authorisation of the Majority Lenders ; or
(p) any other event occurs or any other circumstances arise or develop including, without limitation:
(i) a change in the financial position, state of affairs or prospects of any Relevant Person; or
(ii) any accident or other event involving any Ship or another vessel owned, chartered or operated by a Relevant Person; or
(iii) instability in any country where the Ship is flagged
in the light of which the Majority Lenders consider that there is a significant risk that the Borrower or the Guarantor is, or will later become, unable to discharge its liabilities under the Finance Documents as they fall due.
19.2 Actions following an Event of Default. On, or at any time after, the occurrence of an Event of Default:
(a) the Agent may, and if so instructed by the Majority Lenders, the Agent shall:
(i) serve on the Borrower a notice stating that the Commitments and all other obligations of each Lender to the Borrower under this Agreement are terminated; and/or
(ii) serve on the Borrower a notice stating that the Loan, all accrued interest and all other amounts accrued or owing under this Agreement are immediately due and payable or are due and payable on demand; and/or
(iii) take any other action which, as a result of the Event of Default or any notice served under paragraph (i) or (ii), the Agent and/or the Lenders are entitled to take under any Finance Document or any applicable law; and/or
(b) the Security Trustee may, and if so instructed by the Agent acting with the authorisation of the Majority Lenders, the Security Trustee shall take any action which, as a result of the Event of Default or any notice served under paragraph (a) (i) or (ii), the Security Trustee, the Agent and/or the Lenders and/or the Swap Banks are entitled to take under any Finance Document or any applicable law.
19.3 Termination of Commitments. On the service of a notice under Clause 19.2(a)(i), all obligations of each Lender to the Borrower under this Agreement shall terminate.
19.4 Acceleration of Loan. On the service of a notice under Clause 19.2(a)(ii), the Loan and all accrued interest and all other amounts accrued or owing from the Borrower under this Agreement and every other Finance Document shall become immediately due and payable or, as the case may be, payable on demand.
19.5 Multiple notices; action without notice. The Agent may serve notices under Clauses 19.2(a)(i) or (ii) simultaneously or on different dates and it and/or the Security Trustee may take any action referred to in Clause 19.2 if no such notice is served or simultaneously with or at any time after the service of both or either of such notices.
19.6 Notification of Creditor Parties and Security Parties. The Agent shall send to each Lender, each Swap Bank, the Security Trustee and each Security Party a copy or the text of any notice which the Agent serves on the Borrower under Clause 19.2; but the notice shall become effective when it is served on the Borrower, and no failure or delay by the Agent to send a copy or the text of the notice to any other person shall invalidate the notice or provide the Borrower or any Security Party with any form of claim or defence.
19.7 Creditor Party rights unimpaired. Nothing in this Clause 19 shall be taken to impair or restrict the exercise of any right given to individual Lenders, or Swap Banks under a
Finance Document, a Master Agreement or the general law; and, in particular, this Clause is without prejudice to Clause 3.1.
19.8 Exclusion of Creditor Party liability. No Creditor Party, and no receiver or manager appointed by the Security Trustee, shall have any liability to the Borrower or a Security Party:
(a) for any loss caused by an exercise of rights under, or enforcement of a Security Interest created by, a Finance Document or by any failure or delay to exercise such a right or to enforce such a Security Interest; or
(b) as mortgagee in possession or otherwise, for any income or principal amount which might have been produced by or realised from any asset comprised in such a Security Interest or for any reduction (however caused) in the value of such an asset;
except that this does not exempt a Creditor Party or a receiver or manager from liability for losses shown to have been directly and mainly caused by the dishonesty or the wilful misconduct of such Creditor Partys own officers and employees or (as the case may be) such receivers or managers own partners or employees; and
19.9 Relevant Person. In this Clause 19 a Relevant Person means the Borrower, a Security Party and any company which is a subsidiary of the Borrower or a Security Party or of which the Borrower or the Security Party is a subsidiary; but excluding any company which is dormant and the value of whose gross assets is $50,000 or less;
19.10 Interpretation. In Clauses 19.1(f) and (n) references to an event of default or a termination event include any event, howsoever described, which is similar to an event of default in a facility agreement or a termination event in a finance lease; and in Clause 19.1(g) petition includes an application.
19.11 Position of Swap Banks. Neither the Agent nor the Security Trustee shall be obliged, in connection with any action taken or proposed to be taken under or pursuant to the foregoing provisions of this Clause 19, to have any regard to the requirements of any Swap Bank except to the extent that a Swap Bank is also a Lender.
20 FEES AND EXPENSES
20.1 Arrangement, commitment and agency fees. The Borrower undertakes that it shall pay to:
(a) the Lenders on the date of this Agreement, an up front fee of an amount and in the manner set out in the relevant Fee Letter;
(b) the Agent quarterly in arrears, a commitment fee at a rate of 1.00 per cent. per annum during the period from (and including) the date of this Agreement to (and including) 31 December 2010 and a commitment fee of 1.25% per annum during the period from (and including) 1 January 2011 until the end of the Availability Period and in each case, such commitment fee shall be calculated on the undrawn Total Commitments, for distribution among the Lenders pro rata to their undrawn Commitments; and
(c) to the Agent on or before the first Drawdown Date and thereafter, on each anniversary of the date of this Agreement during the Security Period, an annual agency fee of an amount and in the manner set out in the relevant Fee Letter.
20.2 Costs of negotiation, preparation etc. The Borrower undertakes that it shall pay to the Agent on its demand the amount of all expenses incurred by the Agent or the Security Trustee in connection with the negotiation, preparation, execution or registration of any
Finance Document or any related document or with any transaction contemplated by a Finance Document or a related document or with any authorised publicity or creation of tombstones or similar in respect of the transactions contemplated by the Finance Documents or a related document.
20.3 Costs of variations, amendments, enforcement etc. The Borrower undertakes that it shall pay to the Agent, on the Agents demand, for the account of the Creditor Party concerned,:
(a) the amount of all expenses incurred by a Creditor Party in connection with any amendment or supplement to a Finance Document, or any proposal for such an amendment to be made; or
(b) the amount of all expenses incurred by a Creditor Party in connection with any consent or waiver by the Lenders, the Majority Lenders or the Creditor Party concerned under or in connection with a Finance Document, or any request for such a consent or waiver; or
(c) the valuation of any security provided or offered under Clause 15 or any other matter relating to such security; or
(d) the amount of all expenses of any kind (and without regard as to whether these have been previously agreed) incurred by a Creditor Party in connection with any step taken by the Creditor Party concerned with a view to the protection, exercise or enforcement of any right or Security Interest created by a Finance Document or for any similar purpose.
There shall be recoverable under paragraph (d) the full amount of all legal expenses, whether or not such as would be allowed under rules of court or any taxation or other procedure carried out under such rules.
20.4 Extraordinary management time. The Borrower shall pay to the Agent on its demand compensation in respect of the reasonable and documented amount of time which the management of either Servicing Bank has spent in connection with a matter covered by Clause 20.3 and which exceeds the amount of time which would ordinarily be spent in the performance of the relevant Servicing Banks routine functions. Any such compensation shall be based on such reasonable daily or hourly rates as the Agent may notify to the Borrower and is in addition to any fee paid or payable to the relevant Servicing Bank.
20.5 Documentary taxes. The Borrower undertakes that it shall promptly pay any tax payable on or by reference to any Finance Document, and shall, on the Agents demand, fully indemnify each Creditor Party against any claims, expenses, liabilities and losses resulting from any failure or delay by the Borrower to pay such a tax.
20.6 Financial Services Authority fees. The Borrower shall pay to the Agent, on the Agents demand, for the account of the Lender concerned the amounts which the Agent from time to time notifies the Borrower that a Lender has notified the Agent to be necessary to compensate it for the cost attributable to its Contribution resulting from the imposition from time to time under or pursuant to the Bank of England Act 1998 and/or by the Bank of England and/or by the Financial Services Authority (or other United Kingdom governmental authorities or agencies) of a requirement to pay fees to the Financial Services Authority calculated by reference to liabilities used to fund its Contribution, but excluding statutory costs or fees imposed by governmental authorities or agencies that are applicable as a matter of law at the date hereof .
20.7 Certification of amounts. A notice which is signed by 2 officers of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 20 and which indicates (without necessarily specifying a detailed
breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.
21 INDEMNITIES
21.1 Indemnities regarding borrowing and repayment of Loan. The Borrower shall fully indemnify the Agent and Lender and each Swap Bank on the Agents demand and the Security Trustee on its demand in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by that Creditor Party, or which that Creditor Party reasonably and with due diligence estimates that it will incur, as a result of or in connection with:
(a) an Advance not being borrowed on the date specified in the Drawdown Notice for any reason other than a default by the Lender claiming the indemnity;
(b) the receipt or recovery of all or any part of the Loan or an overdue sum otherwise than on the last day of an Interest Period or other relevant period;
(c) any failure (for whatever reason) by the Borrower to make payment of any amount due under a Finance Document on the due date or, if so payable, on demand (after giving credit for any default interest paid by the Borrower on the amount concerned under Clause 7);
(d) the occurrence and/or continuance of an Event of Default or a Potential Event of Default and/or the acceleration of repayment of the Loan under Clause 19;
and in respect of any tax (other than tax on its overall net income) for which a Creditor Party is liable in connection with any amount paid or payable to that Creditor Party (whether for its own account or otherwise) under any Finance Document.
21.2 Breakage costs. Without limiting its generality, Clause 21.1 covers any claim, expense, liability or loss incurred by a Lender:
(a) in liquidating or employing deposits from third parties acquired or arranged to fund or maintain all or any part of its Contribution and/or any overdue amount (or an aggregate amount which includes its Contribution or any overdue amount); and
(b) in terminating, or otherwise in connection with, any interest and/or currency swap or any other transaction entered into (whether with another legal entity or with another office or department of the Lender concerned) to hedge any exposure arising under this Agreement or that part which the Lender concerned 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.
21.3 Miscellaneous indemnities. The Borrower shall fully indemnify each Creditor Party severally on their respective demands in respect of all claims, expenses, liabilities and losses which may be made or brought against or incurred by a Creditor Party, in any country, as a result of or in connection with:
(a) any action taken, or omitted or neglected to be taken, under or in connection with any Finance Document by the Agent, the Security Trustee or any other Creditor Party or by any receiver appointed under a Finance Document; or
(b) any other Pertinent Matter;
other than claims, expenses, liabilities and losses which are shown to have been caused by the dishonesty or wilful misconduct of the officers or employees of the Creditor Party concerned.
Without prejudice to its generality, this Clause 21.3 covers any claims, expenses, liabilities and losses which arise, or are asserted, under or in connection with any law relating to safety at sea, the ISM Code, the ISPS Code or any Environmental Law.
21.4 Currency indemnity. If any sum due from the Borrower or any Security Party to a Creditor Party under a Finance Document or under any order or judgment relating to a Finance Document has to be converted from the currency in which the Finance Document provided for the sum to be paid (the Contractual Currency ) into another currency (the Payment Currency ) for the purpose of:
(a) making or lodging any claim or proof against the Borrower or any Security Party, whether in its liquidation, any arrangement involving it or otherwise; or
(b) obtaining an order or judgment from any court or other tribunal; or
(c) enforcing any such order or judgment;
the Borrower shall indemnify the Creditor Party concerned against the loss arising when the amount of the payment actually received by that Creditor Party is converted at the available rate of exchange into the Contractual Currency.
In this Clause 21.4, the available rate of exchange means the rate at which the Creditor Party concerned is able at the opening of business (London time) on the Business Day after it receives the sum concerned to purchase the Contractual Currency with the Payment Currency.
This Clause 21.4 creates a separate liability of the Borrower which is distinct from its other liabilities under the Finance Documents and which shall not be merged in any judgment or order relating to those other liabilities.
21.5 Application to Master Agreements. For the avoidance of doubt, Clause 21.4 does not apply in respect of sums due from the Borrower to a Swap Bank under or in connection with any Master Agreement as to which sums the relevant provisions of that Master Agreement shall apply.
21.6 Certification of amounts. A notice which is signed by 2 officers of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 21 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.
21.7 Sums deemed due to a Lender. For the purposes of this Clause 21, a sum payable by the Borrower to the Agent or the Security Trustee for distribution to a Lender shall be treated as a sum due to that Lender.
22 NO SET-OFF OR TAX DEDUCTION
22.1 No deductions. All amounts due from the Borrower under a Finance Document shall be paid:
(a) without any form of set-off, cross-claim or condition; and
(b) free and clear of any tax deduction except a tax deduction which the Borrower is required by law to make.
22.2 Grossing-up for taxes. If the Borrower is required by law to make a tax deduction from any payment by it:
(a) the Borrower shall notify the Agent as soon as it becomes aware of the requirement;
(b) the Borrower shall pay the tax deducted to the appropriate taxation authority promptly, and in any event before any fine or penalty arises;
(c) the amount due in respect of the payment shall be increased by the amount necessary to ensure that each Creditor Party receives and retains (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which it would otherwise have received.
22.3 Evidence of payment of taxes. Within 1 month after making any tax deduction, the Borrower shall deliver to the Agent documentary evidence satisfactory to its Agent that the tax had been paid to the appropriate taxation authority.
22.4 Tax Credit. A Creditor Party which receives for its own account a repayment or credit in respect of tax on account of which the Borrower has made an increased payment under Clause 22.2 shall pay to the Borrower a sum equal to the proportion of the repayment or credit which that Creditor Party allocates to the amount due from the Borrower in respect of which the Borrower made the increased payment provided that:
(a) the Creditor Party shall not be obliged to allocate to this transaction any part of a tax repayment or credit which is referable to a class or number of transactions;
(b) nothing in this Clause 22.4 shall oblige a Creditor Party to arrange its tax affairs in any particular manner, to claim any type of relief, credit, allowance or deduction instead of, or in priority to, another or to make any such claim within any particular time;
(c) nothing in this Clause 22.4 shall oblige a Creditor Party to make a payment which would leave it in a worse position than it would have been in if the Borrower had not been required to make a tax deduction from a payment; and
(d) any allocation or determination made by a Creditor Party under or in connection with this Clause 22.4 shall be conclusive and binding on the Borrower and the other Creditor Parties.
22.5 Exclusion of tax on overall net income. In this Clause 22 tax deduction means any deduction or withholding for or on account of any present or future tax except tax on a Creditor Partys overall net income.
22.6 Application of Master Agreements. For the avoidance of doubt, Clause 22 does not apply in respect of sums due from the Borrower to a Swap Bank under or in connection with any Master Agreement as to which sums the relevant provisions of that Master Agreement shall apply.
23 ILLEGALITY, ETC
23.1 Illegality. This Clause 23 applies if a Lender (the Notifying Lender ) notifies the Agent that it has become, or will with effect from a specified date, become:
(a) unlawful or prohibited as a result of the introduction of a new law, an amendment to an existing law or a change in the manner in which an existing law is or will be interpreted or applied; or
(b) contrary to, or inconsistent with, any regulation,
for the Notifying Lender to maintain or give effect to any of its obligations under this Agreement in the manner contemplated by this Agreement.
23.2 Notification of illegality. The Agent shall promptly notify the Borrower, the Security Parties, the Security Trustee and the other Lenders of the notice under Clause 23.1 which the Agent receives from the Notifying Lender.
23.3 Prepayment; termination of Commitment. On the Agent notifying the Borrower under Clause 23.2, the Notifying Lenders Commitment shall terminate; and thereupon or, if later, on the date specified in the Notifying Lenders notice under Clause 23.1 as the date on which the notified event would become effective the Borrower shall prepay the Notifying Lenders Contribution in accordance with Clause 8.
23.4 Mitigation . If circumstances arise which would result in a notification under Clause 23.1 then, without in any way limiting the rights of the Notifying Lender under Clause 23.3, the Notifying Lender shall use all reasonable endeavours to transfer its obligations, liabilities and rights under this Agreement and the other Finance Documents to another office or financial institution not affected by the circumstances but the Notifying Lender shall not be under any obligation to take any such action if, in its opinion, to do would or might:
(a) have an adverse effect on its business, operations or financial condition; or
(b) involve it in any activity which is unlawful or prohibited or any activity that is contrary to, or inconsistent with, any regulation; or
(c) involve it in any expense (unless indemnified to its satisfaction) or tax disadvantage.
24 INCREASED COSTS
24.1 Increased costs. This Clause 24 applies if a Lender (the Notifying Lender ) notifies the Agent that the Notifying Lender considers that as a result of:
(a) the introduction or alteration after the date of this Agreement of a law or an alteration after the date of this Agreement in the manner in which a law is interpreted or applied (disregarding any effect which relates to the application to payments under this Agreement of a tax on the Lenders overall net income); or
(b) complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Notifying Lender allocates capital resources to its obligations under this Agreement) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Agreement,
the Notifying Lender (or a parent company of it) has incurred or will incur an increased cost .
24.2 Meaning of increased cost. In this Clause 24, increased cost means, in relation to a Notifying Lender:
(a) an additional or increased cost incurred as a result of, or in connection with, the Notifying Lender having entered into, or being a party to, this Agreement or a Transfer Certificate,
of funding or maintaining its Commitment or Contribution or performing its obligations under this Agreement, or of having outstanding all or any part of its Contribution or other unpaid sums;
(b) a reduction in the amount of any payment to the Notifying Lender under this Agreement or in the effective return which such a payment represents to the Notifying Lender or on its capital;
(c) an additional or increased cost of funding all or maintaining all or any of the advances comprised in a class of advances formed by or including the Notifying Lenders Contribution or (as the case may require) the proportion of that cost attributable to its Contribution; or
(d) a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received or receivable by the Notifying Lender under this Agreement;
but not an item attributable to a change in the rate of tax on the overall net income of the Notifying Lender (or a parent company of it) or an item covered by the indemnity for tax in Clause 21.1 or by Clause 22, or an item arising directly out of the implementation or application of or compliance with the International Convergence of Capital Measurement and Capital Standards, a Revised Framework published by the Basle Committee on Banking Supervision in June 2004, in the form existing on the date of this Agreement ( Basel II ) or any other law or regulation which implements Basel II (whether such implementation, application or compliance is by a government, regulator, Creditor Party or any of its affiliates).
For the purposes of this Clause 24.2 the Notifying Lender may in good faith allocate or spread costs and/or losses among its assets and liabilities (or any class of its assets and liabilities) on such basis as it considers appropriate.
24.3 Notification to Borrower of claim for increased costs. The Agent shall promptly notify the Borrower and the Security Parties of the notice which the Agent received from the Notifying Lender under Clause 24.1.
24.4 Payment of increased costs. The Borrower undertakes that it shall pay to the Agent, on the Agents demand, for the account of the Notifying Lender the amounts which the Agent from time to time notifies the Borrower that the Notifying Lender has specified to be necessary to compensate the Notifying Lender for the increased cost.
24.5 Notice of prepayment. If the Borrower is not willing to continue to compensate the Notifying Lender for the increased cost under Clause 24.4, the Borrower may give the Agent not less than 10 Business Days notice of their intention to prepay the Notifying Lenders Contribution at the end of an Interest Period.
24.6 Prepayment; termination of Commitment. A notice under Clause 24.5 shall be irrevocable; the Agent shall promptly notify the Notifying Lender of the Borrowers notice of intended prepayment; and:
(a) on the date on which the Agent serves that notice, the Commitment of the Notifying Lender shall be cancelled; and
(b) on the date specified in its notice of intended prepayment, the Borrower shall prepay (without premium or penalty) the Notifying Lenders Contribution, together with accrued interest thereon at the applicable rate plus the Margin.
24.7 Application of prepayment. Clause 8 shall apply in relation to the prepayment.
25 SET-OFF
25.1 Application of credit balances. Each Creditor Party may without prior notice:
(a) upon the occurrence of an Event of Default or Potential Event of Default apply any balance (whether or not then due) which at any time stands to the credit of any account in the name of the Borrower at any office in any country of that Creditor Party in or towards satisfaction of any sum then due from the Borrower to that Creditor Party under any of the Finance Documents; and
(b) for that purpose:
(i) break, or alter the maturity of, all or any part of a deposit of the Borrower;
(ii) convert or translate all or any part of a deposit or other credit balance into Dollars;
(iii) enter into any other transaction or make any entry with regard to the credit balance which the Creditor Party concerned considers appropriate.
25.2 Existing rights unaffected. No Creditor Party shall be obliged to exercise any of its rights under Clause 25.1; and those rights shall be without prejudice and in addition to any right of set-off, combination of accounts, charge, lien or other right or remedy to which a Creditor Party is entitled (whether under the general law or any document).
25.3 Sums deemed due to a Lender. For the purposes of this Clause 25, a sum payable by the Borrower to the Agent or the Security Trustee for distribution to, or for the account of, a Lender shall be treated as a sum due to that Lender; and each Lenders proportion of a sum so payable for distribution to, or for the account of, the Lenders shall be treated as a sum due to such Lender.
25.4 No Security Interest. This Clause 25 gives the Creditor Parties a contractual right of set-off only and does not create any equitable charge or other Security Interest over any credit balance of the Borrower.
26 TRANSFERS AND CHANGES IN LENDING OFFICES
26.1 Transfer by Borrower. The Borrower may not transfer any of its rights, liabilities or obligations under any Finance Document.
26.2 Transfer by a Lender. Subject to Clause 26.4, a Lender (the Transferor Lender ) may at any time cause:
(a) its rights in respect of all or part of its Contribution; or
(b) its obligations in respect of all or part of its Commitment; or
(c) a combination of (a) and (b);
to be (in the case of its rights) transferred to, or (in the case of its obligations) assumed by, another bank or financial institution or a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (a Transferee Lender ) by delivering to the Agent not later than 10 Business Days prior to the proposed transfer date, a completed certificate in the form set out in Schedule 4 with any modifications approved or required by the Agent (a Transfer Certificate ) executed by the Transferor Lender and the Transferee Lender.
However, any rights and obligations of the Transferor Lender in its capacity as Agent or Security Trustee will have to be dealt with separately in accordance with the Agency and Trust Deed.
Consent from the Borrower and the Guarantor shall be required (not to be unreasonably withheld or delayed) unless the transfer or assignment is to an affiliate of an existing Lender. The Agent shall notify the Borrower and the Guarantor of each proposed Transfer and the Borrower and the Guarantor shall be deemed to have given consent if no express refusal is notified to the Agent in writing within 5 Business Days of such notification.
26.3 Transfer Certificate, delivery and notification. As soon as reasonably practicable after a Transfer Certificate is delivered to the Agent, it shall (unless it has reason to believe that the Transfer Certificate may be defective):
(a) sign the Transfer Certificate on behalf of itself, the Borrower, the Security Parties, the Security Trustee, each of the other Lenders and each of the Swap Banks;
(b) on behalf of the Transferee Lender, send to the Borrower and each Security Party letters or faxes notifying them of the Transfer Certificate and attaching a copy of it;
(c) send to the Transferee Lender copies of the letters or faxes sent under paragraph (b),
but the Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Transferor Lender once it is satisfied it has complied with all necessary know your customer or other similar checks under all applicable laws and regulations in relation to the transfer to that Transferee Lender.
26.4 Effective Date of Transfer Certificate. A Transfer Certificate becomes effective on the date, if any, specified in the Transfer Certificate as its effective date Provided that it is signed by the Agent under Clause 26.3 on or before that date.
26.5 No transfer without Transfer Certificate. No assignment or transfer of any right or obligation of a Lender under any Finance Document is binding on, or effective in relation to, the Borrower, any Security Party, the Agent or the Security Trustee unless it is effected, evidenced or perfected by a Transfer Certificate.
26.6 Lender re-organisation; waiver of Transfer Certificate. However, if a Lender enters into any merger, de-merger or other reorganisation as a result of which all its rights or obligations vest in another person (the successor ), the Agent may, if it sees fit, by notice to the successor and the Borrower and the Security Trustee waive the need for the execution and delivery of a Transfer Certificate; and, upon service of the Agents notice, the successor shall become a Lender with the same Commitment and Contribution as were held by the predecessor Lender.
26.7 Effect of Transfer Certificate. A Transfer Certificate takes effect in accordance with English law as follows:
(a) to the extent specified in the Transfer Certificate, all rights and interests (present, future or contingent) which the Transferor Lender has under or by virtue of the Finance Documents are assigned to the Transferee Lender absolutely, free of any defects in the Transferor Lenders title and of any rights or equities which the Borrower or any Security Party had against the Transferor Lender;
(b) the Transferor Lenders Commitment is discharged to the extent specified in the Transfer Certificate;
(c) the Transferee Lender becomes a Lender with the Contribution previously held by the Transferor Lender and a Commitment of an amount specified in the Transfer Certificate;
(d) the Transferee Lender becomes bound by all the provisions of the Finance Documents which are applicable to the Lenders generally, including those about pro-rata sharing and the exclusion of liability on the part of, and the indemnification of, the Agent and the Security Trustee and, to the extent that the Transferee Lender becomes bound by those provisions (other than those relating to exclusion of liability), the Transferor Lender ceases to be bound by them;
(e) any part of the Loan which the Transferee Lender advances after the Transfer Certificates effective date ranks in point of priority and security in the same way as it would have ranked had it been advanced by the transferor, assuming that any defects in the transferors title and any rights or equities of the Borrower or any Security Party against the Transferor Lender had not existed;
(f) the Transferee Lender becomes entitled to all the rights under the Finance Documents which are applicable to the Lenders generally, including but not limited to those relating to the Majority Lenders and those under Clause 5.7 and Clause 21, and to the extent that the Transferee Lender becomes entitled to such rights, the Transferor Lender ceases to be entitled to them; and
(g) in respect of any breach of a warranty, undertaking, condition or other provision of a Finance Document or any misrepresentation made in or in connection with a Finance Document, the Transferee Lender shall be entitled to recover damages by reference to the loss incurred by it as a result of the breach or misrepresentation, irrespective of whether the original Lender would have incurred a loss of that kind or amount.
The rights and equities of the Borrower or any Security Party referred to above include, but are not limited to, any right of set off and any other kind of cross-claim.
26.8 Maintenance of register of Lenders. During the Security Period the Agent shall maintain a register in which it shall record the name, Commitment, Contribution and administrative details (including the lending office) from time to time of each Lender holding a Transfer Certificate and the effective date (in accordance with Clause 26.4) of the Transfer Certificate; and the Agent shall make the register available for inspection by any Lender, the Security Trustee and the Borrower during normal banking hours, subject to receiving at least 3 Business Days prior notice.
26.9 Reliance on register of Lenders. The entries on that register shall, in the absence of manifest error, be conclusive in determining the identities of the Lenders and the amounts of their Commitments and Contributions and the effective dates of Transfer Certificates and may be relied upon by the Agent and the other parties to the Finance Documents for all purposes relating to the Finance Documents.
26.10 Authorisation of Agent to sign Transfer Certificates. The Borrower, the Security Trustee, each Lender and each Swap Bank irrevocably authorise the Agent to sign Transfer Certificates on its behalf.
26.11 Registration fee. In respect of any Transfer Certificate, the Agent shall be entitled to recover a registration fee of $3,000 from the Transferee Lender.
26.12 Sub-participation; subrogation assignment. A Lender may sub-participate all or any part of its rights and/or obligations under or in connection with the Finance Documents without the consent of, or any notice to, the Borrower, any Security Party, the Agent or the Security Trustee; and the Lenders may assign, in any manner and terms agreed by the Majority Lenders, the Agent and the Security Trustee, all or any part of those rights to an insurer or surety who has become subrogated to them.
26.13 Disclosure of information. The Borrower consents to each Creditor Party its officers and agents disclosing information relating to each of the Borrower and the Security Parties or their respective account(s) with any Creditor Party and/or their respective dealing relationship(s) with any Creditor Party, including but not limited to details of their respective facilities, any security taken, transactions undertaken and balances and positions with the relevant Creditor Party, to:
(a) the head office of the relevant Creditor Party , any of its subsidiaries or subsidiaries of its holding company, affiliates, representative and branch offices in any jurisdiction (the Permitted Parties );
(b) bone fide professional advisers and service providers of the Permitted Parties who are under a duty of confidentiality to the Permitted Parties;
(c) any actual or potential Transferee Lender or participant or sub-participant in relation to any of the relevant Creditor Party s rights and/or obligations under any agreement between such Creditor Party and the Borrower and/or any Security Party, or assignee, novatee or transferee (or any agent or adviser of any of the foregoing) who are under a duty of confidentiality to the relevant Permitted Parties;
(d) any rating agency, insurer or insurance broker of, or direct or indirect provider of credit protection to any Permitted Party provided that in the case of provision of any such information to a rating agency (i) any correspondence addressed to a Permitted Party from such rating agency shall not be disclosed to any person or entity that is not a Permitted Party and (ii) such rating agency shall be under a confidentiality undertaking not to disclose any such information to any person or entity that is not a Permitted Party;
(e) any court or tribunal or regulatory, supervisory, governmental or quasi-governmental authority with jurisdiction over the Permitted Parties;
(f) any person where required to do so by any law or regulation;
(g) any person where required to enforce the rights of a Creditor Party under any Finance Document;
(h) any provider of data processing or other outsourced services who is under a duty of confidentiality to the relevant Permitted Parties; and/or
(i) any potential acquirer of the assets and liabilities of, or potential merger candidate of, any Creditor Party where there are bone fide negotiations for acquisition or merger save where there is to be particular information disclosed in relation to this Agreement and the other Finance Documents, in which case the relevant Creditor Party shall obtain a confidentiality undertaking from the relevant potential acquirer or (as the case may be) potential merger candidate.
26.14 Change of lending office. A Lender may change its lending office by giving not less than 5 Business Days notice to the Agent and the change shall become effective on the later of:
(a) The fifth Business Day form the date on which the Agent receives the notice; and
(b) the date, if any, specified in the notice as the date on which the change will come into effect.
26.15 Notification. On receiving such a notice, the Agent shall notify the Borrower and the Security Trustee; and, until the Agent receives such a notice, it shall be entitled to assume that a Lender is acting through the lending office of which the Agent last had notice.
26.16 Replacement of Reference Bank. If any Reference Bank ceases to be a Lender or is unable on a continuing basis to supply quotations for the purposes of Clause 5 then, unless the Borrower, the Agent and the Majority Lenders otherwise agree, the Agent, acting on the instructions of the Majority Lenders, and after consulting the Borrower, shall appoint another bank (whether or not a Lender) to be a replacement Reference Bank; and, when that appointment comes into effect, the first-mentioned Reference Banks appointment shall cease to be effective.
26.17 Tax indemnity, tax gross-up and increased costs on assignment, transfer and change of lending office. If:
(a) a Lender assigns or transfers any rights or obligations under the Finance Documents pursuant to Clause 26.2 and Clause 26.6 or changes its lending office; and
(b) as a result of circumstances existing at the date the assignment, transfer or change occurs the Borrower would be obliged to make a payment to the Transferee Lender or Lender acting through its new lending office under Clause 22.1 in respect of any tax, Clause 20 or Clause 22,
then the Transferee Lender or the Lender acting through its new lending office is only entitled to receive payment under those Clauses to the same extent as the Transferor Lender or the Lender acting through its previous lending office would have been if the assignment, transfer or change had not occurred.
27 VARIATIONS AND WAIVERS
27.1 Variations, waivers etc. by Majority Lenders. Subject to Clause 27.2, a document shall be effective to vary, waive, suspend or limit any provision of a Finance Document, or any Creditor Partys rights or remedies under such a provision or the general law, only if the document is signed, or specifically agreed to by fax, by the Borrower, by the Agent on behalf of the Majority Lenders, by the Agent and the Security Trustee in their own rights, and, if the document relates to a Finance Document to which a Security Party is party, by that Security Party.
27.2 Variations, waivers etc. requiring agreement of all Lenders. However, as regards the following, Clause 27.1 applies as if the words by the Agent on behalf of the Majority Lenders were replaced by the words by or on behalf of every Lender and every Swap Bank:
(a) a change in the Margin or in the definition of LIBOR;
(b) a change to the date for, the amount of, any payment of principal, interest, fees, or other sum payable under this Agreement;
(c) a change to any Lenders Commitment;
(d) an extension of Availability Period;
(e) a change to the definition of Majority Lenders or Finance Documents;
(f) a change to the preamble or to Clause 2, 3, 4, 5.1, 17, 18 or 30;
(g) a change to this Clause 27;
(h) any release of, or material variation to, a Security Interest, guarantee, indemnity or subordination arrangement set out in a Finance Document; and
(i) any other change or matter as regards which this Agreement or another Finance Document expressly provides that each Lenders consent is required.
27.3 Exclusion of other or implied variations. Except for a document which satisfies the requirements of Clauses 27.1 and 27.2 no document, and no act, course of conduct, failure or neglect to act, delay or acquiescence on the part of the Creditor Parties or any of them (or any person acting on behalf of any of them) shall result in the Creditor Parties or any of them (or any person acting on behalf of any of them) being taken to have varied, waived, suspended or limited, or being precluded (permanently or temporarily) from enforcing, relying on or exercising:
(a) a provision of this Agreement or another Finance Document; or
(b) an Event of Default; or
(c) a breach by a Borrower or a Security Party of an obligation under a Finance Document or the general law; or
(d) any right or remedy conferred by any Finance Document or by the general law;
and there shall not be implied into any Finance Document any term or condition requiring any such provision to be enforced, or such right or remedy to be exercised, within a certain or reasonable time.
28 NOTICES
28.1 General. Unless otherwise specifically provided, any notice under or in connection with any Finance Document shall be given by letter or fax; and references in the Finance Documents to written notices, notices in writing and notices signed by particular persons shall be construed accordingly.
28.2 Addresses for communications. A notice shall be sent:
(a) |
to the Borrower: |
200 Cantonment Road |
|
|
#06-04 Southpoint |
|
|
Singapore 089763 |
|
|
|
|
|
Fax No: +65 63230046 |
|
|
Attn: Financial Manager |
|
|
Email: accounts@ivs-int.com/christopherk@ivs-int.com |
|
|
|
|
With a copy to: |
Grindrod Shipping (South Africa) (Pty) Ltd. |
|
|
8th Floor Grindrod House |
|
|
108 Margaret Mncadi (Victoria Embankment) |
|
|
Durban 4001 |
|
|
South Africa |
|
|
|
|
|
Fax No: +27 31 302 1815 |
|
|
Attn: Financial Manager |
|
|
Email: murrayg@grindrod.co.za |
|
|
|
(b) |
to a Lender: |
at the address next to its name in Part A of Schedule 1 (or as the case may require) in the relevant Transfer Certificate. |
|
|
|
(c) |
to a Swap Bank |
at the address next to its name in Part B of Schedule 1. |
|
|
|
(d) |
to the Agent or Security Trustee |
Standard Chartered Bank (Hong Kong) Limited |
|
|
11/F., Standard Chartered Tower |
|
|
388 Kwun Tong Road, Kwun Tong |
|
|
Hong Kong |
|
|
|
|
|
Attn: Anita Ip/Rebecca Yung |
|
|
Fax: +852 2810 0180 |
|
|
|
|
|
Email: anita.ip@sc.com/Rebecca.sf.yung@sc.com |
or to such other address as the relevant party may notify the Agent or, if the relevant party is the Agent or the Security Trustee, the Borrower, the Lenders, the Swap Banks and the Security Parties.
28.3 Effective date of notices. Subject to Clauses 28.4 and 28.5:
(a) a notice which is delivered personally or posted shall be deemed to be served, and shall take effect, at the time when it is delivered;
(b) a notice which is sent by fax shall be deemed to be served, and shall take effect, 2 hours after its transmission is completed.
28.4 Service outside business hours. However, if under Clause 28.3 a notice would be deemed to be served:
(a) on a day which is not a business day in the place of receipt; or
(b) on such a business day, but after 5 p.m. local time;
the notice shall (subject to Clause 28.5) be deemed to be served, and shall take effect, at 9 a.m. on the next day which is such a business day.
28.5 Illegible notices. Clauses 28.3 and 28.4 do not apply if the recipient of a notice notifies the sender within 1 hour after the time at which the notice would otherwise be deemed to be served that the notice has been received in a form which is illegible in a material respect.
28.6 Valid notices. A notice under or in connection with a Finance Document shall not be invalid by reason that its contents or the manner of serving it do not comply with the requirements of this Agreement or, where appropriate, any other Finance Document under which it is served if:
(a) the failure to serve it in accordance with the requirements of this Agreement or other Finance Document, as the case may be, has not caused any party to suffer any significant loss or prejudice; or
(b) in the case of incorrect and/or incomplete contents, it should have been reasonably clear to the party on which the notice was served what the correct or missing particulars should have been.
28.7 Electronic communication. Any communication to be made between the Agent and a Lender under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Agent and the relevant Lender:
(a) agree that, unless and until notified to the contrary, this is to be an accepted form of communication;
(b) notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and
(c) notify each other of any change to their respective addresses or any other such information supplied to them.
Any electronic communication made between the Agent and a Lender will be effective only when actually received in readable form and, in the case of any electronic communication made by a Lender to the Agent, only if it is addressed in such a manner as the Agent shall specify for this purpose.
28.8 English language. Any notice under or in connection with a Finance Document shall be in English.
28.9 Meaning of notice. In this Clause 28, notice includes any demand, consent, authorisation, approval, instruction, waiver or other communication.
29 SUPPLEMENTAL
29.1 Rights cumulative, non-exclusive. The rights and remedies which the Finance Documents give to each Creditor Party are:
(a) cumulative;
(b) may be exercised as often as appears expedient; and
(c) shall not, unless a Finance Document explicitly and specifically states so, be taken to exclude or limit any right or remedy conferred by any law.
29.2 Severability of provisions. If any provision of a Finance Document is or subsequently becomes void, unenforceable or illegal, that shall not affect the validity, enforceability or legality of the other provisions of that Finance Document or of the provisions of any other Finance Document.
29.3 Counterparts. A Finance Document may be executed in any number of counterparts.
29.4 Third Party rights. 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.
30 LAW AND JURISDICTION
30.1 English law. This Agreement shall be governed by, and construed in accordance with, English law.
30.2 Exclusive English jurisdiction. Subject to Clause 30.3, the courts of England shall have exclusive jurisdiction to settle any Dispute.
30.3 Choice of forum for the exclusive benefit of the Creditor Parties. Clause 30.2 is for the exclusive benefit of the Creditor Parties, each of which reserves the right:
(a) to commence proceedings in relation to Dispute in the courts of any country other than England and which have or claim jurisdiction to that Dispute; and
(b) to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.
The Borrower shall not commence any proceedings in any country other than England in relation to a Dispute.
30.4 Process agent. The Borrower hereby appoints Unicorn Tankers (International) Limited at its principal place of business for the time being, presently at St Magnus House, 8th Floor, East Wing, 3 Lower Thames Street, London EC3R 6HD to act as to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with a Dispute.
30.5 Creditor Party rights unaffected. Nothing in this Clause 30 shall exclude or limit any right which any Creditor Party may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.
30.6 Meaning of proceedings. In this Clause 30, proceedings means proceedings of any kind, including an application for a provisional or protective measure and a Dispute means any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement) or any non-contractual obligation arising out of or in connection with this Agreement .
THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.
SCHEDULE 1
PART A
LENDERS AND COMMITMENTS
Lender |
Lending Office |
Commitment
|
Payment Details |
|
|
|
|
Standard Chartered Bank |
6 Battery Road #22-00
Attn: Steve Lim
|
50,000,000 |
Standard Chartered Bank, New York
|
PART B
SWAP BANKS
Swap Bank |
Address |
|
|
Standard Chartered Bank |
Standard Chartered Bank @ Plaza by the Park 51 Bras Basah Road Level 6 Singapore 189554 Telephone: +65 64279 555 Facsimile: +65 6884 5242 Attn: Financial Markets Operations Email: fmo_cc_sg@sc.com |
SCHEDULE 2
DRAWDOWN NOTICE
To: Standard Chartered Bank (Hong Kong) Limited
11/F., Standard Chartered Tower
388 Kwun Tong Road, Kwun Tong
Hong Kong
Attention: Anita Ip/Rebecca Yung |
|
[Date] |
DRAWDOWN NOTICE
1 We refer to the loan agreement (the Loan Agreement ) dated [ · ] 2010 and made between (amongst others) ourselves as Borrower and yourselves as Agent in connection with a term loan facility of US$50,000,000. Terms defined in the Loan Agreement have their defined meanings when used in this Drawdown Notice.
2 We request to borrow an Advance as follows:
(a) |
Amount of Advance: |
US$[ · ]; |
|
|
|
(b) |
Drawdown Date: |
[ · ]; |
|
|
|
(c) |
Payment instructions: |
account of [ · ] and numbered [ · ] with [ · ] of [ · ]. |
3 We hereby confirm that immediately following the making of such Advance, the Loan shall not exceed 65% of the aggregate of the Fair Market Value of the Ships plus any cash collateral put up in accordance with Clause 15 of the Loan Agreement.
4 We represent and warrant that:
(a) the representations and warranties made by us in Clause 10 of the Loan Agreement would remain true and not misleading if repeated on the date of this notice with reference to the circumstances now existing;
(b) no Event of Default or Potential Event of Default has occurred or will result from the borrowing of the Advance.
5 This notice cannot be revoked without the prior consent of the Majority Lenders.
___________________________________
for and on behalf of
ISLAND VIEW SHIPPING INTERNATIONAL PTE. LTD.
SCHEDULE 3
CONDITION PRECEDENT DOCUMENTS
PART A
The following are the documents referred to in Clause 9.1(a).
1 A duly executed original of this Agreement, the Guarantee, the Fee Letters, the Agency and Trust Deed and the Negative Pledge.
2 Copies of the certificate of incorporation and constitutional documents of the Borrower, and the Guarantor.
3 Copies of resolutions or extracts of minutes of meetings of directors and shareholders (if required) of the Borrower and the Guarantor authorising the execution of each of the Finance Documents to which the Borrower or the Guarantor is a party and (in relation to the Borrower), each of the Master Agreements and, in the case of the Borrower, authorising named officers of the Borrower to give the Drawdown Notices under this Agreement (together with specimen signatures of the persons so authorised).
4 The original of any power of attorney under which any Finance Document or (in the case of the Borrower) any Master Agreement is executed on behalf of the Borrower or the Guarantor.
5 Copies of all consents which the Borrower or any Security Party requires to enter into, or make any payment under, any Finance Document or any Master Agreement.
6 The originals of any mandates or other documents required in connection with the opening or operation of the Borrower Account.
7 Copies of the audit packs in relation to the consolidated accounts of the Borrower and the audit packs in relation to the consolidated accounts of the Guarantor for the period ending on 31 December 2009, certified by the chief financial officer of the Borrower in the case of the audit packs to be provided by the Borrower and in the case of the audit packs to be provided in relation to the Guarantor, the chief financial officer of the Guarantor, together with a side letter executed by the auditors of each of the Borrower and the Guarantor confirming that the calculations set out in the respective audit packs are correct.
8 All documentation required by each Creditor Party in respect of the Borrower pursuant to that Creditor Partys know your customer requirements.
9 Favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of England, Isle of Man, Singapore and such other relevant jurisdictions as the Agent may require.
10 If the Agent so requires, in respect of any of the documents referred to above, a certified English translation prepared by a translator approved by the Agent.
11 Documentary evidence that the agent for service of process named in Clause 30 has accepted the appointment.
12 Confirmation (satisfactory to the Agent (acting on the instructions of the Lenders)) that the Availability Period (as defined in the Unicorn Loan Agreement), under the Unicorn Facility has expired.
PART B
In this Part B of Schedule 3, the following expressions shall have the following meanings:
Relevant Ship means for the purposes of Clause 9.1(b), the Ship which is to be partially financed by the Tranche to be made on the relevant Drawdown Date.
The following are the documents referred to in Clause 9.1(b) required on or before the Drawdown Date of each Advance.
1 A duly executed original of the Guarantee, the Shares Pledge, the Mortgage (together with all documents and attachments to be provided thereunder) in respect of the Owner owning each Relevant Ship, the Mortgage, the Deed of Covenants and the General Assignment for each Relevant Ship, together with duly executed notices of assignment as required under the terms of the General Assignments.
2 A copy of the current charter, pooling agreement or other contract of employment relating to each Relevant Ship that is for a term of 6 months or more.
3 Documentary evidence that:
(a) each Relevant Ship is registered in the name of the Borrower under Approved flag;
(b) each Relevant Ship is in the absolute and unencumbered ownership of the Borrower save as contemplated by the Finance Documents;
(c) each Relevant Ship maintains the highest class with an Approved Classification Society free of all overdue recommendations and conditions of such classification society;
(d) the Mortgage on each Relevant Ship is or will be duly registered against such Relevant Ship as a valid first priority/preferred ship mortgage; and
(e) each Relevant Ship is insured in accordance with the provisions of the Deed of Covenants relating to such Relevant Ship and all requirements therein in respect of insurances have been complied with.
4 A valuation of each Relevant Ship and each Ship subject to a Mortgage at the relevant Drawdown Date, addressed to the Agent and the Lenders, stated to be for the purposes of this Agreement and dated not earlier than 30 days prior to the relevant Drawdown Date, from an independent sale and purchase shipbroker selected by the Agent which shows that the aggregate of their Fair Market Value exceeds 154% of the Loan (following Drawdown of the Relevant Advance).
5 The latest survey classification report from the Approved Classification Society in respect of the construction and classification of each Relevant Ship.
6 The latest class status report from the Approved Classification Society of each Relevant Ship.
7 A favourable opinion from an independent insurance consultant acceptable to the Agent on such matters relating to the insurances for each Relevant Ship as the Agent may require.
8 A copy of any Management Agreement on terms acceptable to the Agent, together with the relevant Managers Undertaking executed by the Approved Technical Manager and the Borrower in favour of the Security Trustee (and attaching a copy of the relevant Management Agreement) in the terms required by the Agent agreeing certain matters in
relation to the management of each Relevant Ship and subordinating the rights of the Approved Technical Manager and the Borrower against each Relevant Ship to the rights of the Creditor Parties under the Finance Documents.
9 A copy of the Approved Commercial Managers Side Letter executed by the Approved Commercial Manager in relation to their interests in the Insurances for each Relevant Ship.
10 Copies of the Borrowers or Approved Managers Document of Compliance and of each Relevant Ships Safety Management Certificate and ISSC.
11 Copies of the certificate of incorporation and constitutional documents of the relevant Owner.
12 Copies of resolutions or extracts of minutes of meetings of directors and shareholders (if required) of the relevant Owner authorising the execution of each of the Finance Documents to which the relevant Owner is a party.
13 The original of any power of attorney under which any Finance Document is executed on behalf of the relevant Owner.
14 Copies of all consents which the relevant Owner requires to enter into, or make any payment under, any Finance Document.
15 Favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of England, Isle of Man, Singapore and such other relevant jurisdictions as the Agent may require.
16 The originals of any mandates or other documents required in connection with the opening or operation of the relevant Earnings Account.
17 All documentation required by each Creditor Party in respect of the relevant Owner pursuant to that Creditor Partys know your customer requirements.
18 A duly executed original of each Master Agreement executed by each of the Swap Bank respectively.
19 If the Agent so requires, in respect of any of the documents referred to above, a certified English translation prepared by a translator approved by the Agent.
Each copy document delivered under this Schedule shall be certified as a true and up to date copy by a director or the secretary (or equivalent officer) of the Borrower or by a Notary Public (other than in the case of the copy charters to be delivered under item 2 of Part B of this Schedule, which may be certified as true and accurate by a duly authorised attorney-in-fact of the Borrower).
PART C
1. Copies of the audited consolidated accounts of the Borrower and the Guarantor and the individual audited accounts of the Borrower for the period ending on 31 December 2009, together with a Compliance Certificate of the chief financial officer and auditor of the Borrower substantially in the form of Schedule 6 and a Compliance Certificate of the chief financial officer and auditor of the Guarantor substantially in the form of schedule 1 of the Guarantee to be provided no later than 30 September 2010.
2. A survey report addressed to the Agent and the Lenders, stated to be for the purposes of this Agreement and dated and to be provided within 250 days from the date of the first Drawdown Date, from an independent marine surveyor selected by the Agent in respect of the physical condition of each Relevant Ship in respect to which the first Drawdown Date relates.
3. Documentary evidence that the Borrower has entered into certain interest rate hedging transactions under the Master Agreement within 250 days from the date of this Agreement.
4. a Copy of the Managers Undertaking to be executed by the Approved Commercial Manager in favour of the Security Trustee (and attaching a copy of the relevant Management Agreement) in the terms required by the Agent agreeing certain matters in relation to the management of each Relevant Ship and subordinating the rights of the Approved Commercial Manager against each Relevant Ship to the rights of the Creditor Parties under the Finance Documents to be provided no later than 30 November 2010.
SCHEDULE 4
TRANSFER CERTIFICATE
The Transferor and the Transferee accept exclusive responsibility for ensuring that this Certificate and the transaction to which it relates comply with all legal and regulatory requirements applicable to them respectively.
To: Standard Chartered Bank (Hong Kong) Limited for itself and for and on behalf of the Borrower, each Security Party, the Security Trustee, each Lender and each Swap Bank, as defined in the Loan Agreement referred to below.
1 This Certificate relates to a loan agreement (the Loan Agreement ) dated [ · ] 2010 and made between (1) Island View Shipping International Pte. Ltd. (the Borrower ), (2) the banks and financial institutions named therein as Lenders, (3) the banks and financial institutions named thereto as Swap Banks, (4) Standard Chartered Bank (Hong Kong) Limited as Agent and (5) Standard Chartered Bank (Hong Kong) Limited as Security Trustee for a term loan facility of US$50,000,000.
2 In this Certificate, terms defined in the Loan Agreement shall, unless the contrary intention appears, have the same meanings and:
Relevant Parties means the Agent, the Borrower, each Security Party, the Security Trustee, each Lender and each Swap Bank;
Transferor means [full name] of [lending office]; and
Transferee means [full name] of [lending office].
3 The effective date of this Certificate shall be the later of the Proposed Transfer Date: [ · ] and the date on which this Transfer Certificate is executed by the Agent..
4 The Transferor assigns to the Transferee absolutely all rights and interests (present, future or contingent) which the Transferor has as Lender under or by virtue of the Loan Agreement and every other Finance Document in relation to [ · ] per cent. of its Contribution, which percentage represents [an aggregate of] $[ · ].
5 By virtue of this Certificate and Clause 26 of the Loan Agreement, the Transferor is discharged [entirely from its Commitment which amounts to $[ · ]] [from [ · ] per cent. of its Commitment, which percentage represents $[ · ]] and the Transferee acquires a Commitment of $[ · ].
6 The Transferee undertakes with the Transferor and each of the Relevant Parties that the Transferee will observe and perform all the obligations under the Finance Documents which Clause 26 of the Loan Agreement provides will become binding on it upon this Certificate taking effect.
7 The Agent, at the request of the Transferee (which request is hereby made) accepts, for the Agent itself and for and on behalf of every other Relevant Party, this Certificate as a Transfer Certificate taking effect in accordance with Clause 26 of the Loan Agreement.
8 The Transferor:
(a) warrants to the Transferee and each Relevant Party that:
(i) the Transferor has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which are in connection with this transaction; and
(ii) this Certificate is valid and binding as regards the Transferor;
(b) warrants to the Transferee that the Transferor is absolutely entitled, free of encumbrances, to all the rights and interests covered by the assignment in paragraph 4; and
(c) undertakes with the Transferee that the Transferor will, at its own expense, execute any documents which the Transferee reasonably requests for perfecting in any relevant jurisdiction the Transferees title under this Certificate or for a similar purpose.
9 The Transferee:
(a) confirms that it has received a copy of the Loan Agreement and each of the other Finance Documents;
(b) agrees that it will have no rights of recourse on any ground against either the Transferor, the Agent, the Security Trustee, any Lender or any Swap Bank in the event that:
(i) any of the Finance Documents prove to be invalid or ineffective,
(ii) any Borrower or any Security Party fails to observe or perform its obligations, or to discharge its liabilities, under any of the Finance Documents;
(iii) it proves impossible to realise any asset covered by a Security Interest created by a Finance Document, or the proceeds of such assets are insufficient to discharge the liabilities of the Borrowers or Security Party under the Finance Documents;
(c) agrees that it will have no rights of recourse on any ground against the Agent, the Security Trustee, any Lender or any Swap Bank in the event that this Certificate proves to be invalid or ineffective;
(d) warrants to the Transferor and each Relevant Party that:
(i) it has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which it needs to take or obtain in connection with this transaction; and
(ii) this Certificate is valid and binding as regards the Transferee; and
(e) confirms the accuracy of the administrative details set out below regarding the Transferee.
10 The Transferor and the Transferee each undertake with the Agent and the Security Trustee severally, on demand, fully to indemnify the Agent and/or the Security Trustee in respect of any claim, proceeding, liability or expense (including all legal expenses) which they or either of them may incur in connection with this Certificate or any matter arising out of it, except such as are shown to have been mainly and directly caused by the gross and culpable negligence or dishonesty of the Agents or the Security Trustees own officers or employees.
11 The Transferee shall repay to the Transferor on demand so much of any sum paid by the Transferor under paragraph 10 as exceeds one-half of the amount demanded by the Agent or the Security Trustee in respect of a claim, proceeding, liability or expense which was not reasonably foreseeable at the date of this Certificate; but nothing in this paragraph
shall affect the liability of each of the Transferor and the Transferee to the Agent or the Security Trustee for the full amount demanded by it.
[Name of Transferor] |
[Name of Transferee] |
|
|
By: |
By: |
|
|
Date: |
Date: |
Agent
Signed for itself and for and on behalf of itself
as Agent and for every other Relevant Party
[Name of Agent] |
|
|
|
By: |
|
|
|
Date: |
|
Administrative Details of Transferee
Name of Transferee:
Lending Office:
Contact Person
(Loan Administration Department):
Telephone:
Fax:
Email:
Contact Person
(Credit Administration Department):
Telephone:
Fax:
Email:
Account for payments:
Note : This Transfer Certificate alone may not be sufficient to transfer a proportionate share of the Transferors interest in the security constituted by the Finance Documents in the Transferors or Transferees jurisdiction. It is the responsibility of each Lender to ascertain whether any other documents are required for this purpose.
SCHEDULE 5
DESIGNATION NOTICE
Standard Chartered Bank (Hong Kong) Limited
11/F., Standard Chartered Tower
388 Kwun Tong Road, Kwun Tong,
Hong Kong
Attention: Anita Ip/Rebecca Yung
[Date]
Dear Sirs
Loan Agreement dated [ · ] 2010 made between (amongst others) (i) Island View Shipping International Pte. Ltd. as Borrower and (ii) yourselves as Agent in respect of a term loan facility of $50,000,000 (the Loan Agreement).
We refer to:
1 the Loan Agreement;
2 the Master Agreement dated [ · ] made between ourselves and [ · ] (acting through its office at [ · ], the Swap Bank ); and
3 a Confirmation (as defined in the said Master Agreement) delivered pursuant to the said Master Agreement and addressed by the Swap Bank to us.
In accordance with the terms of the Loan Agreement, we confirm that the Transaction evidenced by it complies with the requirements to be, and is hereby designated as, a Secured Transaction for the purposes of the Loan Agreement and the Finance Documents.
Yours faithfully,
.................................................
for and on behalf of
Island View Shipping International Pte. Ltd.
SCHEDULE 6
FORM OF COMPLIANCE CERTIFICATE
To: Standard Chartered Bank (Hong Kong) Limited
11/F., Standard Chartered Tower
388 Kwun Tong Road, Kwun Tong,
Hong Kong
Attention: Anita Ip/Rebecca Yung
From: Island View Shipping International Pte. Ltd.
[Date]
OFFICERS CERTIFICATE
This Certificate is rendered pursuant to clause 11.6(c) of the loan agreement dated [ · ] 2010 (the Loan Agreement ) and entered into between (amongst others) (i) Island View Shipping International Pte. Ltd. as Borrower (the Company) and (ii) yourselves as Agent, relating to a term loan facility of US$50,000,000. Words and expressions defined in the Loan Agreement shall have the same meanings when used herein.
I, [ · ], [and we [ · ], the duly appointed auditors of the Company] 1 hereby certify that:
1 Attached to this Certificate are the latest [audited consolidated financial statements of the Borrower for the financial year ending on [ · ]] [unaudited consolidated semi-annual financial statements of the Borrower in relation to the first half of the financial year ending on [ · ]] (the Accounts ).
2 The Accounts satisfy the requirements of Clause 11.7 of the Loan Agreement.
3 As at [ · ] the Debt Service Cover Ratio is [ · ];
Accordingly, the Company [is] [is not] in compliance with Clause 12.4 of the Loan Agreement.
4 As at the date of this Certificate, no Event of Default has occurred which is continuing.
[ or, specify/identify any Event of Default ]
Chief financial officer
ISLAND VIEW SHIPPING INTERNATIONAL PTE. LTD.
[Auditors of the Company ]
1 required in relation to annual Audited accounts only
SCHEDULE 7
SHIPS
|
Vessel Name |
Owner |
GRT/NRT |
IMO Number |
year, and port of registry |
1 |
IVS KANDA |
IVS Bulk Owning Pte. Ltd. |
19885/11140 |
9295567 |
2004, Singapore |
2 |
IVS NIGHTJAR |
IVS Bulk Carriers Pte. Ltd. |
20283/10227 |
9303429 |
2004, Singapore |
3 |
IVS SENTOSA |
IVS Bulk 603 Pte. Ltd. |
20809/11689 |
9528005 |
2010, Singapore |
4 |
IVS KNOT |
IVS Bulk 511 Pte. Ltd. |
[ · ] |
9459137 |
2010, Singapore |
5 |
IVS ORCHARD |
[ · ] |
[ · ] |
9528029 |
[ · ] |
SCHEDULE 8
EXISTING INDEBTEDNESS AND EXISTING SECURITY INTEREST
SCHEDULE 8 |
|
|
|
EXISTING INDEBTEDNESS AND SECURITY INTERESTS |
|
|
|
|
|
|
|
|
|
|
|
GRINDROD GROUP DEBTORS AND CREDITORS AS AT 30 JUNE 2010 |
|
|
|
|
|
|
|
|
|
|
|
Grindrod Trading and Shipping Limited |
|
$15,110 |
|
Swallow Enterprises |
|
$7,556 |
|
IVS a div of Grindrod Shipping (SA) |
|
-$6,795,109 |
|
Grindrod Limited |
|
-$1,499,272 |
|
Unicorn Shipping a div of Grindrod Shipping (SA) |
|
$11,073 |
|
Atlas Trading and Shipping SA a division of Grindrod Trading (Pty) Ltd |
|
$317,101 |
|
Cockett Marine Oil Asia a div of Grindrod Trading (Asia) Pte Ltd |
|
$3,629,185 |
|
Grindrod Mauritius |
|
-$527,582 |
|
Unicorn Shipping Holdings International |
|
$1,573 |
|
Comshipco |
|
$182,059 |
|
Grindrod Trading and Bunkers |
|
$2,045,785 |
|
|
|
-$2,612,520 |
|
|
|
|
|
|
|
|
|
Loan in respect of cash received for preference shares, plus interest |
|
R 175,000,000 |
|
Term loan from Royal Bank of Scotland secured inter alia by a pledge of shares in Unicorn Tanker Holdings Limited and mortgages over Nyathi and Oliphant with an additional USD20 million revolving credit element.
Cross currency swaps in respect of this Royal Bank of Scotland loan.
Revolving credit facility with Credit Agricole for $25m secured inter alia by mortgages over Inyala and cession of the IVS Kittiwake charter.
Term loan facility from Rabobank secured inter alia by mortgages over Beringzee, Oostzee and Noordzee
General banking facilities from GE Artesia Bank secured inter alia by stock in trade.
Term loan from Mitsui & Co Financial Services (Asia) secured inter alia by mortgage over Lake TriView and shareholder guarantees.
Term loan from Bank of Tokyo Mitsubishi UFJ secured inter alia by mortgage over Imabari Hull 707 and Imabari Hull 708 (to be delivered) and shareholder guarantees.
Initial and variation margin accounts held with MF Global Inc for clearing of FFA trades, which varies from time to time, and in respect of which indebtedness arises under hedge accounting of Freight Forward Agreements.
Investec |
|
R 251,400,000 |
|
ABSA |
|
R 401,000,000 |
|
|
|
R 2,257,000,000 |
|
Guarantees issued to Grindrod Limited on a back-to-back basis for guarantees issued by Grindrod Limited for liabilities of the Grindrod Shipping Limited group including
- guarantees to owners for charter hire commitments including on
IVS KITE
IVS KESTREL
IVS KWELA
IVS KWAITO
IVS KAWANA
IVS KITTIWAKE
LAURETTA
BUMBI
PAOLA
IVS MERLOT
IVS PINOTAGE
IVS KINGBIRD
IVS SHIKRA
IVS CABERNET
STOLT ZULU
STOLT BASUTO
STOLT SWAZI
STOLT PONDO
LEOPARD
IMABARI SZ276
Guarantees issued by Grindrod Shipping Limited group companies for liabilities incurred by the Grindrod Shipping Ltd group in the normal course of its business, such as performance guarantees issued on behalf of special purpose entites.
A facility for USD25m currently under negotiation in the name of Petrochemical Shipping Limited to be secured inter alia by mortgages over Berg and Lavela
SCHEDULE 9
CONTRACT COVER SUMMARY
Contracted out at [31 December
|
Bulk Carriers |
Tankers |
|
|
|||||
Handysize |
Panamax |
Capesize |
MR |
Chemical |
Small |
% Of Fleet
|
Charters
|
||
[ year ] |
No. Ships (average) |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
|
Revenue (USD/day) |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ year ] |
No. Ships (average) |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
|
Revenue (USD/day) |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ year ] |
No. Ships (average) |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
|
Revenue (USD/day) |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ year ] |
No. Ships (average) |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
|
Revenue (USD/day) |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ year ] |
No. Ships (average) |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
|
Revenue (USD/day) |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
[ · ] |
EXECUTION PAGES
BORROWER
SIGNED by |
) |
/s/ Gerard Christopher |
Gerard Christopher Kingsley-Wilkins |
) |
Kingsley-Wilkins |
for and on behalf of |
) |
|
ISLAND VIEW SHIPPING |
) |
|
INTERNATIONAL PTE. LTD. |
) |
|
in the presence of: |
) |
|
LENDERS |
|
|
|
|
|
SIGNED by |
) |
|
Leon Koay |
) |
/s/ Leon Koay |
for and on behalf of |
) |
|
STANDARD CHARTERED BANK |
) |
|
in the presence of: |
) |
AGENT |
|
|
|
|
|
SIGNED by |
) |
|
Russel Trevor Michael Beardmock |
) |
/s/ Russel Trevor |
for and on behalf of |
) |
Michael Beardmock |
STANDARD CHARTERED BANK (HONG KONG) LIMITED |
) |
|
in the presence of: |
) |
|
SECURITY TRUSTEE |
|
|
|
|
|
SIGNED by |
) |
|
Russel Trevor Michael Beardmock |
) |
/s/ Russel Trevor |
for and on behalf of |
) |
Michael Beardmock |
STANDARD CHARTERED BANK (HONG KONG) LIMITED |
) |
|
in the presence of: |
) |
|
SWAP BANKS |
|
|
|
|
|
SIGNED by |
) |
|
Leon Koay |
) |
/s/ Leon Koay |
for and on behalf of |
) |
|
STANDARD CHARTERED BANK |
) |
|
in the presence of: |
) |
EXECUTION VERSION
Dated 13 December 2011
GRINDROD SHIPPING PTE. LTD.
as Borrower
- and -
IVS BULK OWNING PTE. LTD.
IVS BULK CARRIERS PTE. LTD.
IVS BULK 603 PTE. LTD.
as Owners
THE BANKS AND FINANCIAL INSTITUTIONS
listed in Part A of Schedule 1
as Lenders
- and -
THE BANKS AND FINANCIAL INSTITUTIONS
listed in Part B of Schedule 1
as Swap Banks
- and -
STANDARD CHARTERED BANK (HONG KONG) LIMITED
as Agent
and as Security Trustee
__________________________________
SUPPLEMENTAL AGREEMENT
__________________________________
relating to a loan agreement dated 26 August 2010
Watson Farley & Williams
Asia Practice
INDEX
Clause |
Page |
||
|
|
||
|
|
||
1 |
INTERPRETATION |
2 |
|
|
|
|
|
2 |
AGREEMENT OF THE CREDITOR PARTIES |
2 |
|
|
|
|
|
3 |
CONDITIONS PRECEDENT |
2 |
|
|
|
|
|
4 |
REPRESENTATIONS AND WARRANTIES |
3 |
|
|
|
|
|
5 |
AMENDMENTS TO ORIGINAL LOAN AGREEMENT, OTHER FINANCE DOCUMENTS AND THE MASTER AGREEMENT |
4 |
|
|
|
|
|
6 |
FURTHER ASSURANCES |
9 |
|
|
|
|
|
7 |
FEES AND EXPENSES |
10 |
|
|
|
|
|
8 |
COMMUNICATIONS |
10 |
|
|
|
|
|
9 |
SUPPLEMENTAL |
10 |
|
|
|
|
|
10 |
LAW AND JURISDICTION |
11 |
|
|
|
|
|
SCHEDULE 1 |
12 |
||
|
|
|
|
PART A LENDERS |
12 |
||
|
|
|
|
PART B SWAP BANKS |
13 |
||
|
|
|
|
EXECUTION PAGES |
14 |
THIS AGREEMENT is made on 13 December 2011
BETWEEN
(1) GRINDROD SHIPPING PTE. LTD. formerly named Island View Shipping International Pte. Ltd. , a company incorporated in Singapore whose registered office is at 200 Cantonment Road, #03-01, Southpoint, Singapore 089763 as borrower (the Borrower );
(2) IVS BULK OWNING PTE. LTD. , IVS BULK CARRIERS PTE. LTD. , IVS BULK 603 PTE. LTD. , each being a company incorporated in Singapore and each having its registered office at 200 Cantonment Road, #03-01, Southpoint, Singapore 089763 as owners (the Owners );
(3) THE BANKS AND FINANCIAL INSTITUTIONS listed in Part A of Schedule 1, as Lenders ;
(4) THE BANKS AND FINANCIAL INSTITUTIONS listed in Part B of Schedule 1, as Swap Banks ;
(5) STANDARD CHARTERED BANK (HONG KONG) LIMITED , as Agent ; and
(6) STANDARD CHARTERED BANK (HONG KONG) LIMITED , as Security Trustee .
BACKGROUND
(A) By a loan agreement dated 26 August 2010 and made between (i) the Borrower, (ii) the Lenders, (iii) the Agent, (iv) the Security Trustee and (v) the Swap Banks, the Lenders have made available to the Borrower a facility of up to US$50,000,000 upon the terms and conditions contained therein.
(B) The Borrower has requested, and the Creditor Parties have agreed to:
(i) the issue of 1 (one) additional share in the Borrower to the Guarantor for an amount of US$24,000,000 on 30 September 2010 and the issue of 1 (one) additional share in the Borrower to the Guarantor for an amount of US$221,076,166, credited (inter alia) against certain loan accounts relating to the sale of Unicorns business and assets to the Borrower (and its subsidiaries) and which as a result of such issuance, the share capital of the Borrower shall be US$329,104,686,71 divided into 101,003 registered shares;
(ii) release Grindrod Shipping from its obligations and liabilities under the Finance Documents to which it is a party;
(iii) the amendment to the financial covenants of the Borrower in the Original Loan Agreement in consideration of the Creditor Parties agreeing to the items listed at (i) to (iii) above; and
(iv) amend and supplement the Original Loan Agreement, the other Finance Documents, and the Master Agreement to reflect the agreement of the Creditor Parties referred to at (i) to (iii) above, together with all consequential amendments in relation thereto.
IT IS AGREED as follows:
1 INTERPRETATION
1.1 Defined expressions. Words and expressions defined in the Original Loan Agreement shall have the same meanings when used in this Agreement (including the Recitals) unless the context otherwise requires.
1.2 Definitions. In this Agreement, unless the contrary intention appears:
Effective Date means the date on which the Agent notifies the Borrower that the conditions precedent in Clause 3 ( Conditions Precedent ) are satisfied;
Finance Documents has the same meaning given to it in the Original Loan Agreement;
Grindrod Shipping means Grindrod Shipping Limited, a company incorporated in the Isle of Man whose registered office is at PO Box 166, 4 th Floor, One Circular Road, Douglas, Isle of Man 1M99 3NZ;
Loan Agreement means the Original Loan Agreement as amended and supplemented by this Agreement;
Master Agreement means the master agreement (on the 2002 ISDA (Multicurrency Crossborder) form) and the schedule thereto each dated 30 August 2010 and entered between the Borrower and the Swap Bank to hedge the Borrowers floating interest rate exposure under the Original Loan Agreement to interest rate fluctuations;
Original Loan Agreement means the loan agreement dated 26 August 2010 referred to in Recital (A); and
Share Issue Date means the date on which 1 (one) additional share in the Borrower is issued to Grindrod Shipping for an amount of US$221,076,166.
1.3 Application of construction and interpretation provisions of the Original Loan Agreement. Clauses 1.2 ( Construction of certain terms ) and 1.5 ( General Interpretation ) of the Original Loan Agreement apply, with any necessary modifications, to this Agreement.
2 AGREEMENT OF THE CREDITOR PARTIES
2.1 Agreement of the Creditor Parties. The Creditor Parties agree, at the request of the Borrower, subject to and upon the terms and conditions of this Agreement, to:
(a) the matters described in Recital (B) which for the avoidance of doubt, includes, but is not limited to the cancellation of the Guarantee;
(b) the amendments to the Original Loan Agreement, the other Finance Documents and the Master Agreement which are set out in Clause 5 ( Amendments to Original Loan Agreement, the other Finance Documents and the Master Agreement ) of this Agreement; and
(c) the consequential amendment of the Finance Documents and the Master Agreement, in connection with the matters set out at (a) and (b) above.
3 CONDITIONS PRECEDENT
3.1 General. The agreement of the Lenders and the other Creditor Parties contained in Clause 2.1 ( Agreement of the Creditor Parties ) is subject to the fulfilment of the conditions precedent in Clause 3.2 ( Conditions precedent ).
3.2 Conditions precedent. The conditions referred to in Clause 3.1 ( General ) are that the Agent shall have received the following documents and evidence in all respects in form and substance reasonably satisfactory to it on or before 23 December 2011 or such later date as the Agent may agree with the Borrower and the Owners:
(a) copies of any amendments, modifications, revisions or supplements made to the constitutional documents of the Borrower and each Owner since the date that they were provided under Clause 9.1(a) of the Original Loan Agreement;
(b) copies of resolutions of the directors and (only if required under the relevant laws) the shareholders of the Borrower and each Owner duly authorising the execution of this Agreement, and duly appointing relevant persons to execute this Agreement on behalf of the Borrower and each Owner;
(c) the original of any power of attorney under which this Agreement is executed on behalf of the Borrower and each Owner;
(d) if the Share Issue Date falls before 23 December 2011, documentary evidence that the Borrower has a share capital of US$329,104,686,71 divided into 101,003 registered shares all of which shares have been issued in registered form and fully paid to, and are legally and beneficially owned by and registered in the name of Grindrod Shipping free of any Security Interest;
(e) copies of all consents which the Borrower and each Owner requires to enter into, or make any payment under, this Agreement;
(f) a duly executed original of this Agreement duly executed by the parties hereto and, where required under the relevant laws or for the purposes of effecting any registrations, perfection or security or other actions required under the terms of the Finance Documents and/or the Master Agreement;
(g) favourable legal opinions from legal counsel appointed by the Agent on such matters concerning the laws of Singapore and such other relevant jurisdictions as the Agent may reasonably require;
(h) any further opinions, consents, agreements and documents in connection with this Agreement, the Finance Documents and the Master Agreement which the Agent may reasonably request by notice to the Borrower;
(i) the Agent has received all accrued fees and expenses referred to in Clause 20 ( Fees and Expenses ) of the Loan Agreement;
(j) documentary evidence that the agent for service of process named in the Finance Documents (as amended and restated by this Agreement) has accepted its appointment; and
(o) certified copies of any copy document required under this Clause 3.2 ( Conditions precedent ) that the Agent may require, each to be certified as a true and up to date copy by a director or the secretary (or equivalent officer) of the Borrower or (as the case may be) the relevant Owner.
4 REPRESENTATIONS AND WARRANTIES
4.1 Repetition of representations and warranties. The Borrower represents and warrants to the Creditor Parties that the representations and warranties in clause 10 ( Representations and Warranties ) of the Loan Agreement, as updated with appropriate modifications to refer to this Agreement, remain true and not misleading if repeated on the date of this Agreement with reference to the circumstances now existing.
4.2 Repetition of Finance Document representations and warranties. The Borrower and each Owner represents and warrants to the Creditor Parties that the representations and warranties in the Finance Documents (other than the Original Loan Agreement) and the Master Agreement to which it is a party, as amended and supplemented by this Agreement and updated with appropriate modifications to refer to this Agreement, remain true and not misleading if repeated on the date of this Agreement with reference to the circumstances now existing.
4.3 Borrower representations and warranties. The Borrower and each Owner further represents and warrants to the Creditor Parties on the date of this Agreement and at the Effective Date that no Event of Default has occurred and none of the mandatory prepayment events under Clauses 8.8 ( Mandatory prepayment on sale or Total Loss ) or 8.9 ( Mandatory prepayment on change of control ) of the Original Loan Agreement has occurred.
4.4 Repetition. The representations and warranties in this Clause 4 ( Representations and Warranties ) shall be deemed to be repeated by each relevant Security Party (as defined in the Loan Agreement) on the last day of each Interest Period throughout the Security Period as if made with reference to the facts and circumstances existing at such a date.
5 AMENDMENTS TO ORIGINAL LOAN AGREEMENT, OTHER FINANCE DOCUMENTS AND THE MASTER AGREEMENT
5.1 Specific amendments to Original Loan Agreement. With effect on and from the Effective Date, the Original Loan Agreement shall be amended as follows:
(a) The definition of Finance Documents in clause 1.1 ( Definitions ) of the Loan Agreement shall be amended such that:
(i) paragraph (c) of that definition shall be deleted; and
(ii) paragraph (i) of that definition shall be deleted and replaced with the following:
(i) the Supplemental Agreement;;
(b) The following new definitions shall be inserted in alphabetical order in clause 1.1 ( Definitions ) of the Loan Agreement and all references to such definitions throughout the Finance Documents wherever it appears shall be construed accordingly:
Grindrod Shipping means Grindrod Shipping Limited, a company incorporated in the Isle of Man whose registered office is at PO Box 166, 4 th Floor, One Circular Road, Douglas, Isle of Man 1M99 3NZ;
Share Issue Date means the date on which 1 (one) additional share in the Borrower is issued to Grindrod Shipping;
Supplemental Agreement means the supplemental agreement dated 13 December 2011 entered into between the parties to this Agreement and each Owner in relation to (inter alia) the Creditor Parties consent to the release of certain obligations owed to them by Grindrod Shipping including, but not limited to:
(i) a guarantee dated 26 August 2010 and entered into by Grindrod Shipping in favour of the Security Trustee and;
(ii) a negative pledge dated 26 August 2010 and entered into by Grindrod Shipping in favour of the Security Trustee.;
(c) All references to Guarantee (save for when any such reference is to Owner Guarantee), Negative Pledge and Guarantor in the Original Loan Agreement shall be deleted in entirety except that:
(i) the word Guarantor shall be deleted and replaced by the words Grindrod Shipping in Clause 11.4(c) ( No other liabilities or obligations to be incurred ); and
(ii) the word Guarantor shall be deleted and replaced with the word Borrower in Clause 8.9 ( Mandatory prepayment on change of control ) of the Original Loan Agreement.
(d) Clause 10.3 ( Share Capital and Ownership ) shall be deleted in its entirety and replaced with the following new clause:
10.3 Share Capital and Ownership . It has:
(i) up to an excluding the Share Issue Date, a share capital of US$108,028,520.71 divided into 101,002 registered shares of all of which shares have been issued in registered form and fully paid to, and are legally and beneficially owned by and registered in the name of Grindrod Shipping free of any Security Interest; and
(ii) on and from the Share Issue Date, a share capital of US$329,104,686.71 divided into 101,003 registered shares of all of which shares have been issued in registered form and fully paid to, and are legally and beneficially owned by and registered in the name of Grindrod Shipping free of any Security Interest ,
and in each case, all such shares have been or will be issued in registered form and fully paid to the respective shareholder, free from any Security Interest.
(e) The word Borrower in the third line of each of Clause 11.6(a), and Clause 11.6(b) shall be deleted and replaced with Borrowers Group.
(f) The following new clause 11.21 shall be inserted as follows:
Evidence of change of share capital . The Borrower shall, if the Share Issue Date falls after 23 December 2011, provide the Agent with documentary evidence that the Borrower has a share capital of US$329,104,686,71 divided into 101,003 registered shares of all of which shares have been issued in registered form and fully paid to, and are legally and beneficially owned by and registered in the name of Grindrod Shipping free of any Security Interest.
(g) Clause 12.4 ( Financial Covenant ) will be deleted and replaced with the following new Clause 12.4 ( Financial Covenants ):
Financial Covenants. The Borrower will ensure that the consolidated financial position of the Borrowers Group shall at all times during the Security Period be such that:
(i) Market Adjusted Tangible Net Worth is not less than $300,000,000;
(ii) Liquidity is not less than $40,000,000 (of which at least $15,000,000 shall be in cash or cash equivalents);
(iii) the ratio of Debt to Market Adjusted Tangible Fixed Assets shall be not more than 70 per cent.; and
(iv) the ratio of Net Debt to EBITDA shall be not more than 5.5 times.
In this Clause 12.4:
Cash and Cash Equivalents means the cash and cash equivalents set out in the Latest Accounts;
Market Adjusted Tangible Net Worth means the aggregate amount (without double counting) of the following:
(i) the amounts paid up, or credited as paid up, on the issued share capital of the Borrowers Group;
(ii) any credit balance on the consolidated profit and loss account of the Borrowers Group; and
(iii) any amount standing to the credit of any other consolidated capital and revenue reserves of the Borrowers Group including any share premium account and capital redemption reserve,
less the aggregate amount (without double counting) of the following:
(i) any debt balance on the consolidated profit and loss account of the Borrowers Group; and
(ii) any reserves attributable to interests of minority shareholders in any subsidiary (whether direct or indirect) of the Borrowers Group,
all as determined in accordance with IFRS applied in the preparation of the Latest Accounts but adjusted by:
(i) deducting any dividend or other distribution declared, recommended or made by the Borrowers Group;
(ii) deducting any amount attributable to goodwill or any other intangible asset;
(iii) reflecting any variation required to be made to the asset value attributable to any ship owned by the Borrowers Group in order to reflect the fair value of any such ship;
(iv) excluding any amount attributable to deferred taxation;
(v) excluding any amount attributable to minority interests; and
(vi) eliminating inconsistencies (if any) between the acco unting principles,
Liquidity means the aggregate of (i) Cash and Cash Equivalents and (ii) freely available revolving credit facilities unrestricted by conditions relating to drawdown and with a remaining maturity of minimum 6 months as shown in the Latest Accounts;
Debt means the aggregate (without double counting) of secured or unsecured bank loans, finance lease obligations, bonds and any other financial obligations included as a liability on the balance sheet in terms of IFRS, but excluding the mark to market of swaps and other derivative instruments and excluding contingent liabilities as shown in the Latest Accounts;
Net Debt means the Debt as reduced by the amount of the cash and cash equivalents as shown in the Latest Accounts;
EBITDA means the profit before tax having added back the amount of interest paid, accrued tax, depreciation, amortisation and losses on disposal of assets and deducted the amount of interest earned and profit on disposal of assets as such amount is determined in accordance with the Latest Accounts (where such Latest Accounts are delivered pursuant to Clause 11.6(a)) or as calculated on a rolling 12 month basis (where such Latest Accounts are delivered pursuant to Clause 11.6(b));
Latest Accounts means, at any date, the audited consolidated accounts of the Borrowers Group most recently delivered to the Agent under Clause 11.6(a) or (b); and
Market Adjusted Tangible Fixed Assets means the aggregate of the book value of:
(i) ships (including ships under construction) either wholly or partially owned by the Borrowers Group; and
(ii) land and buildings either wholly or partially owned by the Borrowers Group,
as stated in the Latest Accounts adjusted by such amount to reflect the current open market value of such assets evidenced to the Agents satisfaction and acceptable to the Lenders.
In the event that the Borrower agrees more favourable financial covenants to a particular lender or lenders in relation to any other facility, the financial covenants in this Clause 12.4 shall be amended to reflect those more favourable financial covenants.
(h) Clause 30.4 shall be deleted and replaced with the following clause:
Process Agent. The Borrower hereby appoints Grindrod Shipping Services UK Ltd. at its principal place of business for the time being, presently at St Magnus House, 3 Lower Thames Street, London EC3R 6HD to act as to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with a Dispute under any Finance Document to which it is party.
(i) Item 3 of Schedule 6 shall be deleted and replaced with the following:
Set out below are the respective amounts, in US Dollars, of the Market Adjusted Tangible Net Worth, Debt, EBITDA, Market Adjusted Tangible Fixed Assets and Net Debt of the Borrowers Group as at [ l ]:
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Market Adjusted Tangible Net Worth |
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Net Debt |
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Accordingly, as at the date of this Certificate the financial covenants set out in Clause 12.4 of the Loan Agreement [are] [are not] complied with, in that as at [ l ]:
(i) Market Adjusted Tangible Net Worth is [ l ];
(ii) Liquidity is [ l ] (of which [ l ] is in cash or cash equivalents);
(iii) the ratio of Debt to Market Adjusted Tangible Fixed Assets is [ l ]; and
(iv) the ratio of Net Debt to EBITDA is [ l ] times.
[ or, as the case may be, specify in what respect any of the financial covenants are not complied with. ]
5.2 Amendments to Finance Documents. With effect on and from the Effective Date:
(a) each clause headed Process Agent in each of the Finance Documents to which an Owner is a party and which is subject to the jurisdiction of the courts of England shall be deleted and replaced with the following clause:
Process Agent. The Owner hereby appoints Grindrod Shipping Services UK Ltd. at its principal place of business for the time being, presently at St Magnus House, 3 Lower Thames Street, London, EC3R 6HD to act as to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with a Dispute.
(b) each of the Finance Documents other than the Original Loan Agreement shall be amended by the amendments contained in Clause 5.1 ( Specific amendments to Loan Agreement ) with such modifications as may be necessary to give full force and effect to the terms of this Agreement;
(c) all references throughout each of the Finance Documents to this Agreement, this Deed, hereunder and other like expressions shall be construed as if the same referred to such Finance Documents as amended and supplemented by this Agreement;
(d) all references throughout each of the Finance Documents to Finance Documents shall be construed as if the same referred to such a term as amended and supplemented by Clause 5.1 ( Specific amendments to Loan Agreement ) of this Agreement; and
(e) the definition of, and references throughout each of the Finance Documents to, the Original Loan Agreement, any of the other Finance Documents and the Master Agreement shall be construed as if the same referred to the Original Loan Agreement, those Finance Documents and the Master Agreement as amended and supplemented by this Agreement.
5.3 Amendments to Master Agreement. With effect on and from the Effective Date:
(a) the Master Agreement shall be amended by the amendments contained in Clause 5.1 ( Specific amendments to Loan Agreement ) with such modifications as may be necessary to give full force and effect to the terms of this Agreement;
(b) all references throughout the Master Agreement to this Agreement, this Deed, hereunder and other like expressions shall be construed as if the same referred to the Master Agreement as amended and supplemented by this Agreement;
(c) all references throughout the Master Agreement to Finance Documents shall be construed as if the same referred to such a term as amended and supplemented by Clause 5.1 ( Specific amendments to Loan Agreement ) of this Agreement;
(d) the word Guarantor shall be deleted and replaced with the word Borrower in Part 1(g)(iii) of the Schedule ( Partial Cancellation or Prepayment) of the Master Agreement;
(e) Part 1(g) (iv) of the Schedule ( Partial Cancellation or Prepayment) of the Master Agreement shall be deleted and replaced with the provisions set out in Clause 5.1(g); and
(f) the definition of, and references throughout the Master Agreement to, the Original Loan Agreement, to any of the other Finance Documents and the Master Agreement shall be construed as if the same referred to the Original Loan Agreement, those Finance Documents and the Master Agreement as amended and supplemented by this Agreement.
5.4 Finance Documents and Master Agreement to remain in full force and effect . The Finance Documents and the Master Agreement shall remain in full force and effect as amended and supplemented by:
(a) the amendments to the Finance Documents contained or referred to in Clauses 5.1 (Specific amendments to Original Loan Agreement) and Clause 5.2 ( Amendments to Finance Documents) and to the Master Agreement contained or referred to in Clause 5.3 (Amendments to Master Agreement) ; and
(b) such further or consequential modifications as may be necessary to give full effect to the terms of this Agreement,
and, for the avoidance of any doubt, all of the parties to this Agreement hereby confirm that neither the execution of this Agreement nor the performance of the obligations hereunder nor the amendments to the Finance Documents or the Master Agreement set out herein shall be deemed to affect in any way any existing right of any Creditor Party under the Finance Documents or the Master Agreement, any of the Security Interests constituted and granted to each of them thereunder or under the laws of any Pertinent Jurisdiction.
6 FURTHER ASSURANCES
6.1 Borrowers and Owners obligation to execute further documents etc. The Borrower and each Owner shall:
(a) execute and deliver to the Security Trustee (or as it may direct) any assignment, mortgage, power of attorney, proxy or other document, governed by the laws of England or such other country as the Security Trustee may, in any particular case, specify;
(b) effect any registration or notarisation, give any notice or take any other step,
which the Security Trustee or, the Agent in the case of any document required for the purposes of Clause 6.2(b) may, by notice to the Borrower or the relevant Owner, reasonably specify for any of the purposes described in Clause 6.2 ( Purposes of further assurances ) or for any similar or related purpose.
6.2 Purposes of further assurances. Those purposes are:
(a) validly and effectively to create any Security Interest or right of any kind which the Security Trustee intended should be created by or pursuant to the Loan Agreement, any
other Finance Document or the Master Agreement, each as amended and supplemented by this Agreement; and
(b) implementing the terms and provisions of this Agreement.
6.3 Terms of further assurances. The Security Trustee may reasonably specify the terms of any document to be executed by the Borrower and each Owner under Clause 6.1 ( Borrowers and Owners obligation to execute further documents ), and those terms may include any covenants, powers and provisions which the Security Trustee reasonably considers appropriate to protect its interests.
6.4 Obligation to comply with notice. The Borrower and each relevant Owner shall comply with a notice under Clause 6.1 ( Borrowers and Owners obligation to execute further documents etc) by the date specified in the notice.
6.5 Additional corporate action. At the same time as the Borrower or the relevant Owner delivers to the Security Trustee any document executed under Clause 6.1(a), the Borrower or the relevant Owner shall also deliver to the Security Trustee a certificate signed by one of the Borrowers or the relevant Owners directors which shall:
(a) set out the text of a resolution of the Borrowers or the relevant Owners directors specifically authorising the execution of the document specified by the Security Trustee; and
(b) state that either the resolution was duly passed at a meeting of the directors validly convened and held throughout which a quorum of directors entitled to vote on the resolution was present or that the resolution has been signed by all the directors and is valid under the Borrowers or the relevant Owners articles of association or other constitutional documents.
7 FEES AND EXPENSES
The provisions of clause 20 ( Fees and Expenses ) of the Loan Agreement, shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications and, for the avoidance of doubt, the Borrower undertakes that it shall pay to the Agent on its demand the amount of all expenses reasonably incurred by the Agent or the Security Trustee in connection with the negotiation, preparation, execution or registration of this Agreement, any Finance Document or any related document or with any transaction contemplated by such documents or a related document or with any authorised publicity or similar in respect of the transactions contemplated by such documents.
8 COMMUNICATIONS
The provisions of clause 28 ( Notices ) of the Loan Agreement, shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications.
9 SUPPLEMENTAL
9.1 Counterparts. This Agreement may be executed in any number of counterparts.
9.2 Third party rights. 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.
9.3 One agreement . This Agreement shall be read and construed as a supplement to, and shall form part of, the Original Loan Agreement, each other Finance Document and the Master Agreement.
10 LAW AND JURISDICTION
10.1 Governing law. This Agreement and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.
10.2 Incorporation of the Loan Agreement provisions. The provisions of clause 30 ( Law and Jurisdiction ) of the Loan Agreement, shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications.
10.3 Process agent. The Borrower irrevocably appoints Grindrod Shipping Services UK Ltd. at its principal place of business for the time being, presently at St Magnus House, 8th Floor, East Wing, 3 Lower Thomas Street, London EC3R 6HD to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with a Dispute.
THIS AGREEMENT has been executed by or on behalf of the parties and has, on the date stated at the beginning of this Deed, been delivered as a Deed.
SCHEDULE 1
PART A
LENDERS
Lender |
Lending Office |
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Standard Chartered Bank |
6 Battery Road #23-00,
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PART B
SWAP BANKS
Swap Bank |
Address |
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Standard Chartered Bank |
Standard Chartered Bank @ Plaza by the Park
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EXECUTION PAGES
BORROWER |
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SIGNED, SEALED, EXECUTED and |
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DELIVERED as a DEED by |
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GRINDROD SHIPPING PTE. LTD. |
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) /s/ Hugh William Scheffer |
( formerly known as Island View Shipping |
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International Pte. Ltd. ) acting by |
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such execution being witnessed by: |
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THE OWNERS |
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SIGNED, SEALED, EXECUTED and |
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DELIVERED as a DEED by |
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IVS BULK OWNING PTE. LTD. |
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acting by |
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such execution being witnessed by: |
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SIGNED, SEALED, EXECUTED and |
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DELIVERED as a DEED by |
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IVS BULK CARRIERS PTE. LTD. |
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acting by |
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such execution being witnessed by: |
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SIGNED, SEALED, EXECUTED and |
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DELIVERED as a DEED by |
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IVS BULK 603 PTE. LTD. |
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acting by |
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such execution being witnessed by: |
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THE LENDER |
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EXECUTED and DELIVERED |
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as a DEED by |
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STANDARD CHARTERED BANK |
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acting by Knut Mathiassen |
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such execution being witnessed by: |
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Maria Martin |
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/s/ Maria Martin |
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THE SWAP BANK |
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EXECUTED and DELIVERED |
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as a DEED by |
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STANDARD CHARTERED BANK |
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acting by Knut Mathiassen |
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such execution being witnessed by: |
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Maria Martin |
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/s/ Maria Martin |
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THE AGENT AND SECURITY TRUSTEE |
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EXECUTED and DELIVERED as a DEED |
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by STANDARD CHARTERED BANK |
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(HONG KONG) LIMITED |
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in its capacity as Agent |
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and as Security Trustee |
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acting by Barry Wong |
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and |
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in the presence of: |
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Rebecca Yung |
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/s/ Rebecca Yung |
CONSENT AND AMENDMENT LETTER
To: Grindrod Shipping Pte. Ltd
200 Cantonment Road
#03-01, Southpoint
Singapore 089763
Attn:
IVS Bulk Owning Pte. Ltd.,
200 Cantonment Road
#03-01, Southpoint
Singapore 089763
Attn:
IVS Bulk Carriers Pte. Ltd.,
200 Cantonment Road
#03-01, Southpoint
Singapore 089763
Attn:
and
IVS Bulk 603 Pte. Ltd.,
200 Cantonment Road
#03-01, Southpoint
Singapore 089763
Attn:
30th November 2012
Dear Sirs
1 Background . We refer to a loan agreement dated 26 August 2010 (as supplemented by a supplemental agreement dated 13 December 2011 as so amended, and as may be further amended and/or supplemented from time to time, the Loan Agreement ) made between (i) Grindrod Shipping Pte. Ltd. (formerly named Island View Shipping International Pte. Ltd) as borrower (the Borrower ) (ii) the banks and financial institutions listed in Part A of Schedule 1 of the Loan Agreement as lenders (the Lenders ), (iii) the banks and financial institutions listed in Part B of Schedule 1 of the Loan Agreement as swap banks (the Swap Banks ), (iv) Standard Chartered Bank (Hong Kong) Limited as agent (the Agent ) and (iv) Standard Chartered Bank (Hong Kong) Limited as security trustee (the Security Trustee ) in relation to a loan facility of up to an aggregate of US$50,000,000.
2 Definition of terms. Save as otherwise defined in this Letter, terms defined in the Loan Agreement shall have the same meanings in this Letter.
3 Definitions. In this Letter, unless the contrary intention appears:
Effective Date means the date on which the Agent confirms to the Borrower that it has received the original of this Letter duly executed by all of the parties thereto.
4 Agreement of Creditor Parties . We refer to clause 27 ( Variations and Waivers) of the Loan Agreement. The Creditor Parties agree, at the request of the Borrower, subject to the terms and conditions of this Letter to:
(a) vary the minimum required security cover for the Loan;
(b) various increases in the Borrowers share capital; and
(c) the amendments to the Loan Agreement, the Finance Documents and the Master Agreement as set out in Clauses 5, 6 and 7 below, together with all consequential amendments to the Loan Agreement, Finance Documents and Master Agreement that may arise as a result of such amendments.
5 Amendments to Loan Agreement. It is hereby agreed that with effect from and on the Effective Date, the Loan Agreement shall be deemed to be amended as follows:
(a) the following new definition shall be inserted in alphabetical order in clause 1.1 ( Definitions) of the Loan Agreement and all references throughout the Finance Documents shall be construed accordingly:
Additional Share Issue Date means each date (other than the First Share Issue Date and the Second Share Issue Date) notified by the Borrower to the Agent (pursuant to clause 10.3 (iv)) on which its share capital is to be increased.
(b) the definition of Finance Documents in clause 1.1 ( Definitions ) of the Loan Agreement shall be deleted in its entirety and replaced with the following definition:
Finance Documents means:
(a) this Agreement;
(b) the Agency and Trust Deed;
(c) the Owner Guarantees;
(d) the Mortgages;
(e) the Deeds of Covenant;
(f) the General Assignments;
(g) the Account Security Deeds;
(h) the Supplemental Agreement;
(i) the Shares Pledges;
(j) the Fee Letters;
(k) the Manager Undertakings;
(l) Approved Commercial Managers Side Letter;
(m) the Supplemental Letter; and
(n) any other document (whether creating a Security Interest or not) which is executed at any time by the Borrower or any other person as security for, or to establish any form of subordination or priorities arrangement in relation to, any amount payable to the Lenders and/or the Swap Banks under this Agreement or any of the other documents referred to in this definition or as otherwise acknowledged by the Borrower as a document that falls within this definition.
(c) the following new definition shall be inserted in alphabetical order in clause 1.1 ( Definitions) of the Loan Agreement and all references throughout the Finance Documents wherever it appears shall be construed accordingly:
First Share Issue Date means the date on which 2 (two) additional shares in the Borrower is issued to Grindrod Shipping for an amount of US$221,075,966.00.
(d) the following new definition shall be inserted in alphabetical order in clause 1.1 ( Definitions ) of the Loan Agreement and all references throughout the Finance Documents wherever it appears shall be construed accordingly:
Second Share Issue Date means the date by which 3 (three) additional shares in the Borrower have been issued to Grindrod Shipping for an amount of US$68,494,690.
(e) the definition of Share Issue Date in clause 1.1 (Definitions) of the Loan Agreement shall be deleted in its entirety.
(f) the following new definition shall be inserted in alphabetical order in clause 1.1 (Definitions) of the Loan Agreement and all references throughout the Finance Documents wherever it appears shall be construed accordingly:
Supplemental Letter means the supplemental letter dated 30th November 2012 entered into by the parties to this Agreement and each Owner in relation to the Creditor Parties consent to the amendment to the minimum required security cover for the Loan.
(g) clause 10.3 ( Share capital and ownership ) shall be deleted in its entirety and replaced with the following:
10.3 Share Capital and Ownership . It has:
(i) up to an excluding the First Share Issue Date, a share capital of US$108,028,520.71 divided into 101,002 registered shares of all of which shares have been issued in registered form and fully paid to, and are legally and beneficially owned by and registered in the name of Grindrod Shipping free of any Security Interest;
(ii) on and from the First Share Issue Date, a share capital of US$329,104,486.71 divided into 101,004 registered shares of all of which shares have been issued in registered form and fully paid to, and are legally and beneficially owned by and registered in the name of Grindrod Shipping free of any Security Interest;
(iii) on and from the Second Share Issue Date, a share capital of US$397,599,176.71 divided into 101,007 registered shares all of which shares have been issued in registered form and fully paid to, and are legally and beneficially owned by and registered in the name of Grindrod Shipping free of all Security Interests; and
(iv) on and from any other Additional Share Issue Date a share capital greater than that referred to in paragraph (iii) above provided that in each case the Borrower shall provide the Agent with 5 Business Days notice of such increase
and in each case, all such shares have been or will be issued in registered form and fully paid to the respective shareholder, free from any Security Interest.
(h) clause 11.21 ( Evidence of change in share capital ) shall be deleted in its entirety and replaced with the following:
Evidence of change of share capital . The Borrower shall:
(i) if the First Share Issue Date falls after 23 December 2011, provide the Agent with documentary evidence that the Borrower has a share capital of US$329,104,486.71 divided into 101,004 registered shares of all of which shares have been issued in registered form and fully paid to, and are legally and beneficially owned by and registered in the name of Grindrod Shipping free of any Security Interest;
(ii) on or before 30 th November 2012, provide the Agent with documentary evidence that the Borrower has a share capital of US$397,599,176.71 divided into 101,007 registered shares of all of which shares have been issued in registered form and fully paid to, and are legally and beneficially owned by and registered in the name of Grindrod Shipping free of any Security Interest; and
(iii) within 10 days any Additional Share Issue Date, provide the Agent with documentary evidence of the Borrowers share capital, together with evidence that the shares have been issued in registered form and fully paid to and are legally and beneficially owned by and registered in the name of Grindrod Shipping free of any Security Interest.
(i) clause 11.20 (Valuation of Ship) shall be deleted in its entirety;
(j) the figure 154 in the final line of clause 15.1 (Minimum required security cover) shall be deleted and replaced with the figure 125; and
(k) the following new clause 15.1(c) shall be inserted:
The Borrower shall provide (at its own cost) the valuation of each Ship which is required to determine its Fair Market Value pursuant to Clause 15.5 as at 30 September of each year and as at the end of each calendar quarter thereafter throughout the Security Period within 5 Business days of each calendar quarter.
6 Amendments to Finance Documents . It is hereby agreed that with effect from and on the Effective Date, each Finance Document other than the Loan Agreement shall be deemed to be amended as follows:
(a) such that all references throughout each of the Finance Documents to this Agreement, this Deed, hereunder and other like expressions shall be construed as if the same referred to such Finance Documents as amended and supplemented by this Letter; and
(b) the definition of, and references throughout each of the Finance Documents to, the Loan Agreement, any of the other Finance Documents and the Master Agreement shall be construed as if the same referred to the Loan Agreement, those Finance Documents and the Master Agreement as amended and supplemented by this Letter.
7 Amendments to Master Agreement . It is hereby agreed that with effect from and on the Effective Date, the Master Agreement shall be deemed to be amended as follows:
(a) all references throughout the Master Agreement to this Agreement, this Deed, hereunder and other like expressions shall be construed as if the same referred to the Master Agreement as amended and supplemented by this Letter; and
(b) the definition of, and references throughout the Master Agreement to Finance Documents shall be construed as if the same referred to those Finance Documents as amended and supplemented by this Letter.
8 Repetition of representations and warranties. The Borrower represents and warrants to the Creditor Parties that the representations and warranties in clause 10 ( Representations and Warranties ) of the Loan Agreement, as updated with appropriate modifications to refer
to this Letter, remain true and not misleading if repeated on the date of this Letter with reference to the circumstances now existing.
9 Repetition of Finance Document representations and warranties. The Borrower and each Owner represents and warrants to the Creditor Parties that the representations and warranties in the Finance Documents and the Master Agreement to which it is a party, as amended and supplemented by this Letter and updated with appropriate modifications to refer to this Letter, remain true and not misleading if repeated on the date of this Letter with reference to the circumstances now existing.
10 Continuing Obligations under Finance Documents. The Loan Agreement and the other Finance Documents and the Master Agreement shall remain in full force and effect as amended and supplemented by:
(a) the amendments referred to in Clauses 5, 6 and 7 above; and
(b) such further or consequential modifications as may be necessary to give full effect to the terms of this letter:
11 Existing Rights . All of the parties to this Letter hereby confirm that neither the execution of this Letter nor the performance of the obligations hereunder nor the amendments to the Finance Documents or the Master Agreement set out herein shall be deemed to affect in any way any existing right of any Creditor Party under the Finance Documents or the Master Agreement, any of the Security Interests constituted and granted to each of them thereunder or under the laws of any Pertinent Jurisdiction.
12 Expenses. The provisions of clause 20.3 ( Costs of variations, amendments, enforcement etc. ) of the Loan Agreement (as amended and supplemented by this Letter) shall apply to this Letter as if they were expressly incorporated in this Letter with any necessary modifications.
13 Further Assurances. The Borrower shall, at the request of the Lender and at its own expense, do all such acts and things necessary or desirable to give effect to the amendments made or to be made pursuant to this letter.
14 Counterparts . This Letter may be executed in any number of counterparts and on separate counterparts, each of which when executed shall constitute an original, but all counterparts together shall together constitute one and the same instrument.
15 Third Party Rights. A person who is not a party to this letter cannot enforce or enjoy the benefit of any term of this letter under the Contracts (Rights of Third Parties) Act 1999.
16 Law and Jurisdiction . The provisions of Clause 30 ( Law and Jurisdiction ) of the Loan Agreement as amended and supplemented by this Letter shall apply to this letter as if set out in full herein save that references to this Agreement shall be construed as references to this Letter.
17 Construction of letter . This Letter shall supplement and shall be construed as forming part of the Loan Agreement and as such is deemed to be a Finance Document as defined in the Loan Agreement.
This letter has been duly executed and delivered as a Deed on the date stated at the beginning of this letter.
EXECUTED and DELIVERED |
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STANDARD CHARTERED BANK (HONG KONG) LIMITED |
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EXECUTED and DELIVERED |
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STANDARD CHARTERED BANK |
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as Lender |
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EXECUTED and DELIVERED |
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STANDARD CHARTERED BANK |
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as Swap Bank |
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Acknowledged and agreed: |
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BORROWER |
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SIGNED, SEALED, EXECUTED and |
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DELIVERED as a DEED by |
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GRINDROD SHIPPING PTE. LTD. |
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International Pte. Ltd. ) acting by |
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THE OWNERS |
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IVS BULK OWNING PTE. LTD. |
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IVS BULK CARRIERS PTE. LTD. |
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IVS BULK 603 PTE. LTD. |
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Execution version
Dated 31 May 2016
SUPPLEMENTAL AGREEMENT NO. 2 TO TERM LOAN FACILITY
GRINDROD SHIPPING PTE. LTD.
as Borrower
IVS BULK OWNING PTE. LTD.
IVS BULK CARRIERS PTE. LTD.
IVS BULK 603 PTE. LTD.
as Original Owners
IVS BULK 612 PTE. LTD.
as New Owner
STANDARD CHARTERED BANK (HONG KONG) LIMITED
as Agent
STANDARD CHARTERED BANK (HONG KONG) LIMITED
as Security Trustee
STANDARD CHARTERED BANK
as Lender
and
STANDARD CHARTERED BANK
as Swap Bank
relating to
a term loan facility of up to US$50,000,000 for
general corporate purposes
Index
Clause |
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1 |
Definitions and Interpretation |
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Agreement of the Finance Parties |
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Conditions Precedent |
4 |
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Conditions Subsequent |
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5 |
Representations |
5 |
6 |
Amendments to Loan Agreement and other Finance Documents |
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7 |
Further Assurance |
10 |
8 |
Costs and Expenses |
11 |
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Notices |
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10 |
Counterparts |
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Governing Law |
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Enforcement |
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Schedules |
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Schedule 1 The Lenders |
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Schedule 2 The Swap Banks |
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Schedule 3 Conditions Precedent |
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Execution |
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Execution Pages |
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THIS AGREEMENT is made on 31 May 2016
PARTIES
(1) GRINDROD SHIPPING PTE. LTD. (formerly known as ISLAND VIEW SHIPPING INTERNATIONAL PTE. LTD. ), a company incorporated under the laws of Singapore whose registered office is at 200 Cantonment Road, #03-01 Southpoint, Singapore 089763 (the Borrower );
(2) IVS BULK OWNING PTE. LTD. , a company incorporated under the laws of Singapore whose registered office is at 200 Cantonment Road, #03-01 Southpoint, Singapore 089763 (the Owner 1 ), IVS BULK CARRIERS PTE. LTD. , a company incorporated under the laws of Singapore whose registered office is at 200 Cantonment Road #03-01 Southpoint, Singapore 089763 (the Owner 2 ) and IVS BULK 603 PTE. LTD. , a company incorporated under the laws of Singapore whose registered office is at 200 Cantonment Road, #03-01 Southpoint, Singapore 089763 (the Owner 3 ) and collectively with Owner 1 and Owner 2 (the Original Owners );
(3) IVS BULK 612 PTE. LTD. , a company incorporated under the laws of Singapore whose register office is at 200 Cantonment Road, #03-01 Southpoint, Singapore 089763 (the New Owner );
(4) THE FINANCIAL INSTITUTIONS listed in Schedule 1 ( The Lenders ) as lenders (the Lenders );
(5) THE FINANCIAL INSTITUTIONS listed in Schedule 2 ( The Swap Banks) as swap banks (the Swap Banks );
(6) STANDARD CHARTERED BANK (HONG KONG) LIMITED as agent of the other Creditor Parties (the Agent ); and
(7) STANDARD CHARTERED BANK (HONG KONG) LIMITED as security trustee for the Creditor Parties (the Security Trustee ).
BACKGROUND
(A) By the Loan Agreement, the Lenders agreed to make available to the Borrower a facility of up to US$50,000,000 of which US$20,200,000 is outstanding at the date of this Agreement.
(B) Clause 15.2 ( Provision of additional security; prepayment ) of the Loan Agreement provides that if the Agent (acting on the instructions of the Majority Lenders) serves a notice on the Borrower that (a) the aggregate Fair Market Value of each Ship; plus (b) the net realisable value of any additional security previously provided by the Borrower under clause 15 ( Security cover ) of the Loan Agreement is below 125 percent of the Loan (the Shortfall ), the Borrower shall provide or ensure that a third party provides, additional security which, in the opinion of the Majority Lenders, has a net realisable value at least equal to the Shortfall.
(C) This Agreement sets out the terms and conditions on which the Lenders and the other Creditor Parties agree, with effect on and from the Effective Date, at the request of the Security Parties, to:
(a) the provision by the New Owner of additional security of a net realisable value at least equal to the Shortfall;
(b) amend the frequency of the Borrowers provision of the valuation of each Ship which is required to determine its Fair Market Value; and
(c) incorporate certain provisions into the Loan Agreement relating to the US Internal Revenue Code
and to the consequential amendment of the Loan Agreement and the other Finance Documents in connection with those matters.
OPERATIVE PROVISIONS
1 DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement:
Additional Account Security Deed means in relation to the account in the name of the New Owner with the Account Bank in London designated as the Earnings Account for the New Owner executed or to be executed by the New Owner in favour of the Security Trustee and of each document to be delivered under it.
Additional Approved Technical Managers Undertaking means in relation to the Approved Technical Managers interests in the Additional Ship, an undertaking executed by the Approved Technical Manager and the Borrower in favour of the Agent.
Additional Approved Commercial Managers Undertaking means in relation to the Approved Commercial Managers interests in the Additional Ship, an undertaking executed by the Approved Commercial Manager in favour of the Agent.
Additional Deed of Covenant means in relation to the Additional Ship, a deed of covenant collateral to the Additional Mortgage executed or to be executed by the New Owner in favour of the Security Trustee.
Additional Finance Documents means this Agreement, the Additional Account Security Deed, the Pool Managers Undertaking, the Additional Deed of Covenant, the Additional General Assignment, the Additional Approved Technical Managers Undertaking, the Additional Approved Commercial Managers Undertaking the Additional Mortgage, the Additional Shares Pledge and the Additional Owner Guarantee.
Additional General Assignment means in relation to the Additional Ship, an assignment of its Earnings, its Insurances, any Requisition Compensation relating to it as executed or to be executed by the New Owner in favour of the Security Trustee.
Additional Mortgage means the first priority Singapore ship mortgage on the Additional Ship executed or to be executed by the New Owner in favour of the Security Trustee.
Additional Owner Guarantee means, in relation to the New Owner, a guarantee of the liabilities of the Borrower under the Loan Agreement and the Master Agreement executed or to be executed by the New Owner in favour of the Security Trustee.
Additional Shares Pledge means a pledge of the entire share capital in the New Owner to be executed by the Borrower in favour of the Security Trustee.
Effective Date means the date on which the conditions precedent in Clause 3 ( Conditions Precedent ) are satisfied.
IVS Raffles means the vessel IVS RAFFLES documented in the name of the New Owner under the laws and flag of Singapore under IMO 9620138 and includes any share or interest in that vessel and its engines, machinery, boats, tackle, outfit, spare gear, fuel, consumable or other stores, belongings and appurtenances whether on board or ashore and whether now owned or hereafter acquired.
Loan Agreement means the Loan Agreement dated 26 August 2010 as amended and supplemented pursuant to a supplemental agreement dated 13 December 2011 and by a supplemental letter dated 30 November 2012 made between, amongst others, (i) the Borrower, (ii) the Lenders, (iii) the Agent, (iv) the Security Trustee and (v) the Swap Banks.
Party means a party to this Agreement.
Pool Managers Undertaking means an undertaking executed or to be executed by Grindrod Shipping Pte. Ltd. as pool manager of the Additional Ship and Ships in favour of the Agent in relation to its interests in the Insurances relating to the Additional Ship and Ships.
Receiver means a receiver or receiver and manager or administrative receiver of the whole or any part of the assets which from time to time are, or are expressed to be the subject to a Security Interest pursuant to the Finance Documents.
1.2 Defined expressions
Defined expressions in the Loan Agreement shall have the same meanings when used in this Agreement (including the Recitals) unless the context otherwise requires or unless otherwise defined in this Agreement.
1.3 Application of construction and interpretation provisions of Loan Agreement
Clause 1.2 (C onstruction of certain terms ) of the Loan Agreement applies to this Agreement as if it were expressly incorporated in it with any necessary modifications.
1.4 Designation as a Finance Document
The Borrower and the Agent designate this Agreement as a Finance Document.
1.5 Third party rights
Unless provided to the contrary in a Finance Document, a person who is not a Party has no right under the Third Parties Act to enforce or to enjoy the benefit of any term of this Agreement.
2 AGREEMENT OF THE FINANCE PARTIES
2.1 Agreement of the Lenders
The Lenders agree, subject to and upon the terms and conditions of this Agreement, to the amendments referred to in Recital (C).
2.2 Agreement of the Creditor Parties
The Creditor Parties agree, subject to and upon the terms and conditions of this Agreement, to the consequential amendment of the Loan Agreement and the other Finance Documents in connection with the matters referred to in Clause 2.1 ( Agreement of the Lenders ).
2.3 Effective Date
The agreement of the Lenders and the other Creditor Parties contained in Clauses 2.1 ( Agreement of the Lenders ) and 2.2 ( Agreement of the Creditor Parties ) shall have effect on and from the Effective Date.
3 CONDITIONS PRECEDENT
The agreement of the Lenders and the other Creditor Parties contained in Clause 2.1 ( Agreement of the Lenders ) and 2.2 ( Agreement of the Creditor Parties ) is subject to:
(a) save for the occurrence of the Event of Default and the Potential Event Default arising under clause 19.1 (b) ( Events of Default ) of the Loan Agreement due to the breach of clause 12.4 ( Financial Covenants ) of the Loan Agreement, no Event of Default or Potential Event of Default continuing on the date of this Agreement and the Effective Date or resulting from the occurrence of the Effective Date;
(b) save for the representation at clause 10.10 ( No default ) of the Loan Agreement, the representations and warranties in clause 10 ( Representations and Warranties ) of the Loan Agreement as amended and supplemented by this Agreement and updated with appropriate modifications to refer to this Agreement being true on the date of this Agreement and the Effective Date;
(c) save for the representation at clause 10.9 ( No default ) of each Owner Guarantee, the representations and warranties in the Finance Documents (other than the Loan Agreement) and the Master Agreement as amended and supplemented by this Agreement and as updated with appropriate modifications to refer to this Agreement being true on the date of this Agreement and the Effective Date; and
(d) the Agent having received all of the documents and other evidence listed in Schedule 3 ( Conditions Precedent ) in form and substance satisfactory to the Agent on or before 31 May 2016 or such later date as the Agent may agree with the Borrower.
4 CONDITIONS SUBSEQUENT
4.1 Conditions subsequent
(a) No later than 30 days from the Effective Date, the Agent shall have received:
(i) the originals of any mandates or other documents required in connection with the opening or operation of the relevant Earnings Account in the name of the New Owner;
(ii) a duly executed original of the Additional Account Security Deed;
(iii) evidence of payment of stamp duty to the Inland Revenue Authority of Singapore relating to the Shares Pledge;
(iv) evidence that all filings in relation to the Additional General Assignment, the Additional Mortgage, the Additional Shares Pledge, the Additional Deed of Covenant and the Additional Account Security Deed have been made with the Accounting and Corporate Regulatory Authority of Singapore;
(v) the signed, dated and issued legal opinion of Singapore counsel to the Agent of the agreed form legal opinion referred to in paragraph 4.2 of Schedule 2 ( Conditions Precedent ); and
(vi) all documentation required by each Creditor Party in respect of the New Owner pursuant to that Creditor Partys know your customer requirements.
(b) No later than 5 Business Days from the Effective Date, the Agent shall have received a transcript of registry from the Maritime Port Authority in Singapore showing that the Additional Ship is in the absolute and unencumbered ownership of the New Owner save as contemplated by the Finance Documents (as amended and supplemented by this Agreement).
4.2 Failure to provide conditions subsequent
A failure of any of the conditions subsequent referred to in clause 4.1 ( Conditions subsequent ) above to be satisfied within the relevant time period shall result in an Event of Default .
5 REPRESENTATIONS
5.1 Loan Agreement representations
Other than the representation at clause 10.10 ( No default ) of the Loan Agreement in relation to the occurrence of the Event of Default and the Potential Event Default arising under clause 19.1 (b) ( Events of Default ) of the Loan Agreement due to the breach of clause 12.4 ( Financial Covenants ) of the Loan Agreement, the Borrower makes the representations and warranties set out in clause 10 ( Representations and warranties ) of the Loan Agreement, as amended and supplemented by this Agreement and updated with appropriate modifications to refer to this Agreement and, where appropriate, the Additional Finance Documents, the Additional Ship and the New Owner by reference to the circumstances then existing on the date of this Agreement and on the Effective Date.
5.2 Finance Document representations
Other than the representation at clause 10.9 ( No default ) of each Owner Guarantee (as such term is amended and supplemented by the terms to of this Agreement), each Security Party (as such term is amended and supplemented by the terms to of this Agreement) makes the representations and warranties set out in the Finance Documents (other than the Loan Agreement) to which it is a party, as amended and supplemented by this Agreement and updated with appropriate modifications to refer to this Agreement and, where appropriate, the Additional Finance Documents, the Additional Ship and the New Owner by reference to the circumstances then existing on the date of this Agreement and on the Effective Date.
6 AMENDMENTS TO LOAN AGREEMENT AND OTHER FINANCE DOCUMENTS
6.1 Specific amendments to the Loan Agreement
With effect on and from the Effective Date the Loan Agreement shall be, and shall be deemed by this Agreement to be amended as follows:
(a) in clause 1.1 ( Definitions ) of the Loan Agreement, the following definitions shall be added:
Additional Ship means the ship whose details are set out in row 6 of the table at Schedule 7.
Code means the US Internal Revenue Code of 1986.
Effective Date has the meaning given to such term in the Supplemental Agreement No. 2.
FATCA means:
(a) sections 1471 to 1474 of the Code or any associated regulations;
(b) any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or
(c) any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.
FATCA Deduction means a deduction or withholding from a payment under a Finance Document required by FATCA.
FATCA Exempt Party means a party to a Finance Document that is entitled to receive payments free from any FATCA Deduction.
Pool Managers Undertaking means an undertaking executed by Grindrod Shipping Pte. Ltd. as pool manager of the Ships in relation to its interest in the Insurances relating to the Ships.
Supplemental Agreement No. 2 means the second supplemental agreement dated 31 May 2016 entered into by the parties to this Agreement, and each Owner in relation to the Creditor Parties consent to the provision of additional security in order to attain the minimum required security cover for the Loan.
US means the United States of America.
US Tax Obligor means:
(a) the Borrower if it is resident for tax purposes in the US; or
(b) a Security Party some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.
(c) in clause 1.1 ( Definitions ) of the Loan Agreement, the following definitions shall be amended as follows:
(b) by inserting the words No. 1 after the word Agreement in the definition of Supplemental Agreement and all references throughout the Finance Documents wherever Supplemental Agreement appears shall be construed as reference to the Supplemental Agreement No. 1;
(c) by inserting the words the Supplemental Agreement No. 2 at paragraph (n) in the definition of Finance Documents;
(d) by inserting the words the Pool Managers Undertaking as new paragraph (o) in the definition of Finance Documents;
(e) by inserting the following new paragraph (c) to the definition of Pertinent Matter
(c) any FATCA related liability
(f) by deleting the definition of Ship and replacing it with the following:
Ship means each Approved Ship, each Substitute Ship and the Additional Ship which is subject to a Mortgage.
(g) by deleting clause 15.1(c) and replacing it as follows:
The Borrower shall provide (at its own cost) the valuation of each Ship which is required to determine its Fair Market Value pursuant to Clause 15.5 on the date following 6 months after
the Effective Date and at the end of each period of 6 months thereafter throughout the Security Period.
(h) by inserting the words:
or any item that relates to a FATCA Deduction required to be made by a Party
at the end of clause 22.1(b) ( No deductions ) .
(i) by deleting clause 22.5 ( Exclusion of tax on overall net income ) and replacing it with the following:
22.5 Exclusion of tax on overall net income . In this Clause 22 tax deduction means any deduction or withholding for or on account of any present or future tax except:
(i) a FATCA Deduction; or
(ii) tax on a Creditor Partys overall net income.
(j) by inserting the following new clause 22.7 as follows:
22.7 FATCA Information
(a) Subject to paragraph (c) below, each party to a Finance Document shall, within ten Business Days of a reasonable request by another party to a Finance Document:
(i) confirm to that other party whether it is:
(A) a FATCA Exempt Party; or
(B) not a FATCA Exempt Party;
(ii) supply to that other party such forms, documentation and other information relating to its status under FATCA as that other party reasonably requests for the purposes of that other partys compliance with FATCA;
(iii) supply to that other party such forms, documentation and other information relating to its status as that other party reasonably requests for the purposes of that other partys compliance with any other law, regulation, or exchange of information regime.
(b) If a party to a Finance Document confirms to another party to a Finance Document pursuant to paragraph (a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not or has ceased to be a FATCA Exempt Party, that party shall notify that other party reasonably promptly.
(c) Paragraph (a) above shall not oblige any Creditor Party to do anything, and paragraph (a)(iii) above shall not oblige any other party to a Finance Document to do anything, which would or might in its reasonable opinion constitute a breach of:
(A) any law or regulation;
(B) any fiduciary duty; or
(C) any duty of confidentiality.
(d) If a party to a Finance Document fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in
accordance with paragraph (a)(i) or (ii) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the party in question provides the requested confirmation, forms, documentation or other information.
(e) If the Borrower is a US Tax Obligor or the Agent reasonably believes that its obligations under FATCA or any other applicable law or regulation require it, each Lender shall, within ten Business Days of:
(A) where the Borrower is a US Tax Obligor and the relevant Lender is the Lender as at the Effective Date;
(B) where a Borrower is a US Tax Obligor on the relevant effective date referred to in a Transfer Certificate and the relevant Lender is a Transferee Lender, on such date; or
(C) where the Borrower is not a US Tax Obligor, the date of a request from the Agent,
supply to the Agent:
(1) a withholding certificate on Form W-8, Form W-9 or any other relevant form; or
(2) any withholding statement or other document, authorisation or waiver as the Agent may require to certify or establish the status of such Lender under FATCA or that other law or regulation.
(f) The Agent shall provide any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) above to the Borrower.
(g) If any withholding certificate, withholding statement, document, authorisation or waiver provided to the Agent by a Lender pursuant to paragraph (e) above is or becomes materially inaccurate or incomplete, that Lender shall promptly update it and provide such updated withholding certificate, withholding statement, document, authorisation or waiver to the Agent unless it is unlawful for the Lender to do so (in which case the Lender shall promptly notify the Agent). The Agent shall provide any such updated withholding certificate, withholding statement, document, authorisation or waiver to the Borrower.
(h) The Agent may rely on any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) or (g) above without further verification. The Agent shall not be liable for any action taken by it under or in connection with paragraph (e), (f) or (g) above.
(i) Without prejudice to any other term of this Loan Agreement, if a Lender fails to supply any withholding certificate, withholding statement, document, authorisation, waiver or information in accordance with paragraph (e) above, or any withholding certificate, withholding statement, document, authorisation, waiver or information provided by a Lender to the Agent is or becomes materially inaccurate or incomplete, then such Lender shall indemnify the Agent, within three Business Days of demand, against any cost, loss, Tax or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by the Agent (including any related interest and penalties) in acting as Agent under the Finance Documents as a result of such failure.
(k) by inserting the following new clause 22.8 as follows:
22.8 FATCA Deduction
(i) Each party to a Finance Document may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no party to a Finance Document shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.
(ii) Each party to a Finance Document shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), and in any case at least three Business Days prior to making a FATCA Deduction, notify the party to a Finance Document to whom it is making the payment and, on or prior to the day on which it notifies that party to a Finance Document, shall also notify the Borrower, the Agent and the other Creditor Parties.
(l) by inserting the following words or an item that relates to a FATCA Deduction required to be made by a party to a Finance Document after the words by Clause 22 in the penultimate paragraph of clause 24.2 ( Meaning of increased cost ).
(m) by deleting rows 4 and 5 from the table at Schedule 7 ( Ships ) and inserting the following rows set out below:
4 |
IVS KNOT |
IVS Bulk 511 Pte. Ltd. |
21,843/10828 |
9459137 |
2010, Singapore |
5 |
IVS ORCHARD |
IVS Bulk 609 Pte Ltd |
20,928/11786 |
9528029 |
2011 Singapore |
6 |
IVS RAFFLES |
IVS Bulk 612 Pte. Ltd. |
20,928/11,786 |
9620138 |
2013, Singapore |
(n) the definition of, and references throughout to, each Finance Document shall be construed as if the same referred to that Finance Document as amended and supplemented by this Agreement; and
(o) by construing references throughout to this Agreement and other like expressions as if the same referred to the Loan Agreement as amended and supplemented by this Agreement.
6.2 Amendments to Finance Documents
With effect on and from the Effective Date each of the Finance Documents other than the Loan Agreement, shall be, and shall be deemed by this Agreement to be amended as follows:
(a) the Agency and Trust Deed shall be amended to add a new paragraph (c) at clause 4.11 ( Indemnifications of Servicing ):
(c) in relation to any FATCA related liability
(b) such that all references throughout each of the Finance Documents to this Agreement, this Deed, hereunder and other like expressions shall be construed as if the same referred to such Finance Documents as amended and supplemented by this Agreement;
(c) the definition of, and references throughout each of the Finance Documents to, the Loan Agreement, any of the other Finance Documents and the Master Agreement shall be construed as if the same referred to the Loan Agreement, those Finance Documents and the Master Agreement as amended and supplemented by this Agreement; and
(d) the definition of, and reference throughout each of the Finance Documents to:
(i) Ship shall be construed as if the same referred to Ship;
(ii) Owner shall be construed as it the same referred to Owner; and
(iii) Earnings Account shall be construed as if the same referred to Earnings Account
in each case, as amended an supplemented by this Agreement.
6.3 Amendments to Master Agreement . It is hereby agreed that with effect from and on the Effective Date, the Master Agreement shall be deemed to be amended as follows:
(a) all references throughout the Master Agreement to this Agreement, this Deed, hereunder and other like expressions shall be construed as if the same referred to the Master Agreement as amended and supplemented by this Agreement;
(b) the definition of, and references throughout the Master Agreement to Finance Documents shall be construed as if the same referred to those Finance Documents as amended and supplemented by this Agreement; and
(c) the definition of, and reference throughout the Master Agreement to:
(i) Ship shall be construed as if the same referred to Ship;
(ii) Owner shall be construed as it the same referred to Owner; and
(iii) Earnings Account shall be construed as if the same referred to Earnings Account
in each case, as amended an supplemented by this Agreement.
6.4 Finance Documents to remain in full force and effect
The Finance Documents and any Security Interests created by them, shall remain in full force and effect as amended and supplemented by:
(a) the amendments to the Finance Documents contained or referred to in Clause 6.1 ( Specific amendments to the Loan Agreement ) and Clause 6.2 ( Amendments to Finance Documents ) and the Additional Finance Documents; and
(b) such further or consequential modifications as may be necessary to give full effect to the terms of this Agreement.
7 FURTHER ASSURANCE
7.1 Borrower and each Security Partys (as such term is amended and supplemented by this Agreement) obligation to execute further documents etc. The Borrower and each Security Party (as such term is amended and supplemented by this Agreement) shall:
(a) execute and deliver to the Security Trustee (or as it may direct) any assignment, mortgage, power of attorney, proxy or other document, governed by the laws of England or such other country as the Security Trustee may, in any particular case, specify;
(b) effect any registration or notarisation, give any notice or take any other step,
which the Security Trustee or, the Agent in the case of any document required for the purposes of Clause 6.2(b) may, by notice to the Borrower or the relevant Security Party (as such term is amended and supplemented by this Agreement), reasonably specify for any of the purposes described in Clause 7.2 ( Purposes of further assurances ) or for any similar or related purpose.
7.2 Purposes of further assurances. Those purposes are:
(a) validly and effectively to create any Security Interest or right of any kind which the Security Trustee intended should be created by or pursuant to the Loan Agreement, any other Finance Document or the Master Agreement, each as amended and supplemented by this Agreement; and
(b) implementing the terms and provisions of this Agreement.
7.3 Terms of further assurances. The Security Trustee may reasonably specify the terms of any document to be executed by the Borrower and each Security Party (as such term is amended and supplemented by this Agreement) under Clause 7.1 (Borrower and Security Partys (as such term is amended and supplemented by this Agreement) obligation to executed further documents) and those terms may include any covenants, powers and provisions which the Security Trustee reasonably considers appropriate to protect its interests.
7.4 Obligation to comply with notice. The Borrower and each relevant Security Party (as such term is amended and supplemented by this Agreement) shall comply with a notice under Clause 7.1 (Borrower and Security Partys (as such term is amended and supplemented by this Agreement) obligations to execute further documents etc.) by the date specified in the notice.
7.5 Additional corporate action. At the same time as the Borrower or the relevant Security Party (as such term is amended and supplemented by this Agreement) delivers to the Security Trustee any document executed under Clause 6.1(a), the Borrower or the relevant Security Party (as such term is amended and supplemented by this Agreement) shall also deliver to the Security Trustee a certificate signed by one of the Borrowers or the relevant Security Partys (as such term is amended and supplemented by this Agreement) directors which shall:
(a) set out the text of a resolution of the Borrowers or the relevant Security Partys (as such term is amended and supplemented by this Agreement) directors specifically authorising the execution of the document specified by the Security Trustee; and
(b) state that either the resolution was duly passed at a meeting of the directors validly convened and held throughout which a quorum of directors entitled to vote on the resolution was present or that the resolution has been signed by all the directors and is valid under the Borrowers or the relevant Security Partys (as such term is amended and supplemented by this Agreement) articles of association or other constitutional documents.
8 COSTS AND EXPENSES
Clause 20.5 ( Costs of variations, amendments, enforcement etc. ) of the Loan Agreement, as amended and supplemented by this Agreement, applies to this Agreement as if it were expressly incorporated in it with any necessary modifications.
9 NOTICES
Clause 28 ( Notices ) of the Loan Agreement, as amended and supplemented by this Agreement, applies to this Agreement as if it were expressly incorporated in it with any necessary modifications and the addresses for communications for:
(a) each Security Party are as follows:
IVS Bulk Owning Pte. Ltd
200 Cantonment Road
#03-01 Southpoint
089763 Singapore
Fax: +65 6323 0046
Att: Chief Financial Officer
IVS Bulk Carriers Pte. Ltd
200 Cantonment Road
#03-01 Southpoint
089763 Singapore
Fax: +65 6323 0046
Att: Chief Financial Officer
IVS Bulk 603 Pte. Ltd
200 Cantonment Road
#03-01 Southpoint
089763 Singapore
Fax: +65 6323 0046
Att: Chief Financial Officer
and
(b) the New Owner is as follows:
IVS Bulk 612 Pte. Ltd
200 Cantonment Road
#03-01 Southpoint
089763 Singapore
Fax: +65 6323 0046
Att: Chief Financial Officer
10 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.
11 GOVERNING LAW
This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.
12 ENFORCEMENT
12.1 Jurisdiction
(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement) (a Dispute ).
(b) The Borrower and each Security Party (as such term is amended and supplemented by this Agreement) accept that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly neither the Borrower nor any Security Party will argue to the contrary.
(c) This Clause 12.1 ( Jurisdiction ) is for the benefit of the Creditor Parties only. As a result, no Creditor Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Creditor Parties may take concurrent proceedings in any number of jurisdictions.
12.2 Service of process
(a) Without prejudice to any other mode of service allowed under any relevant law, the Borrower, each Security Party and the New Owner:
(i) irrevocably appoints Grindrod Shipping Services UK Ltd. at its address for the time being, presently at 5 th Floor, Commodity Quay, St Katharine Docks, London, E1W 1BF as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document and Additional Finance Document; and
(ii) agrees that failure by a process agent to notify the Borrower or the relevant Security Party (as such term is amended and supplemented by this Agreement) of the process will not invalidate the proceedings concerned.
(b) If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, the Borrower (on behalf of itself and all the Security Parties (as such term is amended and supplemented by this Agreement)) must immediately (and in any event within 10 days of such event taking place) appoint another agent on terms acceptable to the Agent. Failing this, the Agent may appoint another agent for this purpose.
This Agreement has been entered into on the date stated at the beginning of this Agreement.
SCHEDULE 1
THE LENDERS
Lender |
Lending Office |
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Standard Chartered Bank |
8 Marina Boulevard #24-01 Marina Bay Financial Centre Tower 1 Singapore 018981 Attn: Steve Lim Fax: +65 6535 5532 Email: Email: C.Rajanish@sc.com; Hazel.Looi@sc.com; debaditya.gangulee@sc.com; Madiha.Aslam@sc.com
Attn: Grindrod Shipping 1 USD 50m Facility |
SCHEDULE 2
THE SWAP BANKS
Swap Bank |
Address |
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Standard Chartered Bank |
8 Marina Boulevard #24-01 Marina Bay Financial Centre Tower 1 Singapore 018981 Attn: Steve Lim Fax: +65 6535 5532 Email: Email: C.Rajanish@sc.com; Hazel.Looi@sc.com; debaditya.gangulee@sc.com; Madiha.Aslam@sc.com
Attn: Grindrod Shipping 1 USD 50m Facility |
SCHEDULE 3
CONDITIONS PRECEDENT
1 Constitutional and Corporate Authority Documents
1.1 Copies of the certificate of incorporation and constitutional documents of the Borrower, each Original Owner and the New Owner.
1.2 Copies of resolutions or extracts of minutes of meetings of directors and shareholders (if required) of the Borrower, each Original Owner and the New Owner authorising the execution of this Agreement and/or (in relation to the New Owner) the other Additional Finance Documents.
1.3 The original of any power of attorney under which this Agreement or any other Additional Finance Document is executed on behalf of the Borrower, each Original Owner and/or the New Owner.
1.4 Copies of all consents which the Borrower, each Original Owner and or the New Owner requires to enter into, or make any payment under, this Agreement or any other Additional Finance Document.
2 Security
2.1 A duly executed original of the Additional Mortgage, together with documentary evidence that the Additional Mortgage has been duly registered as a valid first priority ship mortgage in accordance with the laws of the jurisdiction of the Approved Flag.
2.2 A duly executed original of each other Additional Finance Document (other than the Additional Account Security Deed) and of each document to be delivered under it.
3 Ship Documents
3.1 A copy of the current charter, pooling agreement or other contract of employment relating to the Additional Ship that is for a term of 6 months or more.
3.2 Documentary evidence that:
(a) the Additional Ship is registered in the name of the New Owner under the Approved Flag;
(b) the Additional Ship is in the absolute and unencumbered ownership of the New Owner save as contemplated by the Finance Documents (as amended and supplemented by this Agreement);
(c) the Additional Ship maintains the highest class with an Approved Classification Society free of all overdue recommendations and conditions of such classification society; and
(d) each Additional Ship is insured in accordance with the provisions of the Additional Deed of Covenants and all requirements therein in respect of insurances have been complied with.
3.3 A valuation of the Additional Ship and each Ship subject to a Mortgage, addressed to the Agent and the Lenders, stated to be for the purposes of the Loan Agreement (as amended and supplemented by this Agreement) and dated not earlier than 1 May 2016, from an independent sale and purchase shipbroker selected by the Agent which shows that the aggregate of their Fair Market Value exceeds 125% of the Loan.
3.4 A favourable opinion from an independent insurance consultant acceptable to the Agent on such matters relating to the insurances for the Additional Ship as the Agent may require.
3.5 A copy of any Management Agreement in relation to the Additional Ship on terms acceptable to the Agent.
3.6 Copies of the Additional Ships Safety Management Certificate and ISSC.
3.7 A copy of the Approved Managers Document of Compliance.
4 Other documents and evidence
4.1 A favourable legal opinion from lawyers appointed by the Agent on such matters concerning the laws of England and such other relevant jurisdictions as the Agent may require.
4.2 A favourable agreed form legal opinion from lawyers appointed by the Agent on such matters concerning the laws of Singapore and such other relevant jurisdictions as the Agent may require.
4.3 Documentary evidence that the agent for service of process named in Clause 12.2 ( Service of process ) has accepted the appointment.
4.4 A copy of any other authorisation or other document, opinion or assurance which the Agent 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 this Agreement, and the other Additional Finance Documents or for the validity and enforceability of any Finance Document as amended and supplemented by this Agreement including the Additional Finance Documents.
4.5 Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 8 ( Costs and Expenses ) have been paid or will be paid by the Effective Date.
Each copy document delivered under this Schedule shall be certified as a true and up to date copy by a director or the secretary (or equivalent officer) of the Borrower, the Original Owner or the New Owner as the case may be.
EXECUTION PAGES
BORROWER |
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SIGNED by |
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for and on behalf of |
) /s/ Gerald Christopher Kingsley-Wilkins |
GRINDROD SHIPPING PTE. LTD. |
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in the presence of: |
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Witness signature: |
) /s/ Meryl Montefiore |
Witness name: |
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Witness address: |
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NEW OWNER |
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SIGNED by |
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for and on behalf of |
) /s/ Gerald Christopher Kingsley-Wilkins |
IVS BULK 612 PTE. LTD. |
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in the presence of: |
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Witness signature: |
) /s/ Yvette Kingsley-Wilkins |
Witness name: |
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Witness address: |
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ORIGINAL OWNER |
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SIGNED by |
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for and on behalf of |
) /s/ Gerald Christopher Kingsley-Wilkins |
IVS BULK OWNING PTE. LTD. |
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in the presence of: |
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Witness signature: |
) /s/ Yvette Kingsley-Wilkins |
Witness name: |
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Witness address: |
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SIGNED by |
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for and on behalf of |
) /s/ Gerald Christopher Kingsley-Wilkins |
IVS BULK CARRIERS PTE. LTD. |
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in the presence of: |
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Witness signature: |
) /s/ Yvette Kingsley-Wilkins |
Witness name: |
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Witness address: |
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SIGNED by |
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for and on behalf of |
) /s/ Gerald Christopher Kingsley-Wilkins |
IVS BULK 603 PTE. LTD. |
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in the presence of: |
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Witness signature: |
) /s/ Yvette Kingsley-Wilkins |
Witness name: |
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Witness address: |
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LENDER |
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SIGNED by |
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duly authorised |
) /s/ Abhishek Pandey |
for and on behalf of |
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STANDARD CHARTERED BANK |
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in the presence of: |
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Witness signature: |
) /s/ Riza Yuanita |
Witness name: |
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Witness address: |
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SWAP BANK |
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SIGNED by |
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duly authorised |
) /s/ Abhishek Pandey |
for and on behalf of |
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STANDARD CHARTERED BANK |
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in the presence of: |
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Witness signature: |
) /s/ Riza Yuanita |
Witness name: |
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Witness address: |
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AGENT |
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SIGNED by |
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duly authorised |
) /s/ Lam Tze Kit |
for and on behalf of |
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STANDARD CHARTERED BANK (HONG KONG) LIMITED |
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in the presence of: |
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Witness signature: |
) /s/ Wendy Lan |
Witness name: |
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Witness address: |
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SECURITY TRUSTEE |
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SIGNED by |
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duly authorised |
) /s/ Lam Tze Kit |
for and on behalf of |
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STANDARD CHARTERED BANK (HONG KONG) LIMITED |
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in the presence of: |
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Witness signature: |
) /s/ Wendy Lan |
Witness name: |
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Witness address: |
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THIRD AMENDMENT LETTER
To: |
Grindrod Shipping Pte. Ltd. |
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200 Cantonment Road |
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#03-01, Southpoint |
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Singapore 089763 |
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Attn: Martyn Wade |
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IVS Bulk Owning Pte. Ltd. |
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200 Cantonment Road |
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#03-01, Southpoint |
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Singapore 089763 |
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Attn: Martyn Wade |
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IVS Bulk Carriers Pte. Ltd. |
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200 Cantonment Road |
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#03-01, Southpoint |
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Singapore 089763 |
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Attn; Martyn Wade |
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IVS Bulk 603 Pte. Ltd. |
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200 Cantonment Road |
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#03-01, Southpoint |
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Singapore 089763 |
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Attn; Martyn Wade |
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and |
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IVS Bulk 612 Pte. Ltd. |
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200 Cantonment Road |
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#03-01, Southpoint |
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Singapore 089763 |
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Attn: Martyn Wade |
Date: 10 th February 2017
Dear Sirs
1. Background. We refer to the loan agreement dated 26 August 2010, as supplemented by a supplemental agreement dated 13 December 2011, as amended by a consent and amendment letter dated 30 November 2012, as supplemented by a supplemental agreement no. 2 to term loan facility dated 31 May 2016 and as may be further amended and supplemented from time to time (the Loan Agreement) made between amongst others (i) Grindrod Shipping Pte. Ltd. as borrower (the Borrower ), (ii) the banks and financial institutions listed in Part A of Schedule 1 of the Loan Agreement as lenders (the Lenders ), (iii) the banks and financial institutions listed in Part B of Schedule 1 of the Loan Agreement as swap banks (the Swap Banks ), (iv) Standard Chartered Bank (Hong Kong) Limited as agent (the Agent) and (iv) Standard Chartered Bank (Hong Kong) Limited as security trustee (the Security Trustee ) in relation to a loan facility of up to an aggregate of US$50,000,000.
2. Definition of terms . Save as otherwise defined in this letter, terms defined in the Loan Agreement shall have the same meanings in this letter.
3. Definitions. In this letter, unless the contrary intention appears:
Effective Date means the date on which the Agent confirms to the Borrower that it has received the original of this letter duly executed by all the parties hereto.
4. Amendments to Loan Agreement . It is hereby agreed that from the Effective Date, the Loan Agreement shall be deemed to be amended as follows:
a. the definition of Finance Documents in Clause 1.1 (Definitions) of the Loan Agreement shall be amended by:
i. deleting and from paragraph (m) in the definition; and
ii. inserting the following new paragraph (n) in the definition:
(n) the Third Amendment Letter; and
b. the following new definition shall be inserted in alphabetical order in Clause 1.1 (Definitions) ofthe Loan Agreement and all references throughout the Finance Documents wherever it appears shall be construed accordingly:
Third Amendment Letter means the amendment letter dated 10 th February 2017 entered into by the parties to this Agreement in relation to the amendment to the financial covenants on the Loan.
c. Clause 12.4 (Financial Covenants) shall be amended as follows:
i. the definition of Financial Covenants shall be deleted and replaced with the following definition:
Financial Covenants. The Borrower will ensure that the consolidated financial position of the Borrowers Group shall at all times during the Security Period be such that:
i. Book Value Net Worth is a minimum of (i) $275,000,000 in 2016 and (ii) $250,000,000 in 2017;
ii. Cash or cash equivalents shall be at least $30,000,000; and
ill. the ratio of Debt to Market Adjusted Tangible Fixed Assets shall be not more than 75 per cent.
ii. the following new definition shall be inserted In alphabetical order within Clause 12.4 (Financial Covenants):
Book Value Net Worth means the aggregate amount (without double counting) of the following:
i. the amounts paid up, or credited as paid up, on the issued share capital of the Borrowers Group;
ii. any credit balance on the consolidated profit and loss account of the Borrowers Group; and
iii. any amount standing to the credit of any other consolidated capital and revenue reserves of the Borrowers Group including any share premium account and capital redemption reserve,
less the aggregate amount (without double counting) of the following:
i. any debt balance on the consolidated profit and loss account of the Borrowers Group; and
ii. any reserves attributable to interests of minority shareholders in any subsidiary (whether direct or indirect) of the Borrowers Group,
all as determined in accordance with IFRS applied in the preparation of the Latest Accounts but adjusted by:
i. deducting any dividend or other distribution declared, recommended or made by the Borrowers Group;
ii. deducting any amount attributable to goodwill or any other intangible asset;
iii. reflecting any variation required to be made to the asset value attributable to any ship owned by the Borrowers Group in order to reflect the book value of any such ship;
iv. excluding any amount attributable to deferred taxation;
v. excluding any amount attributable to minority interests; and
vi. eliminating inconsistencies (if any) between the accounting principles;
iii. the following definitions within Clause 12.4 (Financial Covenants) shall be deleted in its entirety:
i. Market Adjusted Tangible Net Worth
ii. Liquidity
iii. Net Debt
iv. EBITDA
5. Amendments to Finance Documents. It is hereby agreed that from the Effective Date, each Finance Document other than the Loan Agreement shall be deemed to be amended as follows:
a. such that all references throughout each of the Finance Documents to this Agreement, this Deed, hereunder and other like expressions shall be construed as if the same referred to such Finance Documents as amended and supplemented by this letter; and
b. the definition of, and references throughout each of the Finance Documents to, the Loan Agreement, any of the other Finance Documents and the Master Agreement shall be construed as if the same referred to the Loan Agreement, those Finance Documents and the Master Agreement as amended and supplemented by this letter.
6. Amendments to Master Agreement . it is hereby agreed that from the Effective Date, the Master Agreement shall be deemed to be amended as follows:
a. such that all references throughout the Master Agreement to this Agreement, this Deed, hereunder and other like expressions shall be construed as if the same referred to the Master Agreement as amended and supplemented by this letter; and
b. the definition of, and references throughout the Master Agreement to Finance Documents shall be construed as if the same referred to those Finance Documents as amended and supplemented by this letter.
7. Repetition of representations and warranties. The Borrower represents and warrants to the Creditor Parties that the representations and warranties in Clause 10 (Representations and Warranties) of the Loan Agreement, as updated with appropriate modifications to refer to this letter, remain true and not misleading if repeated on the date of this letter with reference to the circumstances now existing.
8. Repetition of Finance Document representations and warranties. The Borrower and each Owner represents and warrants to the Creditor Parties that the representations and warranties in the Finance Documents and the Master Agreement to which it is a party, as amended and supplemented by this letter and updated with appropriate modifications to refer to this letter, remain true and not misleading if repeated on the date of this letter with reference to the circumstances now existing.
9. Continuing Obligations under Finance Documents. The Loan Agreement and the other Finance Documents and the Master Agreement shall remain in full force and effect as amended and supplemented by;
a. the amendments referred to in this letter; and
b. such further or consequential modifications as may be necessary to give full effect to the terms of this letter.
10. Existing Rights. All of the parties to this letter herby confirm that neither the execution of this letter nor the performance of the obligations hereunder nor the amendments to the Finance Documents or the Master Agreement set out herein shall be deemed to affect in any way any existing right of any Creditor Party under the Finance Documents or the Master Agreement, any of the Security Interests constituted and grated to each of them thereunder or under the laws of any Pertinent Jurisdiction.
11. Expenses. The provisions of Clause 20.3 (Costs of variations, amendments, enforcement etc.) of the Loan Agreement (as amended and supplemented by this letter shall apply to this letter as if they were expressly incorporated in this letter with any necessary modifications.
12. Further Assurances. The Borrower shall, at the request of the Lender and at its own expense, do all such acts and things necessary and desirable to give effect to the amendments made or to be made pursuant to this letter.
13. Counterparts. This letter may be executed in any number of counterparties and on separate counterparts, each of which when executed shall constitute an original, but all counterparts together shall constitute one and the same instrument.
14. Third Party Rights. A person who is not a party to this letter cannot enforce or enjoy the benefit of any term of this letter under the Contracts (Rights of Third Parties) Act 1999.
15. Law and Jurisdiction. The provisions of Clause 30 (Law and Jurisdiction) of the Loan Agreement as amended and supplemented by this letter shall apply to this letter as if set out in full herein save that references to this Agreement shall be construed as references to this letter.
16. Construction of letter. This letter shall supplement and shall be construed as forming part of the Loan Agreement and as such is deemed to be a Finance Document as defined in the Loan Agreement.
This letter has been duly executed on the date stated at the beginning of this letter.
Signed by: |
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for and on behalf of |
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STANDARD CHARTERED BANK (HONG KONG) LIMITED |
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/s/ Lam Tse Kit |
as Agent and Security Trustee |
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Signed by: |
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for and on behalf of |
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STANDARD CHARTERED BANK |
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/s/ Abhishek Pandey |
as Lender |
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Signed by: |
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for and on behalf of |
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STANDARD CHARTERED BANK |
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/s/ Abhishek Pandey |
as Swap Bank |
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) |
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Acknowledged and agreed: |
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BORROWER |
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Signed by: |
) |
/s/ Martyn Richard Wade |
for and on behalf of |
) |
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GRINDROD SHIPPING PTE. LTD. |
) |
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THE OWNERS |
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Signed by: |
) |
/s/ Martyn Richard Wade |
for and on behalf of |
) |
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IVS BULK OWNING PTE. LTD. |
) |
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Signed by: |
) |
/s/ Martyn Richard Wade |
for and on behalf of |
) |
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IVS BULK CARRIERS PTE. LTD. |
) |
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Signed by: |
) |
/s/ Martyn Richard Wade |
for and on behalf of |
) |
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IVS BULK 603 PTE. LTD. |
) |
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Signed by: |
) |
/s/ Martyn Richard Wade |
for and on behalf of |
) |
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IVS BULK 612 PTE. LTD. |
) |
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FOURTH AMENDMENT LETTER
To: |
Grindrod Shipping Pte. Ltd. |
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200 Cantonment Road |
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#03-01, Southpoint |
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Singapore 089763 |
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Attn: Martyn Wade |
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IVS Bulk Owning Pte. Ltd. |
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200 Cantonment Road |
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#03-01, Southpoint |
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Singapore 089763 |
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Attn: Martyn Wade |
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IVS Bulk Carriers Pte. Ltd. |
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200 Cantonment Road |
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#0301, Southpoint |
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Singapore 089763 |
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Attn: Martyn Wade |
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IVS Bulk 603 Pte. Ltd. |
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200 Cantonment Road |
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#03-01, Southpoint |
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Singapore 089763 |
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Attn: Martyn Wade |
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and |
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IVS Bulk 612 Pte. Ltd. |
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200 Cantonment Road |
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#03-01, Southpoint |
|
Singapore 089763 |
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Attn: Martyn Wade |
Date: 31 August 2017
Dear Sirs
1. Background. We refer to the loan agreement dated 26 August 2010, as supplemented by a supplemental agreement dated 13 December 2011, as amended by a consent and amendment letter dated 30 November 2012, as supplemented by a supplemental agreement no. 2 to term loan facility dated 31 May 2016 and as amended and supplemented by a third amendment letter dated 10 February 2017 and as may be further amended and supplemented from time to time (the Loan Agreement ) made between amongst others (i) Grindrod Shipping Pte. Ltd. as borrower (the Borrower ), (ii) the banks and financial institutions listed in Part A of Schedule 1 of the Loan Agreement as lenders (the Lenders ), (iii) the banks and financial institutions listed in Part B of Schedule 1 of the Loan Agreement as swap banks (the Swap Banks ), (iv) Standard Chartered Bank (Hong Kong) Limited as agent (the Agent ) and (iv) Standard Chartered Bank (Hong Kong) Limited as security trustee (the Security Trustee ) in relation to a loan facility of up to an aggregate of US$50,000,000.
2. Definition of terms. Save as otherwise defined in this letter, terms defined in the Loan Agreement shall have the same meanings in this letter.
3. Definitions. In this letter, unless the contrary intention appears:
Effective Date means 31 August 2017, provided that the Agent confirms to the Borrower that it has received a copy of this letter duly executed by all the parties hereto.
4. Amendments to Loan Agreement. It is hereby agreed that with effect on and from the Effective Date, the Loan Agreement shall be deemed to be amended as follows:
a. the definition of Finance Documents in clause 1.1 (Definitions) of the Loan Agreement shall be amended by:
i. deleting and from paragraph (n) in the definition; and
ii. inserting the following new paragraph (o) in the definition:
(o) the Fourth Amendment Letter; and;
b. the definition of Margin in clause 1.1 (Definitions) of the Loan Agreement shall be deleted and replaced with:
Margin means 3.04 per cent, per annum;; and
c. the following new definition shall be inserted in alphabetical order in clause 1.1 (Definitions) of the Loan Agreement and all references throughout the Finance Documents wherever it appears shall be construed accordingly:
Fourth Amendment Letter means the amendment letter dated 31 August 2017 entered into by the parties to this Agreement in relation to the amendment to the interest rate and Interest Periods applicable to the Loan..
5. Amendment to Interest Period
In consideration for the amendment to the Margin pursuant to Clause 4 above, the Agent (on behalf of all the Lenders) hereby agrees and confirms pursuant to clause 6.2(c) (Duration of normal Interest Periods) that each Interest Period shall with effect on and from the Effective Date be 3 months.
6. Amendments to Finance Documents. It is hereby agreed that from and with effect on and from the Effective Date, each Finance Document other than the Loan Agreement shall be deemed to be amended as follows:
a. such that all references throughout each of the Finance Documents to this Agreement, this Deed, hereunder and other like expressions shall be construed as if the same referred to such Finance Documents as amended and supplemented by this letter; and
b. the definition of, and references throughout each of the Finance Documents to, the Loan Agreement, any of the other Finance Documents and the Master Agreement shall be construed as if the same referred to the Loan Agreement, those Finance Documents and the Master Agreement as amended and supplemented by this letter.
7. Amendments to Master Agreement. It is hereby agreed that with effect on and from the Effective Date, the Master Agreement shall be deemed to be amended as follows:
a. such that all references throughout the Master Agreement to this Agreement, this Deed, hereunder and other like expressions shall be construed as if the same referred to the Master Agreement as amended and supplemented by this letter; and
b. the definition of, and references throughout the Master Agreement to Finance Documents
shall be construed as if the same referred to those Finance Documents as amended and supplemented by this letter.
8. Repetition of representations and warranties. The Borrower represents and warrants to the Creditor Parties that the representations and warranties in clause 10 (Representations and Warranties) of the Loan Agreement, as updated with appropriate modifications to refer to this letter, remain true and not misleading if repeated on the date of this letter with reference to the circumstances now existing.
9. Repetition of Finance Document representations and warranties. The Borrower and each Owner represents and warrants to the Creditor Parties that the representations and warranties in the Finance Documents and the Master Agreement to which it is a party, as amended and supplemented by this letter and updated with appropriate modifications to refer to this letter, remain true and not misleading if repeated on the date of this letter with reference to the circumstances now existing.
10. Continuing Obligations under Finance Documents . The Loan Agreement and the other Finance Documents and the Master Agreement shall remain in full force and effect as amended and supplemented by:
a. the amendments referred to in this letter; and
b. such further or consequential modifications as may be necessary to give full effect to the terms of this letter.
11. Existing Rights.
a. All of the parties to this letter hereby confirm that neither the execution of this letter nor the performance of the obligations hereunder nor the amendments to the Finance Documents or the Master Agreement set out herein shall be deemed to affect in any way any existing right of any Creditor Party under the Finance Documents or the Master Agreement, any of the Security Interests constituted and granted to each of them thereunder or under the laws of any Pertinent Jurisdiction.
b. Each Owner hereby confirms that neither the execution of this letter nor the performance of the obligations hereunder nor the amendments to the Finance Documents or the Master Agreement set out herein shall be deemed to affect in any way its obligations under its respective Owner Guarantee and that each of the Owner Guarantees shall remain in full force and effect notwithstanding the amendments to the Loan Agreement contemplated hereby.
12. Expenses. The provisions of Clause 20.3 (Costs of variations, amendments, enforcement etc.) of the Loan Agreement (as amended and supplemented by this letter) shall apply to this letter as if they were expressly incorporated in this letter with any necessary modifications.
13. Further Assurances.
a. The Borrower shall, at the request of the Lender and at its own expense, do all such acts and things necessary and desirable to give effect to the amendments made or to be made pursuant to this letter.
b. The Borrower shall, promptly following the Effective Date, deliver to the Agent an original of this letter duly executed by each of the Borrower and each Owner.
14. Notices. Clause 28 (Notices) of the Loan Agreement shall apply to this letter as if it were expressly
incorporated in it with any necessary modification.
15. Counterparts. This letter may be executed in any number of counterparties and on separate counterparts, each of which when executed shall constitute an original, but all counterparts together shall constitute one and the same instrument.
16. Third Party Rights . A person who is not a party to this letter cannot enforce or enjoy the benefit of any term of this letter under the Contracts (Rights of Third Parties) Act 1999.
17. Law and Jurisdiction. This letter and any non-contractual obligations arising out of, or in connection with, it shall be governed by, and construed in accordance with, English law. The provisions of clause 30.2 (Exclusive English jurisdiction) to 30.6 (Meaning of proceedings) inclusive of the Loan Agreement (as amended and supplemented by this letter) shall apply to this letter as if set out in full herein save that references to this Agreement shall be construed as references to this letter.
18. Construction of letter. This letter shall supplement and shall be construed as forming part of the Loan Agreement and as such is deemed to be a Finance Document as defined in the Loan Agreement.
This letter has been duly executed on the date stated at the beginning of this letter.
Signed by: |
) |
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for and on behalf of |
) |
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STANDARD CHARTERED BANK (HONG KONG) LIMITED |
) |
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as Agent and Security Trustee |
) /s/ Lam Tse Kit |
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Signed by: |
) |
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for and on behalf of |
) |
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STANDARD CHARTERED BANK |
) /s/ Abhishek Pandey |
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as Lender |
) |
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Signed by: |
) |
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for and on behalf of |
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STANDARD CHARTERED BANK |
) /s/ Abhishek Pandey |
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as Swap Bank |
) |
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Acknowledged and agreed: |
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BORROWER |
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Signed by: |
) /s/ Martyn Richard Wade |
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for and on behalf of |
) |
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GR1NDROD SHIPPING PTE. LTD. |
) |
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THE OWNERS |
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Signed by: |
) /s/ Martyn Richard Wade |
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for and on behalf of |
) |
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IVS BULK OWNING PTE. LTD. |
) |
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Signed by: |
) /s/ Martyn Richard Wade |
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for and on behalf of |
) |
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IVS BULK CARRIERS PTE. LTD. |
) |
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Signed by: |
) /s/ Martyn Richard Wade |
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for and on behalf of |
) |
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IVS BULK 603 PTE. LTD. |
) |
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Signed by: |
) /s/ Martyn Richard Wade |
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for and on behalf of |
) |
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IVS BULK 612 PTE. LTD. |
) |
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Date 7 July 2011
GRINDROD SHIPPING PTE. LTD.
as Borrower
- and -
THE BANKS AND FINANCIAL INSTITUTIONS
listed in Schedule 1
as Lenders
- and -
THE BANKS AND FINANCIAL INSTITUTIONS
listed in Schedule 2
as Swap Banks
- and -
CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK
STANDARD CHARTERED BANK, SINGAPORE BRANCH
DVB GROUP MERCHANT BANK (ASIA) LTD
BNP PARIBAS, SINGAPORE BRANCH
as Mandated Lead Arrangers
- and -
CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK
as Agent and as Security Trustee
LOAN AGREEMENT
relating to a loan facility of US$123,000,000 comprising:
(i) a term loan facility of US$73,000,000; and
(ii) a revolving credit facility of US$50,000,000
Watson, Farley & Williams
London
INDEX
Clause |
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Page |
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1 |
|
INTERPRETATION |
1 |
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2 |
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FACILITY |
18 |
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3 |
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POSITION OF THE LENDERS AND SWAP BANKS |
18 |
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4 |
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DRAWDOWN |
19 |
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5 |
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INTEREST |
21 |
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6 |
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INTEREST PERIODS |
24 |
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7 |
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DEFAULT INTEREST |
25 |
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8 |
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REDUCTION, REPAYMENT AND PREPAYMENT |
26 |
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9 |
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CONDITIONS PRECEDENT |
30 |
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10 |
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REPRESENTATIONS AND WARRANTIES |
30 |
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11 |
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GENERAL UNDERTAKINGS |
33 |
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12 |
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CORPORATE UNDERTAKINGS |
36 |
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13 |
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INSURANCE |
39 |
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14 |
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SHIP COVENANTS |
43 |
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15 |
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SECURITY COVER |
48 |
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16 |
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PAYMENTS AND CALCULATIONS |
50 |
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17 |
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APPLICATION OF RECEIPTS |
52 |
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18 |
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APPLICATION OF EARNINGS; SWAP PAYMENTS |
53 |
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19 |
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EVENTS OF DEFAULT |
54 |
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20 |
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FEES AND EXPENSES |
59 |
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21 |
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INDEMNITIES |
60 |
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22 |
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NO SET-OFF OR TAX DEDUCTION |
62 |
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23 |
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ILLEGALITY, ETC |
63 |
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24 |
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INCREASED COSTS |
64 |
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25 |
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SET-OFF |
66 |
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26 |
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TRANSFERS AND CHANGES IN LENDING OFFICES |
67 |
|
27 |
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VARIATIONS AND WAIVERS |
71 |
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28 |
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NOTICES |
72 |
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29 |
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SUPPLEMENTAL |
74 |
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30 |
|
LAW AND JURISDICTION |
75 |
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SCHEDULE 1 LENDERS AND COMMITMENTS |
77 |
||
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SCHEDULE 2 SWAP BANKS |
79 |
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SCHEDULE 3 DRAWDOWN NOTICE |
80 |
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SCHEDULE 4 CONDITION PRECEDENT DOCUMENTS |
81 |
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SCHEDULE 5 TRANSFER CERTIFICATE |
85 |
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SCHEDULE 6 DETAILS OF SHIPS AND OWNERS |
89 |
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SCHEDULE 7 DESIGNATION NOTICE |
90 |
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SCHEDULE 8 FORM OF CERTIFICATE OF COMPLIANCE |
91 |
||
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EXECUTION PAGES |
93 |
THIS AGREEMENT is made on July 2011
BETWEEN
(1) GRINDROD SHIPPING PTE. LTD. , as Borrower ;
(2) THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as Lenders ;
(3) THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 2, as Swap Banks ;
(4) CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK , STANDARD CHARTERED BANK, SINGAPORE BRANCH, DVB GROUP MERCHANT BANK (ASIA) LTD and BNP PARIBAS, SINGAPORE BRANCH , as Mandated Lead Arrangers ;
(5) CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK , as Agent ; and
(6) CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK , as Security Trustee .
BACKGROUND
(A) The Lenders have agreed to make available to the Borrower a loan facility of $123,000,000 comprising:
(i) a Term Loan Facility of $73,000,000 to refinance the purchase price of each New Ship and for general corporate purposes; and
(ii) a Revolving Credit Facility of $50,000,000 for general corporate purposes.
(B) The Swap Banks may agree to enter into interest rate swap transactions with the Borrower from time to time to hedge the Borrowers exposure under this Agreement to interest rate fluctuations.
(C) The Lenders and the Swap Banks have agreed to share pari passu in the security to be granted to the Security Trustee pursuant to this Agreement on the terms described herein.
IT IS AGREED as follows:
1 INTERPRETATION
1.1 Definitions. Subject to Clause 1.5, in this Agreement:
Accounts Security Deeds means:
(a) a French law pledge to be signed by the Borrower and Crédit Agricole Corporate and Investment Bank in the capacities referred to therein and the Lenders and the Swap Banks creating security in respect of the Retention Account (and the balances from time to time credited to that account); and
(b) 9 French law pledges, each to be signed by an Owner and Crédit Agricole Corporate and Investment Bank in the capacities referred to therein creating security in respect of that Operating Account (and the balances from time to time credited that account),
each in the Agreed Form and in the singular means either of them;
Advance means each Term Advance and each Revolving Advance;
Affected Lender has the meaning given in Clause 5.7;
Agency and Trust Deed means the agency and trust deed dated the same date as this Agreement and entered into between the same parties as are parties to this Agreement;
Agent means Crédit Agricole Corporate and Investment Bank acting in such capacity through its office at 9, quai du Président Paul Doumer, 92920 Paris La Defense Cedex, France, or any successor of it appointed under clause 5 of the Agency and Trust Deed;
Agreed Form means in relation to any document, that document in a form agreed in writing by the Agent (acting on the instructions of the Lenders), or if otherwise approved in accordance with any other approval procedure specified in the relevant provision of any Finance Document;
Approved Classification Society means Bureau Veritas, Det Norske Veritas or any other classification society which is (i) a member of the International Association of Classification Societies and (ii) approved by the Majority Lenders;
Approved Flag means, in relation to a Ship,:
(a) on the Drawdown Date on which a Mortgage is granted over that Ship, Singapore flag;
(b) thereafter, United Kingdom flag, Panama flag, Isle of Man flag or any other flag approved by the Agent (with the authorisation of the Lenders);
Approved Manager means:
(a) in relation to the Ships listed as Ships 1 to 3 in Schedule 6;
(i) in relation to the technical management Sandigan Ship Services Inc. of 9/F Salustiano D Ty Towers, 104 pasero de Roxas, corner Perea Street, Legaspi Village, Makati City, 1229, Philippines; and
(ii) in relation to the crewing management Philippine Transmarine Carriers, Inc., First Maritime Place, 7458 Bagtican Street, San Antonio Village, Makati City, Philippines; and
(b) in relation to the Ships listed as Ships 4 to 9 in Schedule 6, Grindrod Shipping (South Africa) (Pty) Ltd, Quadrant House, 115 Margaret Mncadi Ave, Durban, 4001, South Africa,
or any other company which the Agent may, with the authorisation of the Majority Lenders, approve from time to time as the technical manager or crewing manager of that Ship;
Approved Shipbroker means H. Clarkson & Company Ltd., R S Platou Shipbrokers A.S., Braemar Seascope Limited, Barry Rogliano Salles, Galbraiths Ltd, Fearnleys A/S and Simpson, Spence and Young Ltd. or any of their relevant subsidiaries or such other independent sale and purchase shipbrokers which the Agent has approved or selected (with the authorisation of the Majority Lenders);
Available Revolving Commitment means, in relation to a Lender and at any time, its Revolving Commitment less its Revolving Contribution at that time (and Total Available Revolving Commitments means the aggregate of the Available Revolving Commitments of all the Lenders);
Available Term Commitment means, in relation to a Lender and at any time, its Term Commitment less its Term Contribution at that time (and Total Available Term Commitments means the aggregate of the Available Term Commitments of all the Lenders);
Availability Period means:
(a) in the case of the Term Loan Facility, a period commencing on the date of this Agreement and ending on:
(i) 31 March 2012 (or such later date as the Agent may, with the authorisation of the Lenders, agree with the Borrower); or
(ii) if earlier, the date on which the Total Term Commitments are fully borrowed, cancelled or terminated; and
(b) in the case of the Revolving Credit Facility, a period commencing on the date on which the Total Term Commitments are fully borrowed, cancelled or terminated and ending on:
(i) the Maturity Date (or such later date as the Agent may, with the authorisation of the Lenders, agree with the Borrower); or
(ii) if earlier, the date on which the Total Revolving Commitments are fully cancelled or terminated;
Borrower means Grindrod Shipping Pte. Ltd., a company incorporated in Singapore (with company registration number 200407212K) whose registered office is at 200 Cantonment Road., #06-04 Southpoint, Singapore, 089763;
Borrowers Group means the Borrower and each of its subsidiaries;
Business Day means a day on which banks are open in Singapore, Paris and London and, in respect of a day on which a payment is required to be made under a Finance Document, also in New York City;
Charter means, in relation to a Ship, any time or consecutive voyage charter in respect of that Ship which exceeds, or which by virtue of any operating extensions may exceed 12 months;
Charter Assignment means, in relation to a Charter, a deed executed or to be executed by the Owner owning that Ship in favour of the Security Trustee creating security in respect of that Charter and any supporting guarantee of that Charter in the Agreed Form;
Commitment means, in relation to a Lender, the aggregate of its Term Commitment and its Revolving Commitment (and Total Commitments means the aggregate of the Commitments of all the Lenders);
Confirmation and Early Termination Date , in relation to any continuing Designated Transaction, have the meaning given in the relevant Master Agreement;
Contractual Currency has the meaning given in Clause 21.4;
Contribution means, in relation to a Lender, the aggregate of its Term Contribution and its Revolving Contribution;
Creditor Party means the Agent, the Security Trustee, the Mandated Lead Arrangers, any Lender or any Swap Bank, whether as at the date of this Agreement or at any later time;
Deed of Covenant means, in relation to a Ship and where applicable on the basis of the Approved Flag, a deed of covenant collateral to the Mortgage on the Ship and creating charges over the Ship, the Earnings, the Insurances and any Requisition Compensation in the Agreed Form;
Designated Transaction means a Transaction which fulfils the following requirements:
(a) it is entered into by the Borrower pursuant to a Master Agreement with a Swap Bank;
(b) its purpose is the hedging of the Borrowers exposure under this Agreement to fluctuations in LIBOR arising from the funding of the Facility (or any part thereof) for a period expiring no later than the Maturity Date; and
(c) it is designated by the Borrower and/or by the relevant Swap Bank, by delivery by the Borrower and/or that Swap Bank to the Agent of a notice of designation in the form set out in Schedule 7, as a Designated Transaction for the purposes of the Finance Documents;
Dollars and $ means the lawful currency for the time being of the United States of America;
Drawdown Date means a Term Drawdown Date or a Revolving Drawdown Date;
Drawdown Notice means a notice in the form set out in Schedule 3 (or in any other form which the Agent approves or reasonably requires);
Earnings means, in relation to a Ship, all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Owner of that Ship or the Security Trustee and which arise out of the use or operation of that Ship, including (but not limited to):
(a) except to the extent that they fall within paragraph (b);
(i) all freight, hire and passage moneys;
(ii) compensation payable to the Owner of that Ship or the Security Trustee in the event of requisition of a Ship for hire;
(iii) remuneration for salvage and towage services;
(iv) demurrage and detention moneys;
(v) damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of a Ship; and
(vi) all moneys which are at any time payable under any Insurances in respect of loss of hire; and
(b) if and whenever a Ship is employed on terms whereby any moneys falling within paragraphs (i) to (vi) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Ship;
Environmental Claim means:
(a) any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law; or
(b) any claim by any other person which relates to an Environmental Incident or to an alleged Environmental Incident,
Provided that this shall not include any claim which, in the opinion of the Lenders will not exceed $250,000 and claim means a claim for damages, compensation, fines, penalties or any other payment of any kind whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset;
Environmental Incident means:
(a) any release of Environmentally Sensitive Material from a Ship; or
(b) any incident in which Environmentally Sensitive Material is released from a vessel other than a Ship and which involves a collision between a Ship and such other vessel or some other incident of navigation or operation, in either case, in connection with which a Ship is actually or is potentially liable to be arrested, attached, detained or injuncted and/or a Ship and/or the Owner of that Ship and/or
any operator or manager of a Ship is at fault or allegedly at fault or is otherwise liable to be subject to any legal or administrative action; or
(c) any other incident in which Environmentally Sensitive Material is released otherwise than from a Ship and in connection with which a Ship is actually or potentially liable to be arrested and/or where the Owner of that Ship and/or any operator or manager of a Ship is at fault or allegedly at fault or is otherwise liable to be subject to any legal or administrative action;
Environmental Law means any law relating to pollution or protection of the environment, to the carriage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material;
Environmentally Sensitive Material means oil, oil products and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous;
Event of Default means any of the events or circumstances described in Clause 19.1;
Facility means, together, the Term Loan Facility and the Revolving Credit Facility;
Fair Market Value means, in relation to a Ship, a valuation of its market price as determined in accordance with Clause 15.3;
Finance Documents means:
(a) this Agreement;
(b) the Agency and Trust Deed;
(c) the Accounts Security Deeds;
(d) the Mortgages;
(e) the Guarantees;
(f) the Deeds of Covenant;
(g) the General Assignments;
(h) the Charter Assignments,
(i) the Master Agreement Security Deeds;
(j) the Shares Pledges;
(k) the Negative Pledge; and
(l) any other document (whether creating a Security Interest or not) which is executed at any time by the Borrower, any Owner or any other person as security for, or to establish any form of subordination or priorities arrangement in relation to, any amount payable to the Lenders and/or the Swap Banks under this Agreement or any of the other documents referred to in this definition;
Financial Indebtedness means, in relation to a person (the debtor ), a liability of the debtor:
(a) for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;
(b) under any loan stock, bond, note or other security issued by the debtor;
(c) under any acceptance credit, guarantee or letter of credit facility or dematerialised equivalent made available to the debtor;
(d) under a financial lease, a deferred purchase consideration arrangement or any other agreement having the commercial effect of a borrowing or raising of money by the debtor;
(e) under any foreign exchange transaction, any interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or
(f) under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within paragraphs (a) to (e) if the references to the debtor referred to the other person;
General Assignment means, in relation to a Ship, a deed executed or to be executed by the Owner owning that Ship in favour of the Security Trustee creating security in respect of the Earnings, the Insurances, any Requisition Compensation and, in the case of a New Ship, the Warranties relating to that Ship in the Agreed Form;
Guarantee means a guarantee of the Borrowers obligations under this Agreement, the other Finance Documents and the Master Agreements to be executed by each Owner in favour of the Security Trustee in the Agreed Form;
IFRS means international accounting standards within the meaning of the IAS Regulations 1606/2002 to the extent applicable to the relevant financial statements;
Initial Ships means the 5 ships listed as Ships 1, 2, 4, 5 and 6 in Schedule 6 which are owned by the Owners at the date of this Agreement and registered on the flag indicated in relation to that Ship in Schedule 6;
Insurances means, in relation to a Ship:
(a) all policies and contracts of insurance, including entries of that Ship in any protection and indemnity or war risks association, which are effected in respect of that Ship, its Earnings or otherwise in relation to it whether before, on or after the date of this Agreement; and
(b) all rights and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium and any rights in respect of any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Agreement;
Interest Period means a Term Interest Period or a Revolving Interest Period;
ISM Code means the International Safety Management Code (including the guidelines on its implementation) as adopted by the International Maritime Organisation Assembly, ( IMO ) as the same may be amended or supplemented from time to time (and the terms safety management system , Safety Management Certificate and Document of Compliance have the same meanings as are given to them in the ISM Code);
ISPS Code means the International Ship and Port Facility Security Code as adopted by the IMO as the same may be amended or supplemented from time to time;
ISSC means a valid and current International Ship Security Certificate issued under the ISPS Code;
Lender means a bank or financial institution listed in Schedule 1 and acting through its lending office indicated in Schedule 1 (or through another branch notified to the Borrower under Clause 26.14) or its transferee, successor or assign;
LIBOR means, in relation to any period for which an interest rate is to be determined under any provision of a Finance Document:
(a) the applicable Screen Rate; or
(b) if no Screen Rate is available for that period, the rate per annum determined by the Agent to be the arithmetic mean (rounded upwards to 4 decimal places) of the rates, as supplied to the Agent at its request, quoted by each Reference Bank to leading banks in the London Interbank Market,
as of 11 a.m. (London time) on the Quotation Date for that period for the offering of deposits in the relevant currency and for a period comparable to that period;
Major Casualty means, in relation to a Ship, any casualty to that Ship in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $ 250,000 or the equivalent in any other currency;
Majority Lenders means:
(a) before any Advance has been made, Lenders the aggregate of whose Commitments total at least 66 2/3 per cent. of the Total Commitments; and
(b) after the first Advance has been made, Lenders the aggregate of whose Contributions total at least 66 2/3 per cent. of the Total Contributions;
Mandated Lead Arrangers means Crédit Agricole Corporate and Investment Bank, Standard Chartered Bank, Singapore Branch, DVB Group Merchant Bank (Asia) Ltd and BNP Paribas, Singapore Branch;
Margin means 2.25 per cent. per annum;
Master Agreement Security Deed means a deed executed or to be executed by the Borrower in favour of the Security Trustee granting security over the Master Agreements in the Agreed Form;
Master Agreement means each master agreement (on the 2002 ISDA (Multicurrency-Crossborder) form) in the Agreed Form made or to be made between the Borrower and a Swap Bank for the purpose of hedging the interest rate on the Facility and includes all Designated Transactions from time to time entered into and Confirmations from time to time exchanged under such master agreement;
Maturity Date means the date falling 84 months after the date of this Agreement;
Mortgage means, in relation to a Ship, a first priority or preferred (as the case may be) mortgage over that Ship executed or to be executed by the Owner owning that Ship in favour of the Security Trustee in the Agreed Form;
Negative Pledge means the negative pledge over the share capital of the Borrower granted by the Shareholder in favour of the Security Trustee in the Agreed Form;
Negotiation Period has the meaning given in Clause 5.10;
New Ships means the 4 newbuildings listed as Ships 3, 7, 8 and 9 in Schedule 6 which are to be acquired by the relevant Owner pursuant to the shipbuilding contract for that Ship and be registered on the flag indicated in relation to that Ship in Schedule 6;
New Ship Shipbuilding Contract means, in relation to a New Ship, the relevant shipbuilding contract entered into between the builder of that Ship and the current buyer of that Ship (in the case of the Ship listed at paragraph 3 in Schedule 6, Grindrod Shipping Pte. Ltd. and in the case of the other New Ships, Unicorn Tankers (International) Ltd) each of which is to be assigned to the relevant Owner on or before delivery of that Ship;
Notifying Lender has the meaning given in Clause 23.1 or Clause 24.1 as the context requires;
Operating Account means, in relation to each Ship, an account in the name of the Owner of that Ship with the Agent in Paris designated [name of ship] - Operating Account, or any other account (with that or another office of the Agent or with a bank or financial institution other than the Agent) which is agreed by the Agent and the Borrower as the Operating Account for that Ship for the purposes of this Agreement and in the plural means all of them;
Owner means each of the Owners which, either currently owns a Ship or would own a Ship on the date the Mortgage over that Ship is granted, (details of which are listed in Schedule 6) and whose registered office is at 200 Cantonment Road., #06-04 Southpoint, Singapore, 089763;
Payment Currency has the meaning given in Clause 21.4;
Permitted Security Interests means:
(a) Security Interests created by the Finance Documents;
(b) liens for unpaid masters and crews wages in accordance with usual maritime practice;
(c) liens for salvage;
(d) liens arising by operation of law for not more than 2 months prepaid hire under any charter in relation to a Ship not prohibited by this Agreement;
(e) liens for masters disbursements incurred in the ordinary course of trading and any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of a Ship, provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested by the relevant Owner in good faith by appropriate steps);
(f) any Security Interest created in favour of a plaintiff or defendant in any action of the court or tribunal before whom such action is brought as security for costs and expenses where the relevant Owner is prosecuting or defending such proceedings or arbitration in good faith by appropriate steps provided such Security Interest does not (and is not likely to) result in any sale, forfeiture or loss of a Ship; and
(g) Security Interests arising by operation of law in respect of taxes which are not overdue for payment or in respect of taxes being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made;
Pertinent Document means:
(a) any Finance Document;
(b) any policy or contract of insurance contemplated by or referred to in Clause 13 or any other provision of this Agreement or another Finance Document;
(c) any other document contemplated by or referred to in any Finance Document; and
(d) any document which has been or is at any time sent by or to a Servicing Bank in contemplation of or in connection with any Finance Document or any policy, contract or document falling within paragraphs (b) or (c);
Pertinent Jurisdiction , in relation to a company, means:
(a) England and Wales;
(b) the country under the laws of which the company is incorporated or formed;
(c) a country in which the company has the centre of its main interests or in which the companys central management and control is or has recently been exercised;
(d) a country in which the overall net income of the company is subject to corporation tax, income tax or any similar tax;
(e) a country in which assets of the company (other than securities issued by, or loans to, related companies) having a substantial value are situated, in which the company maintains a branch or a permanent place of business, or in which a Security Interest created by the company must or should be registered in order to ensure its validity or priority; and
(f) a country the courts of which have jurisdiction to make a winding up, administration or similar order in relation to the company, whether as main or territorial or ancillary proceedings or which would have such jurisdiction if their assistance were requested by the courts of a country referred to in paragraphs (b) or (c);
Pertinent Matter means:
(a) any transaction or matter contemplated by, arising out of, or in connection with a Pertinent Document; or
(b) any statement relating to a Pertinent Document or to a transaction or matter falling within paragraph (a);
and covers any such transaction, matter or statement, whether entered into, arising or made at any time before the signing of this Agreement or on or at any time after that signing;
Potential Event of Default means an event or circumstance which, with the giving of any notice, the lapse of time, a determination of the Majority Lenders and/or the satisfaction of any other condition, would constitute an Event of Default;
Prohibited Person means any person with whom transactions are currently prohibited or restricted under the United States of America sanctions administered by the United States of America Department of Treasurys Office of Foreign Assets Control (OFAC), any other United States of America government sanction, export or procurement laws or any other sanctions or other such restrictions on business dealings imposed by a member state of the European Union, including a person on any list of restricted entities, persons or organisations published by the United States of America government, the United Nations or the European Union or any member state of the European Union, including without limitation:
(a) the United States of America Governments List of Specially Designated Nationals and Blocked Persons, Denied Persons List, Entities List, Debarred Parties List, Excluded Parties List and Terrorism Exclusion List;
(b) Her Majestys Treasurys Consolidated List of Financial Sanctions Targets;
(c) the European Union Restricted Person Lists issued pursuant to Council Regulation (EC) No. 881/2002 of 27 May 2002, Council Regulation (EC) No. 2580/2001 of 27 December 2001 and Council Common Position 2005/725/CFSP of 17 October 2005; and
(d) the United Nations Consolidated List established and maintained by the 1267 Committee;
Quotation Date means, in relation to any period for which an interest rate is to be determined under any provision of a Finance Document, the day which is 2 Business Days before the first day of that period, unless market practice differs in the London Interbank Market for a currency, in which case the Quotation Date will be determined by the Agent in accordance with market practice in the London Interbank Market (and if
quotations would normally be given by leading banks in the London Interbank Market on more than one day, the Quotation Date will be the last of those days);
Reference Banks means, subject to Clause 26.16, the principal London offices of Crédit Agricole Corporate and Investment Bank, Standard Chartered Bank, Singapore Branch, BNP Paribas S.A., Société Generale, The Royal Bank of Scotland Plc and the German office of DVB Bank SE;
Relevant Person has the meaning given in Clause 19.9;
Requisition Compensation includes all compensation or other moneys payable by reason of any act or event such as is referred to in paragraph (b) of the definition of Total Loss;
Retention Account means an account in the name of the Borrower with the Agent in Paris designated Grindrod Shipping - Retention Account, or any other account (with that or another office of the Agent or with a bank or financial institution other than the Agent) which is agreed by the Agent and the Borrower as the Retention Account for the purposes of this Agreement;
Revolving Advance means the principal amount of each borrowing of a portion of the Revolving Credit Facility under this Agreement;
Revolving Commitment means, in relation to a Lender, the amount set opposite its name in the fourth column of Schedule 1, or, as the case may require, the amount specified in the relevant Transfer Certificate, as that amount may be reduced, cancelled or terminated in accordance with this Agreement (and Total Revolving Commitments means the aggregate of the Revolving Commitments of all the Lenders);
Revolving Contribution means, in relation to a Lender, the part of the Revolving Loan which is owing to that Lender;
Revolving Credit Facility means the revolving loan of $50,000,000 as that amount may be reduced by borrowing, cancellation or termination under this Agreement;
Revolving Drawdown Date means, in relation to a Revolving Advance, the date requested by the Borrower for that Revolving Advance to be made, or (as the context requires) the date on which that Revolving Advance is actually made;
Revolving Interest Period means a period determined in accordance with Clause 6.2;
Revolving Loan means the principal amount of the Total Revolving Commitments borrowed by the Borrower under this Agreement which is for the time being outstanding under this Agreement;
Revolving Repayment Date means a date on which a repayment of the Revolving Loan is required to be made under Clause 8;
Screen Rate means, in relation to any period for which an interest rate is to be determined under any provision of a Finance Document, 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 service ceases to be
available, the Agent may specify another page or service displaying the appropriate rate after consultation with the Borrower and the Lenders;
Secured Liabilities means all liabilities which the Borrower, the Security Parties or any of them have, at the date of this Agreement or at any later time or times, under or in connection with any Finance Document or any Master Agreement or any judgment relating to any Finance Document or any Master Agreement; and for this purpose, there shall be disregarded any total or partial discharge of these liabilities, or variation of their terms, which is effected by, or in connection with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country;
Security Interest means:
(a) a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien or any other security interest of any kind;
(b) the security rights of a plaintiff under an action in rem ; and
(c) any arrangement entered into by a person (A) the effect of which is to place another person (B) in a position which is similar, in economic terms, to the position in which B would have been had he held a security interest over an asset of A; but this paragraph (c) does not apply to a right of set off or combination of accounts conferred by the standard terms of business of a bank or financial institution;
Security Party means each Owner, the Shareholder and any other person (except a Creditor Party) who, as a surety or mortgagor, as a party to any subordination or priorities arrangement, or in any similar capacity, executes a document falling within the last paragraph of the definition of Finance Documents;
Security Period means the period commencing on the date of this Agreement and ending on the date on which the Agent notifies the Borrower, the Security Parties and the other Creditor Parties that:
(a) all amounts which have become due for payment by the Borrower or any Security Party under the Finance Documents and the Master Agreements have been paid; and
(b) no amount is owing or has accrued (without yet having become due for payment) under any Finance Document or any Master Agreement;
(c) neither any Borrower nor any Security Party has any future or contingent liability under Clause 20, 21 or 22 or any other provision of this Agreement or another Finance Document or a Master Agreement; and
(d) the Agent, the Security Trustee and the Majority Lenders do not consider that there is a significant risk that any payment or transaction under a Finance Document or a Master Agreement would be set aside, or would have to be reversed or adjusted, in any present or possible future bankruptcy of the Borrower or a Security Party or in any present or possible future proceeding relating to a Finance Document or a Master Agreement or any asset covered (or previously covered) by a Security Interest created by a Finance Document;
Security Trustee means Crédit Agricole Corporate and Investment Bank, acting in such capacity through its office at 9, quai du Président Paul Doumer, 92920 Paris La Defense Cedex, France, or any successor of it appointed under clause 5 of the Agency and Trust Deed;
Servicing Bank means the Agent or the Security Trustee;
Shareholder means Grindrod Shipping Limited whose registered office is at 4 th Floor, Standard Bank House, 1 Circular Road, Douglas, Isle of Man, IM99 3NZ;
Shares Pledge means, in relation to an Owner, a deed creating security over the share capital of that Owner to be executed by the Borrower in favour of the Security Trustee in the Agreed Form;
Ships means each of the Initial Ships and the New Ships;
Swap Bank means a bank or financial institution listed in Schedule 2 and acting through its branch indicated in that Schedule or its transferee, successor or assign;
Swap Exposure means, as at any relevant date, the amount certified by each Swap Bank to the Agent to be the aggregate net amount in Dollars which would be payable by the Borrower to that Swap Bank under (and calculated in accordance with) section 6(e)(i) (Payments on Early Termination) of the relevant Master Agreement if an Early Termination Date had occurred on the relevant date in relation to all continuing Transactions;
Term Advance means the principal amount of each borrowing of the Term Loan Facility under this Agreement;
Term Commitment means, in relation to a Lender, the amount set opposite its name in the third column of Schedule 1, or, as the case may require, the amount specified in the relevant Transfer Certificate, as that amount may be reduced, cancelled or terminated in accordance with this Agreement (and Total Term Commitments means the aggregate of the Term Commitments of all the Lenders);
Term Contribution means, in relation to a Lender, the part of the Term Loan which is owing to that Lender;
Term Drawdown Date means the date requested by the Borrower for a Term Advance to be made, or (as the context requires) the date on which a Term Advance is actually made;
Term Interest Period means a period determined in accordance with Clause 6.1;
Term Loan means the principal amount of the Total Term Commitments borrowed by the Borrower under this Agreement which is for the time being outstanding under this Agreement;
Term Loan Facility means the term loan facility of $73,000,000 as that amount may be reduced by borrowing, cancellation or termination under this Agreement;
Term Repayment Date means a date on which a repayment of the Term Loan is required to be made under Clause 8;
Total Loss means, in relation to a Ship:
(a) actual, constructive, compromised, agreed or arranged total loss of that Ship;
(b) any expropriation, confiscation, requisition or acquisition of that Ship, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority (excluding a requisition for hire for a fixed period not exceeding 1 year without any right to an extension) unless it is within 1 month redelivered to the relevant Owners full control;
(c) any condemnation of that Ship by any tribunal or by any person claiming to be a tribunal; and
(d) any arrest, capture, seizure or detention of that Ship (including piracy or theft) unless it is within 1 month redelivered to the relevant Owners full control;
Total Loss Date means, in relation to a Ship:
(a) in the case of an actual loss of that Ship, the date on which it occurred or, if that is unknown, the date when that Ship was last heard of;
(b) in the case of a constructive, compromised, agreed or arranged total loss of that Ship, the earliest of:
(i) the date on which a notice of abandonment is given to the insurers; and
(ii) the date of any compromise, arrangement or agreement made by or on behalf of the relevant Owner with that Ships insurers in which the insurers agree to treat that Ship as a total loss; and
(c) in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Agent that the event constituting the total loss occurred;
Transaction has the meaning given in each Master Agreement;
Transfer Certificate has the meaning given in Clause 26.2;
Trust Property has the meaning given in clause 3.1 of the Agency and Trust Deed; and
Warranties means the post delivery warranties provided pursuant to each New Ship Shipbuilding Contract by the builder of that Ship to the buyer of that Ship.
1.2 Construction of certain terms. In this Agreement:
administration notice means a notice appointing an administrator, a notice of intended appointment and any other notice which is required by law (generally or in the case concerned) to be filed with the court or given to a person prior to, or in connection with, the appointment of an administrator;
approved means, for the purposes of Clause 13, approved in writing by the Agent, such approval not to be unreasonably withheld;
asset includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment;
company includes any partnership, joint venture and unincorporated association;
consent includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;
contingent liability means a liability which is not certain to arise and/or the amount of which remains unascertained;
document includes a deed; also a letter or fax;
excess risks means, in relation to a Ship, the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Ship in consequence of its insured value being less than the value at which the Ship is assessed for the purpose of such claims;
expense means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;
law includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;
legal or administrative action means any legal proceeding or arbitration and any administrative or regulatory action or investigation;
liability includes every kind of debt or liability (present or future, certain or contingent), whether incurred as principal or surety or otherwise;
months shall be construed in accordance with Clause 1.3;
obligatory insurances means, in relation to a Ship, all insurances effected, or which the Owner of that Ship is obliged to effect, under Clause 13 or any other provision of this Agreement or another Finance Document;
parent company has the meaning given in Clause 1.4;
person includes any company; any state, political sub-division of a state and local or municipal authority; and any international organisation;
policy , in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;
protection and indemnity risks means the usual risks covered by a protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are
not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (01/11/02 or 01/11/03), clause 8 of the Institute Time Clauses (Hulls) (1/11/1995 or 1/10/83) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;
regulation includes any regulation, rule, official directive, request or guideline whether or not having the force of law of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;
subsidiary has the meaning given in Clause 1.4;
tax includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any political sub-division of a state or any local or municipal authority (including any such imposed in connection with exchange controls), and any connected penalty, interest or fine; and
war risks includes the risk of mines and all risks excluded by clause 29 of the International Hull Clauses (1/11/02 or 1/11/03), clause 24 of the Institute Time Clauses (Hulls) (1/11/95) or clause 23 of the Institute Time Clauses (Hulls) (1/11/1995).
1.3 Meaning of month. A period of 1 or more months ends on the day in the relevant calendar month numerically corresponding to the day of the calendar month on which the period started ( the numerically corresponding day ), but:
(a) on the Business Day following the numerically corresponding day if the numerically corresponding day is not a Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding the numerically corresponding day; or
(b) on the last Business Day in the relevant calendar month, if the period started on the last Business Day in a calendar month or if the last calendar month of the period has no numerically corresponding day;
and month and monthly shall be construed accordingly.
1.4 Meaning of subsidiary. A company (S) is a subsidiary of another company (P) if:
(a) a majority of the issued shares in S (or a majority of the issued shares in S which carry unlimited rights to capital and income distributions) are directly owned by P or are indirectly attributable to P; or
(b) P has direct or indirect control over a majority of the voting rights attaching to the issued shares of S; or
(c) P has the direct or indirect power to appoint or remove a majority of the directors of S; or
(d) P otherwise has the direct or indirect power to ensure that the affairs of S are conducted in accordance with the wishes of P;
and any company of which S is a subsidiary is a parent company of S.
1.5 General Interpretation. In this Agreement:
(a) references to, or to a provision of, a Finance Document or any other document are references to it as amended or supplemented, whether before the date of this Agreement or otherwise;
(b) references to, or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Agreement or otherwise;
(c) words denoting the singular number shall include the plural and vice versa; and
(d) Clauses 1.1 to 1.5 apply unless the contrary intention appears.
1.6 Headings. In interpreting a Finance Document or any provision of a Finance Document, all clause, sub-clause and other headings in that and any other Finance Document shall be entirely disregarded.
1.7 Security trustee as joint and several creditor. Solely for the purposes of each of the Guarantees, the Borrower, each Guarantor, the Lenders and the Swap Banks agree that the Security Trustee shall be the joint creditor together with each Lender and each Swap Bank of each liability and obligation of the Borrower towards any Lender and any Swap Bank under each of the Guarantee, and that accordingly the Security Trustee will have its own independent right to demand performance by the relevant Guarantor of those liabilities and obligations. However, any discharge of any liability or obligation of such Guarantor to the Security Trustee or another Lender or Swap Bank shall, to the same extent, discharge the corresponding liability or obligation owing by the Guarantor to the Security Trustee or such other Lender or Swap Bank.
2 FACILITY
2.1 Amount of facility. Subject to the other provisions of this Agreement, the Lenders shall make available to the Borrower:
(a) the Term Loan Facility; and
(b) the Revolving Credit Facility.
2.2 Lenders participations. Subject to the other provisions of this Agreement, each Lender shall:
(a) participate in each Term Advance in the proportion which, as at the Term Drawdown Date, its Term Commitment bears to the Total Term Commitments; and
(b) participate in each Revolving Advance in the proportion which, as at the relevant Revolving Drawdown Date, its Revolving Commitment bears to the Total Revolving Commitments.
2.3 Purpose of Advances. The Borrower undertakes with each Creditor Party to use each Term Advance and each Revolving Advance only for the respective purposes stated in the preamble to this Agreement.
3 POSITION OF THE LENDERS AND SWAP BANKS
3.1 Interests of Lenders several. The rights of the Lenders and of the Swap Banks under this Agreement and under each Master Agreement are several.
3.2 Individual right of action. Each Lender and each Swap Bank shall be entitled to sue for any amount which has become due and payable by the Borrower to it under this Agreement or under a Master Agreement without joining the Agent, the Security Trustee, any Mandated Lead Arranger, any other Lender or any other Swap Bank as additional parties in the proceedings.
3.3 Proceedings requiring Majority Lender consent. Except as provided in Clause 3.2, no Lender and no Swap Bank may commence proceedings against the Borrower or any Security Party in connection with a Finance Document or a Master Agreement without the prior consent of the Majority Lenders.
3.4 Obligations several. The obligations of the Lenders under this Agreement and of the Swap Banks under the Master Agreement to which each is a party are several; and a failure of a Lender to perform its obligations under this Agreement or a failure of a Swap Bank to perform its obligations under the Master Agreement to which it is a party shall not result in:
(a) the obligations of the other Lenders or the other Swap Banks being increased; nor
(b) the Borrower, any Security Party, any other Lender or any other Swap Bank being discharged (in whole or in part) from its obligations under any Finance Document or a Master Agreement;
and in no circumstances shall a Lender or a Swap Bank have any responsibility for a failure of another Lender or another Swap Bank to perform its obligations under this Agreement or the Master Agreement to which it is a party.
4 DRAWDOWN
4.1 Request for Advance. Subject to the following conditions, the Borrower may request that a Term Advance or a Revolving Advance be made by ensuring that the Agent receives a completed Drawdown Notice not later than 11.00 a.m. (Singapore time) 4 Business Days prior to the intended Drawdown Date.
4.2 Availability. The conditions referred to in Clause 4.1 are that:
(a) in the case of a Term Advance:
(i) the Term Drawdown Date has to be a Business Day during the Availability Period for the Term Loan Facility;
(ii) the first Term Advance shall be drawn down in an amount of at least $40,000,000;
(iii) the minimum amount of a Term Advance, other than the first Term Advance, shall be $4,000,000 and shall be used to refinance part or all of the purchase price of one of the New Ships or for general corporate purposes;
(iv) there shall be not more than 4 Term Advances; and
(v) the aggregate amount of the Term Advances shall not exceed the Total Term Commitments;
(b) in the case of a Revolving Advance:
(i) a Revolving Drawdown Date has to be a Business Day during the Availability Period for the Revolving Credit Facility;
(ii) subject to sub-paragraph (iii) below, a Revolving Drawdown Date, other than the first Revolving Drawdown Date, has to be a Term Repayment Date;
(iii) up to 3 Revolving Advances may be drawndown on a date other than a Term Repayment Date.
(iv) the aggregate amount of the Revolving Advances shall not exceed the Total Revolving Commitments; and
(v) the minimum amount of a Revolving Advance shall be $4,000,000; and
(vi) not more than 4 Revolving Advances shall be outstanding at any time unless agreed otherwise by the Lenders.
4.3 Notification to Lenders of receipt of a Drawdown Notice. The Agent shall promptly notify the Lenders that it has received a Drawdown Notice and shall inform each Lender of:
(a) the amount and nature of the Advance (whether it is a Term Advance or a Revolving Advance (as the case may be)) and the Drawdown Date;
(b) the amount of that Lenders participation in the relevant Advance; and
(c) the duration of the first Interest Period for the relevant Advance.
4.4 Drawdown Notice irrevocable. A Drawdown Notice must be signed by a duly authorised person on behalf of the Borrower; and once served, a Drawdown Notice cannot be revoked without the prior consent of the Agent, acting with the authorisation of the Majority Lenders.
4.5 Lenders to make available Contributions. Subject to the provisions of this Agreement, each Lender shall, on and with value on each Drawdown Date, make available to the Agent for the account of the Borrower the amount due from that Lender on that Drawdown Date under Clause 2.2.
4.6 Disbursement of Advances. Subject to the provisions of this Agreement, the Agent shall on each Drawdown Date pay to the Borrower the amounts which the Agent receives from the Lenders under Clause 4.5; and that payment to the Borrower shall be made:
(a) to the account which the Borrower specifies in the Drawdown Notice; and
(b) in the like funds as the Agent received the payments from the Lenders.
4.7 Disbursement of Advances to third party. A payment by the Agent under Clause 4.6 shall constitute the making of the relevant Advance and the Borrower shall thereupon become indebted, as principal and direct obligor, to each Lender in an amount equal to that Lenders Term Contribution or that Lenders Revolving Contribution as the case may be.
5 INTEREST
5.1 Payment of normal interest.
(a) Subject to the provisions of this Agreement, interest on a Term Advance in respect of each Term Interest Period applicable to it shall be paid by the Borrower on the last day of that Term Interest Period; and
(b) Subject to the provisions of this Agreement, interest on a Revolving Advance in respect of each Revolving Interest Period applicable to it shall be paid by the Borrower on the last day of that Revolving Interest Period.
5.2 Normal rate of interest. Subject to the provisions of this Agreement, the rate of interest on each Term Advance and each Revolving Advance (as the case may be) in respect of an Interest Period applicable to it shall be the aggregate of the Margin and LIBOR for that Interest Period.
5.3 Payment of accrued interest. In the case of an Interest Period longer than 3 months, accrued interest shall be paid every 3 months during that Interest Period and on the last day of that Interest Period.
5.4 Notification of Interest Periods and rates of normal interest. The Agent shall notify the Borrower and each Lender of:
(a) each rate of interest; and
(b) the duration of each Interest Period;
as soon as reasonably practicable after each is determined.
5.5 Obligation of Reference Banks to quote. A Lender which is a Reference Bank shall use all reasonable efforts to supply any quotation required of it for the purposes of fixing a rate of interest under this Agreement.
5.6 Absence of quotations by Reference Banks. If any Reference Bank fails to supply a quotation when required, the Agent shall determine the relevant LIBOR on the basis of the quotations supplied by the other Reference Bank or Banks; but if less than 2 of the Reference Banks provide a quotation, the relevant rate of interest shall be set in accordance with the following provisions of this Clause 5.
5.7 Market disruption. The following provisions of this Clause 5 apply if:
(a) no Screen Rate is available for an Interest Period and 2 or more of the Reference Banks do not, before 1.00 p.m. (London time) on the Quotation Date, provide quotations to the Agent in order to fix LIBOR; or
(b) at least 1 Business Day before the start of an Interest Period:
(i) in the case of a Term Advance, Lenders having Term Contributions together amounting to at least 50 per cent. of a Term Advance (or, if a Term Advance has not been made, Term Commitments amounting to at least 50 per cent. of the Total Term Commitments);
(ii) in the case of a Revolving Advance, Lenders having Revolving Contributions together amounting to at least 50 per cent. of the Revolving Advance (or, if a Revolving Advance has not been made, Revolving Commitments amounting to at least 50 per cent. of the Total Revolving Commitments),
notify the Agent that LIBOR fixed by the Agent would not accurately reflect the cost to those Lenders of funding their respective Term Contributions or Revolving Contributions as the case may be (or any part of them) during the Interest Period in the London Interbank Market at or about 11.00 a.m. (London time) on the Quotation Date for the Interest Period; or
(c) at least 1 Business Day before the start of an Interest Period, the Agent is notified by a Lender (the Affected Lender ) that for any reason it is unable to obtain Dollars in the London Interbank Market in order to fund its Term Contribution or Revolving Contribution as the case may be (or any part of it) during that Interest Period.
5.8 Notification of market disruption. The Agent shall promptly notify the Borrower and each of the Lenders and the Swap Banks stating the circumstances falling within Clause 5.7 which have caused its notice to be given.
5.9 Suspension of drawdown. If the Agents notice under Clause 5.8 is served before that Term Advance or that Revolving Advance (as the case may be) has been made:
(a) in a case falling within Clauses 5.7(a) or (b), the Lenders obligations to make that Term Advance or that Revolving Advance, as the case may be;
(b) in a case falling within Clause 5.7(c), the Affected Lenders obligation to participate in that Term Advance or that Revolving Advance, as the case may be;
shall be suspended while the circumstances referred to in the Agents notice continue.
5.10 Negotiation of alternative rate of interest. If the Agents notice under Clause 5.8 is served after a Term Advance or a Revolving Advance (as the case may be) has been made, the Borrower, the Agent and the Lenders or (as the case may be) the Affected Lender shall use reasonable endeavours to agree, within the 15 days after the date on which the Agent serves its notice under Clause 5.8 (the Negotiation Period ), an alternative interest rate or (as the case may be) an alternative basis for the Lenders or (as the case may be) the Affected Lender to fund or continue to fund their or its Term Contribution or Revolving Contribution (as the case may be) during the relevant Term Interest Period or the Revolving Interest Period concerned.
5.11 Application of agreed alternative rate of interest. Any alternative interest rate or an alternative basis which is agreed during the Negotiation Period shall take effect in accordance with the terms agreed.
5.12 Alternative rate of interest in absence of agreement. If an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the Agent shall, with the agreement of each Lender or (as the case may be) the Affected Lender, set an Interest Period (which shall not exceed 3 months) and interest rate representing the cost of funding of the Lenders or (as the case may be) the Affected Lender in Dollars or in any available currency of their or its Term Contribution or Revolving Contribution (as the
case may be) plus the Margin; and the procedure provided for by this Clause 5.12 shall be repeated if the relevant circumstances are continuing at the end of the interest period so set by the Agent.
5.13 Notice of prepayment. If the Borrower does not agree with an interest rate set by the Agent under Clause 5.12, the Borrower may give the Agent not less than 15 Business Days notice of its intention to prepay the relevant Advance at the end of the interest period set by the Agent.
5.14 Prepayment. A notice under Clause 5.13 shall be irrevocable; the Agent shall promptly notify the Lenders or (as the case may require) the Affected Lender of the Borrowers notice of intended prepayment; and on the last Business Day of the interest period set by the Agent, the Borrower shall prepay (without premium or penalty) the relevant Advance, together with accrued interest thereon at the applicable rate plus the Margin.
5.15 Application of prepayment. The provisions of Clause 8 shall apply in relation to the prepayment.
5.16 Designated Transactions under a Master Agreement .
(a) At any time the Borrower may request a Swap Bank to conclude Designated Transactions for the purpose of hedging its interest payment obligations under this Agreement. Signature of a Master Agreement does not commit that Swap Bank to conclude Designated Transactions, or even to offer terms for doing so, but does provide a contractual framework within which Designated Transactions may be concluded and secured, assuming that a Swap Bank is willing to conclude any Designated Transaction at the relevant time and that, if that is the case, mutually acceptable terms can then be agreed at the relevant time.
(b) In relation to a Master Agreement, the Borrower hereby agrees and undertakes with the Agent, the Security Trustee and the Lenders throughout the Security Period:
(i) only to use Designated Transactions concluded under a Master Agreement for the purpose of hedging its interest payment obligations under this Clause 5 from LIBOR-based funding to longer-term fixed rate funding;
(ii) to procure that each Owner shall apply relevant sums out of the Earnings of the Ships and any other amount standing to the credit of the Operating Accounts to meet the Borrowers obligations under the Designated Transactions and procure that all the sums derived from such Designated Transactions will be used to meet their interest payment obligations under this Clause 5;
(iii) not to conclude Designated Transactions which would result, at any time during the Security Period, in the notional principal amount of all Designated Transactions then remaining exceeding the amount of the Loan, as reduced from time to time under Clause 8; and
(iv) not to incur any liability or obligation under a Master Agreement except that directly incurred in relation to a Designated Transaction.
(c) The Lenders agree that, to enable the obligations of the Borrower to each Swap Bank under each Master Agreement to be secured, the security of the Guarantees, the Mortgages, the Deed of Covenant, the Accounts Security Deeds, the General
Assignments and the Charter Assignments in respect of each of the Ships shall be held by the Security Trustee not only to secure the Borrowers obligations under this Agreement but also the Borrowers obligations under the Master Agreements on the terms set out in Clause 17.
(d) In relation to each Designated Transaction, the Borrower shall obtain a quotation from each Swap Bank and each quotation shall be made available to the other Swap Banks. Each Swap Bank shall have the right, but not the obligation, to match the most competitive swap quote and share in such swap pro-rata to its share of the Total Commitments. Where one or more Swap Bank decides not to match the most competitive quote, such swap shall be shared equally amongst the Swap Banks offering or matching the most competitive quote.
6 INTEREST PERIODS
6.1 Term Interest Periods. The first Term Interest Period applicable to a Term Advance shall commence on the Term Drawdown Date and each subsequent Term Interest Period applicable to a Term Advance shall commence on the expiry of the preceding applicable Term Interest Period; and, subject to Clauses 6.3, 6.4 and 6.6, each Term Interest Period shall be:
(a) 3, 6, 9 or 12 months as notified by the Borrower to the Agent not later than 11.00 a.m. (London time) 3 Business Days before the commencement of that Term Interest Period; or
(b) in the case of the first Term Interest Period applicable to the second and any subsequent Advance under the Term Loan Facility, a period ending on the last day of the Term Interest Period applicable to the first Advance under the Term Loan Facility then current, whereupon all the Advances under the Term Loan Facility shall be consolidated and treated as a single Advance under the Term Loan Facility; or
(c) 3 months, if the Borrower fails to notify the Agent by the time specified in paragraph (a); or
(d) in the case of the first Term Interest Period applicable to the first Term Advance such period as shall end on the first Term Repayment Date; or
(e) such other period as the Agent may, with the authorisation of all the Lenders, agree with the Borrower.
6.2 Revolving Interest Periods . The first Revolving Interest Period applicable to a Revolving Advance shall commence on the applicable Revolving Drawdown Date and each subsequent Revolving Interest Period applicable to the Revolving Advance shall commence on the expiry of the preceding applicable Revolving Interest Period; and, subject to Clauses 6.3, 6.5 and 6.6, each Revolving Interest Period shall be:
(a) 3, 6, 9 or 12 months as notified by the Borrower to the Agent not later than 11.00 a.m. (London time) 3 Business Days before the commencement of that Revolving Interest Period; or
(b) in the case of the first Revolving Interest Period applicable to the second and any subsequent Advance under the Revolving Credit Facility, a period ending on the last day of the Revolving Interest Period applicable to the first Advance under the Revolving
Credit Facility then current, whereupon all the Advances under the Revolving Credit Facility shall be consolidated and treated as a single Advance under the Revolving Credit Facility;
(c) 3 months, if the Borrower fails to notify the Agent by the time specified in paragraph (a); or
(d) in the case of the first Revolving Interest Period applicable to the first Revolving Advance such period as may end on the first Term Repayment Date; or
(e) such other period as the Agent may, with the authorisation of all the Lenders, agree with the Borrower.
6.3 Limit on number of Interest Periods. The Borrower shall select Interest Periods under this Clause 6 so that there are no more than 4 Interest Periods of different lengths current at any time unless agreed otherwise by the Lenders. The first Term Interest Period shall end 3 months after the date of this Agreement.
6.4 Duration of Term Interest Periods for repayment instalments. In respect of an amount due to be repaid under Clause 8.1 on a particular Term Repayment Date, a Term Interest Period shall end on that Term Repayment Date.
6.5 Duration of Revolving Interest Period for repayment instalments. In respect of an amount due to be repaid under Clause 8.2 on a particular Revolving Repayment Date, a Revolving Interest Period shall end on that Revolving Repayment Date.
6.6 Non-availability of matching deposits for Interest Period selected. If, after the Borrower has selected and the Lenders have agreed an Interest Period longer than 3 months, any Lender notifies the Agent by 11.00 a.m. (London time) on the second Business Day before the commencement of that Interest Period that it is not satisfied that deposits in Dollars for a period equal to that Interest Period will be available to it in the London Interbank Market when that Interest Period commences, that Interest Period shall be of 3 months.
7 DEFAULT INTEREST
7.1 Payment of default interest on overdue amounts. The Borrower shall pay interest in accordance with the following provisions of this Clause 7 on any amount payable by the Borrower under any Finance Document which the Agent, the Security Trustee or the other designated payee does not receive on or before the relevant date, that is:
(a) the date on which the Finance Documents provide that such amount is due for payment; or
(b) if a Finance Document provides that such amount is payable on demand, the date on which the demand is served; or
(c) if such amount has become immediately due and payable under Clause 19.4, the date on which it became immediately due and payable.
7.2 Default rate of interest. Interest shall accrue on an overdue amount from (and including) the relevant date until the date of actual payment (as well after as before judgment) at the rate per annum determined by the Agent to be 2 per cent. above:
(a) in the case of an overdue amount of principal, the higher of the rates set out at Clauses 7.3(a) and (b); or
(b) in the case of any other overdue amount, the rate set out at Clause 7.3(b).
7.3 Calculation of default rate of interest. The rates referred to in Clause 7.2 are:
(a) the rate applicable to the overdue principal amount immediately prior to the relevant date (but only for any unexpired part of any then current Interest Period applicable to it);
(b) the Margin plus, in respect of successive periods of any duration (including at call) up to 3 months which the Agent may select from time to time:
(i) LIBOR; or
(ii) if the Agent (after consultation with the Reference Banks) determines that Dollar deposits for any such period are not being made available to any Reference Bank by leading banks in the London Interbank Market in the ordinary course of business, a rate from time to time determined by the Agent by reference to the cost of funds to the Reference Banks from such other sources as the Agent (after consultation with the Reference Banks) may from time to time determine.
7.4 Notification of interest periods and default rates. The Agent shall promptly notify the Lenders and the Borrower of each interest rate determined by the Agent under Clause 7.3 and of each period selected by the Agent for the purposes of paragraph (b) of that Clause; but this shall not be taken to imply that the Borrower is liable to pay such interest only with effect from the date of the Agents notification.
7.5 Payment of accrued default interest. Subject to the other provisions of this Agreement, any interest under this Clause shall be immediately due and payable; and the payment shall be made to the Agent for the account of the Creditor Party to which the overdue amount is due.
7.6 Compounding of default interest. Any such interest which is not paid at the end of the period by reference to which it was determined shall thereupon be compounded.
7.7 Application to Master Agreements. For the avoidance of doubt, this Clause 7 does not apply to any amount payable under a Master Agreement in respect of any continuing Designated Transaction as to which section 2(e) (Default Interest; Other Amounts) of that Master Agreement shall apply.
8 REDUCTION, REPAYMENT AND PREPAYMENT
8.1 Repayment of Term Loan. The Borrower shall repay the Term Loan as follows:
(a) if the full amount of the Term Loan is drawndown, by 28 consecutive quarterly instalments the first 2 instalments in the amount of $550,000, the next 25 instalments in the amount of $2,550,000 and the 28 th and final instalment in the amount of $8,150,000. If less than the full amount of the Term Loan is drawdown, instalment numbers 3 to 28 shall be reduced pro rata; and
(b) the first instalment shall be repaid on the date falling 3 months after the date of this Agreement and the last instalment shall be repaid on the Maturity Date.
8.2 Reduction of Total Revolving Commitments. The Total Revolving Commitments shall be repaid in one instalment and cancelled on the Maturity Date.
8.3 Repayment Date for each Revolving Advance. Subject to the provisions of Clause 8.2:
(a) each Revolving Advance shall be repaid in full on the Revolving Interest Period applicable to it; and
(b) unless the Borrower notifies the Agent to the contrary not later than 11.00 a.m. (London time) 3 Business Days prior to the Revolving Repayment Date applicable to a Revolving Advance, then, notwithstanding Clause 8.3(a), where that Revolving Repayment Date is also a Revolving Drawdown Date in respect of another Revolving Advance, the Agent shall, on behalf of the Borrower, apply the Revolving Advance which would otherwise have been paid to the Borrower on that Revolving Drawdown Date in or towards the discharge of the amount payable by the Borrower on that Revolving Repayment Date pursuant to Clause 8.3 (but without prejudice to the obligation of the Borrower to pay any balance due after application of such amount).
8.4 Maturity Date. On the Maturity Date, the Borrower shall additionally pay to the Agent for the account of the Creditor Parties all other sums then accrued or owing under any Finance Document.
8.5 Voluntary prepayment. Subject to the following conditions in Clauses 8.6, 8.7 and 8.8, the Borrower may prepay, without penalty but subject to any payment required under Clause 8.10, the whole or any part of the Term Loan or the Revolving Loan.
8.6 Conditions for voluntary prepayment. The conditions referred to in Clause 8.5 are that:
(a) a partial prepayment shall be $4,000,000 or a higher integral multiple of $4,000,000;
(b) the Agent has received from the Borrower at least 5 Business Days prior written notice specifying the amount to be prepaid and the date on which the prepayment is to be made; and
(c) the Borrower has provided evidence satisfactory to the Agent that any consent required by the Borrower or any Security Party in connection with the prepayment has been obtained and remains in force, and that any requirement relevant to this Agreement which affects the Borrower or any Security Party has been complied with.
8.7 Effect of notice of prepayment. A prepayment notice may not be withdrawn or amended without the consent of the Agent, given with the authorisation of the Majority Lenders, and the amount specified in the prepayment notice shall become due and payable by the Borrower on the date for prepayment specified in the prepayment notice.
8.8 Notification of notice of prepayment. The Agent shall notify the Lenders promptly upon receiving a prepayment notice, and shall provide any Lender which so requests with a copy of any document delivered by the Borrower under Clause 8.6(c).
8.9 Mandatory prepayment and cancellation on sale or Total Loss. The Borrower shall be obliged to prepay the relevant proportion of the aggregate outstanding amount of the Term Loan and the Revolving Loan:
(a) if a Ship which is subject to a Mortgage is sold, on the date on which the sale is completed by delivery of the Ship to the buyer; or
(b) if a Ship which is subject to a Mortgage becomes a Total Loss, on the earlier of the date falling 120 days after the Total Loss Date and the date of receipt by the Security Trustee of the proceeds of insurance relating to such Total Loss,
and in this Clause 8.9, relevant proportion means a fraction of which the numerator is the Fair Market Value of the Ship (determined immediately prior to the date of the sale or Total Loss) which is to be sold or (as the case may be) the subject of Total Loss and the denominator is the aggregate of the most recently determined Fair Market Value of the Ships (determined on the same basis) mortgaged pursuant to this Agreement immediately prior to the sale or Total Loss or, if greater, such amount so that the aggregate outstanding amount of the Term Loan, the Revolving Loan and the Swap Exposure does not exceed the security maintenance cover ratio set out in Clause 15.1.
The prepayment shall be applied first to the Term Loan, secondly to the Revolving Loan then outstanding and thirdly to the Swap Exposure in inverse order of maturity.
This Clause 8.9 is without prejudice to the provisions of Clause 15.1.
The Borrower shall have option to provide substitute security including cash collateral or a substitute ship or ships as an alternative to prepaying the relevant proportion of the aggregate outstanding amount of the Term Loan and Revolving Loan on a sale or Total Loss of a Ship provided:
(a) where a substitute ship is provided that the owner of that substitute ship provides similar security in relation to that ship as was granted by the Owner of the Ship which was the subject to sale or a Total Loss including, but not limited to, a Guarantee, Mortgage and Deed of Covenant (if applicable), General Assignment, Charter Assignment (if applicable), Account Security Deed and Shares Pledge all in a form approved by the Agent (acting with the authorisation of the Lenders); and
(b) where cash collateral is provided the Borrower provides security over that cash in a form acceptable to the Agent (acting with the authorisation of the Lenders),
in each case the Lenders receive legal opinions in relation to such jurisdictions as the Agent may require in a form acceptable to the Lenders.
The provision of a substitute ship or ships shall be subject to the Lenders approval of such substitute and where the substitute Ship is of equivalent age, condition, value and type to the Ship subject to the Total Loss or sale, the Lenders consent shall not be unreasonably withheld or delayed.
If a Ship is sold, the Borrower may pledge the sale proceeds to the Lenders for a maximum period of 3 months as an alternative to prepayment or cancellation of the Term Loan provided that (a) the amount of cash collateral shall be sufficient to ensure that the ratio of (i) the value of the Ships subject to a Mortgage plus the amount of the cash collateral to (ii) the aggregate of the Term Loan, the Revolving Loan outstanding and the Swap Exposure shall not result in a breach of the loan to value ratio set out in Clause 15.1 and (b) the Lenders have an irrevocable right of set-off of the cash collateral against
the Term Loan and Revolving Credit. During such 3 month period the Borrower shall have the option to provide alternative security, including a substitute ship, acceptable to the Lenders on the terms set out in this Agreement and failing that, at the end of any such 3 month period, the Borrower shall be obliged to prepay the relevant proportion of the aggregate outstanding amount of the Term Loan and the Revolving Loan in accordance with Clause 8.9.
8.10 Amounts payable on prepayment. A prepayment shall be made together with accrued interest (and any other amount payable under Clause 21 or otherwise) in respect of the amount prepaid and, if the prepayment is not made on the last day of an applicable Term Interest Period or Revolving Interest Period (as the case may be) together with any sums payable under Clause 21.1(b) and 21.2 but without premium or penalty.
8.11 Application of partial prepayment of Term Loan and Revolving Loan. Each partial voluntary prepayment shall be applied firstly to the instalments specified in Clause 8.1 (in the case of the Term Loan) in inverse order of maturity and secondly to the bullet repayment specified in Clause 8.2 (in the case of the Revolving Loan).
8.12 Reborrowing
(a) No amount of the Term Loan prepaid may be reborrowed;
(b) No amount of the Revolving Loan prepaid pursuant to Clause 8.9 may be reborrowed.
8.13 Voluntary cancellation of Term Commitments or Revolving Commitments. Subject to the following conditions, the Borrower may, without penalty, cancel the whole or any part of the Total Available Term Commitments or Total Available Revolving Commitments.
8.14 Conditions for cancellation of Term Commitments or Revolving Commitments. The conditions referred to in Clause 8.13 are that:
(a) a partial cancellation shall be $1,000,000 or a higher integral multiple of $1,000,000; and
(b) the Agent has received from the Borrower at least 3 Business Days prior written notice specifying the amount of the Total Available Term Commitments or Total Available Revolving Commitments to be cancelled and the date on which the cancellation is to take effect.
8.15 Effect of notice of cancellation. The service of a cancellation notice given under Clause 8.14 shall cause the amount of the Total Term Commitments or Total Revolving Commitments (as the case may be) specified in the notice to be permanently cancelled and any partial cancellation shall be applied against the Term Commitment or the Revolving Commitment (as the case may be) of each Lender pro rata.
8.16 Unwinding of Designated Transactions. On or prior to any repayment or prepayment of the Facility under this Clause 8 or any other provision of this Agreement, the Borrower shall wholly or partially reverse, offset, unwind or otherwise terminate one or more of the continuing Designated Transactions so that the notional principal amount of the continuing Designated Transactions thereafter remaining does not and will not in the future (taking into account the scheduled amortisation) exceed the amount of the aggregate of the Term Loan as reducing from time to time thereafter pursuant to Clause
8.1 and the Revolving Loan as reducing from time to time thereafter pursuant to Clause 8.2.
9 CONDITIONS PRECEDENT
9.1 Documents, fees and no default. Each Lenders obligation to contribute to an Advance is subject to the following conditions precedent:
(a) that, on or before the first Drawdown Date in relation to the first Term Advance, the Agent receives the documents described in Part A of Schedule 4 in form and substance satisfactory to the Agent and its lawyers;
(b) that, on or before a Drawdown Date in relation a Term Advance, other than the first Term Advance, the Agent receives the documents described in Part B of Schedule 4 in relation to the relevant New Ship in form and substance satisfactory to the Agent and its lawyers;
(c) that, on or before the date of this Agreement, the Agent receives all fees pursuant to the fee letter or letters separately agreed between the Borrower and the Agent;
(d) that both at the date of each Drawdown Notice and at each Drawdown Date:
(i) no Event of Default or Potential Event of Default has occurred and is continuing or would result from the borrowing of the relevant Advance;
(ii) the representations and warranties in Clause 10 and those of the Borrower or any Security Party which are set out in the other Finance Documents would be true and not misleading if repeated on each of those dates with reference to the circumstances then existing; and
(iii) none of the circumstances contemplated by Clause 5.7 has occurred and is continuing and a Lender has not suspended its obligations to make or participate in a Term Advance or Revolving Advance pursuant to Clause 5.9; and
(e) that, if the ratio set out in Clause 15.1 were applied immediately following the making of the relevant Advance, the Borrower would not be obliged to provide additional security or prepay part of the Loan under that Clause; and
(f) that the Agent has received, and found to be acceptable to it, any further opinions, consents, agreements and documents in connection with the Finance Documents which the Agent may, with the authorisation of the Majority Lenders, request by notice to the Borrower prior to the relevant Drawdown Date.
9.2 Waiver of conditions precedent. If the Lenders, at their discretion, permit an Advance to be borrowed before certain of the conditions referred to in Clause 9.1 are satisfied, the Borrower shall ensure that those conditions are satisfied within 5 Business Days after the relevant Drawdown Date (or such longer period as the Agent may, with the authorisation of all Lenders, specify).
10 REPRESENTATIONS AND WARRANTIES
10.1 General. The Borrower represents and warrants to each Creditor Party as follows.
10.2 Status. The Borrower is duly incorporated and validly existing and in good standing under the laws of, and has the centre of its main interests in, Singapore.
10.3 Share capital and ownership. The Borrower has an issued share capital of $108,028,520.71 divided into 101,002 shares each issued as fully paid, and the legal title and beneficial ownership of such shares is held, free of any Security Interest or other claim, by the Shareholder.
10.4 Corporate power. The Borrower has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:
(a) to execute the Finance Documents to which the Borrower is a party and the Master Agreements; and
(b) to borrow under this Agreement, to enter into Designated Transaction under the Master Agreements and to make all the payments contemplated by, and to comply with, those Finance Documents and the Master Agreements.
10.5 Consents in force. All the consents referred to in Clause 10.4 remain in force and nothing has occurred which makes any of them liable to revocation.
10.6 Legal validity; effective Security Interests. The Finance Documents to which the Borrower is a party and the Master Agreements, do now or, as the case may be, will, upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents):
(a) constitute the Borrowers legal, valid and binding obligations enforceable against the Borrower in accordance with their respective terms;
(b) create legal, valid and binding Security Interests enforceable in accordance with their respective terms over all the assets to which they, by their terms, relate;
subject to any relevant insolvency laws affecting creditors rights generally and to general equity principles.
10.7 No third party Security Interests. Without limiting the generality of Clause 10.6, at the time of the execution and delivery of each Finance Document:
(a) the Borrower will have the right to create all the Security Interests which that Finance Document purports to create; and
(b) no third party will have any Security Interest (except for Permitted Security Interests) or any other interest, right or claim over, in or in relation to any asset to which any such Security Interest, by its terms, relates.
10.8 No conflicts. The execution by the Borrower of each Finance Document to which it is a party and the Master Agreements, and the borrowing by the Borrower of the Term Loan Facility and the Revolving Credit Facility, and its compliance with each Finance Document and each Master Agreement to which it is a party will not involve or lead to a contravention of:
(a) any law or regulation; or
(b) the constitutional documents of the Borrower; or
(c) any contractual or other obligation or restriction which is binding on the Borrower or any of its subsidiaries or any of their respective assets.
10.9 No default. No Event of Default or Potential Event of Default has occurred and is continuing.
10.10 No withholding taxes. All payments which the Borrower is liable to make under the Finance Documents or any Master Agreement may be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.
10.11 Information. All information which has been provided in writing by or on behalf of the Borrower or any Security Party to any Creditor Party in connection with any Finance Document satisfied the requirements of Clause 11.4; all audited and unaudited accounts which have been so provided satisfied the requirements of Clause 11.5; and there has been no material adverse change in the financial position or state of affairs of the Borrower or its subsidiaries from that disclosed in the latest of those accounts.
10.12 No litigation. No litigation, arbitration or administrative proceedings (including, but not limited to, investigative proceedings) involving the Borrower or any Owner has been commenced or taken or, to the Borrowers knowledge, is likely to be commenced or taken which, in any case, would be likely to have a material adverse effect on the Borrowers or any Owners financial position or profitability.
10.13 Compliance with certain undertakings. At the date of this Agreement, the Borrower is in compliance with Clauses 11.2 and 11.13.
10.14 Taxes paid. The Borrower has paid all taxes applicable to, or imposed on or in relation to, the Borrower and its business.
10.15 No money laundering. Without prejudice to the generality of Clause 2.3, in relation to the borrowing by the Borrower of the Term Loan Facility and the Revolving Credit Facility, the performance and discharge of its obligations and liabilities under the Finance Documents, and the transactions and other arrangements effected or contemplated by the Finance Documents to which it is a party, the Borrower confirms that it is acting for its own account and that the foregoing will not involve or lead to contravention of any law, official requirement or other regulatory measure or procedure implemented to combat money laundering (as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Communities).
10.16 ISM Code and ISPS Code compliance. All requirements of the ISM Code and the ISPS Code as they relate to the Borrower, each Owner the Approved Manager and the Ships have been, or will be, complied with at the time of the Drawdown Date relating to each Ship.
10.17 Prohibited Person.
(a) No Ship is nor will be beneficially owned directly or indirectly by a Prohibited Person;
(b) No Prohibited Person has any interest of any nature whatsoever in the Borrower or any other Security Party; and
(c) No property subject to any Security Interest constituted by a Finance Document has been derived from any unlawful activity.
10.18 Pari passu ranking . The obligations of the Borrower and each Owner under the Finance Documents and the Master Agreements 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.
10.19 Power and authority . The Borrower 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 and the Master Agreements to which it is a party and the transactions contemplated by those Finance Documents and the Master Agreements.
11 GENERAL UNDERTAKINGS
11.1 General. The Borrower undertakes with each Creditor Party to comply with the following provisions of this Clause 11 at all times during the Security Period except as the Agent may, with the authorisation of all Lenders, otherwise permit.
11.2 Title; negative pledge. The Borrower shall procure that each Owner (in the case of a New Ship, from the date of the delivery of that New Ship to the relevant Owner) shall hold the legal title to, and own the entire beneficial interest in the Ship owned by it, its Earnings and Insurances, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents and the effect of assignments contained in the Finance Documents and except for Permitted Security Interests.
11.3 Disposal of assets . The Borrower will not transfer, lease or otherwise dispose of all or a substantial part of its assets, whether by one transaction or a number of transactions, whether related or not except in the usual course of its business and for fair market value payable in cash on completion of such transaction.
11.4 Information provided to be accurate. All financial and other information which is provided in writing by or on behalf of the Borrower under or in connection with any Finance Document will be true and not misleading and will not omit any material fact or consideration at the time it is provided.
11.5 Provision of financial statements . The Borrower will send to the Agent:
(a) as soon as possible, but in no event later than 180 days after the end of each financial year of the Borrower, the audited consolidated accounts of the Borrowers Group and audited individual accounts of the Borrower;
(b) as soon as possible, but in no event later than 90 days after the end of each financial half-year of the Borrower, the unaudited consolidated financial statements of the Borrowers Group and the unaudited individual financial statements of the Borrower certified as to its correctness by the chief financial officer of the Borrower;
(c) concurrently with the annual audited consolidated accounts and the financial statements referred to in paragraphs (a) and (b), a compliance certificate signed by a director or the
Chief Financial Officer of the Borrower in the form attached as Schedule 8 (or in any other format which the Agent may approve) evidencing compliance with the financial covenants in Clause 12.5 and also listing the Fair Market Value of each of the Ships which is subject to a Mortgage at that time.
11.6 Form of financial statements. The audited accounts delivered under Clause 11.5 will:
(a) be prepared in accordance with all applicable laws and IFRS consistently applied;
(b) give a true and fair view of the state of affairs of the Borrowers Group (or the Borrower, as the case may be) at the date of those accounts and of profit for the period to which those accounts relate;
(c) fully disclose or provide for all significant liabilities of the Borrowers Group (or the Borrower, as the case may be); and
(d) be provided in English.
11.7 Provision of further information. The Borrower will, as soon as practicable after receiving a request from the Agent, provide the Agent with such additional financial information in relation to the Borrowers Group including but not limited to fleet employment, charter-in obligations, liabilities under financial instruments, debt repayment profiles and 3 year cash flow projections of the Borrower and any other information which may be reasonably requested by the Agent or any Lender through the Agent.
11.8 Creditor notices. The Borrower will send the Agent, at the same time as they are despatched, copies of all material communications which are despatched to all of the Borrowers shareholders or creditors or to the whole of any class of them.
11.9 Consents. The Borrower will maintain in force and promptly obtain or renew, and will promptly send certified copies to the Agent of, all consents required:
(a) for the Borrower to perform its obligations under any Finance Document to which it is a party and any Master Agreement;
(b) for the validity or enforceability of any Finance Document to which it is a party and any Master Agreement;
and the Borrower will comply with the terms of all such consents.
11.10 Maintenance of Security Interests. The Borrower will:
(a) at its own cost, do all that it reasonably can to ensure that any Finance Document to which it is a party validly creates the obligations and the Security Interests which it purports to create; and
(b) without limiting the generality of paragraph (a), at its own cost, promptly register, file, record or enrol any Finance Document to which it is a party with any court or authority in all Pertinent Jurisdictions, pay any stamp, registration or similar tax in all Pertinent Jurisdictions in respect of any Finance Document to which it is a party, give any notice or take any other step which, in the opinion of the Majority Lenders, is or has become necessary or desirable for any Finance Document to which it is a party to be valid,
enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which it creates.
11.11 Notification of litigation. The Borrower will provide the Agent with details of any legal or administrative action involving the Borrower, any Security Party or any Ship as soon as such action is instituted or it becomes apparent to the Borrower that it is likely to be instituted, unless it is clear that the legal or administrative action cannot be considered material in the context of any Finance Document.
11.12 Principal place of business. The Borrower will notify the Agent if it has a place of business in any jurisdiction which would require a Finance Document to which it is a party to be registered, filed or recorded with any court or authority in that jurisdiction or if the centre of its main interests changes.
11.13 Notification of default. The Borrower will notify the Agent as soon as the Borrower becomes aware of:
(a) the occurrence of an Event of Default or Potential Event of Default; or
(b) any matter which indicates that an Event of Default or Potential Event of Default may have occurred,
and will keep the Agent fully up-to-date with all developments.
11.14 Access to books and records. The Borrower shall permit one or more representatives of the Agent, at the request of the Agent, to have reasonable access to its books and records and to inspect the same during normal business hours at its offices upon reasonable prior written notice and subject to existing confidentiality agreements with third parties.
11.15 No amendment to Master Agreements. The Borrower agrees not to make any amendment or supplement to, waive or fail to enforce, the Master Agreements or any of their provisions unless otherwise agreed by the Agent. For the avoidance of doubt a Designated Transaction shall not be an amendment or supplement for the purposes of this Clause 11.15.
11.16 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 or any Security Party after the date of this Agreement; or
(c) a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges the Agent or any Lender (or, in the case of paragraph (c), 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 Agent or the Lender concerned supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or the Lender concerned (for itself or, in the case of the event described in paragraph (c), on behalf of any
prospective new Lender) in order for the Agent, the Lender concerned or, in the case of the event described in paragraph (c), 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.
11.17 Charter assignments . If an Owner enters into any Charter, the Borrower shall procure that the relevant Owner executes a Charter Assignment in favour of the Security Trustee.
11.18 Maintenance of ownership. The Borrower shall throughout the Security Period remain the legal and beneficial owner of the entire issued and allocated share capital of each Owner.
11.19 No Amendments to Shipbuilding Contracts. The Borrower will not agree to any amendment or supplement to any New Ship Shipbuilding Contract which has a material effect on the value, type or size of such New Ship.
11.20 Vettings. The Borrower shall procure that the relevant Owner of each of the New Ships listed as Ships 7 to 9 in Schedule 6 shall provide to the Agent satisfactory evidence of the vettings of those New Ships within 6 months of the delivery of that New Ship.
11.21 Delivery of New Ships. The Borrower shall procure that the Agent is promptly notified of each notice of delivery delivered by the builder pursuant to each New Ship Shipbuilding Contract. In relation to each New Ship, the Borrower shall procure that no later than 5 days following the delivery date of that New Ship the Agent receives in respect of that New Ship the documents described in Part B of Schedule 4 in form and substance satisfactory to the Agent.
11.22 Accounts Pledge. If the Borrower enters into one or more Designated Transactions under a Master Agreement then on the date on which the first Confirmation is exchanged pursuant to that Master Agreement, the Borrower shall enter into an additional Accounts Pledge in favour of all the Lenders and Swap Banks in the Agreed Form in order to secure their liabilities under that Master Agreement.
12 CORPORATE UNDERTAKINGS
12.1 General. The Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 12 at all times during the Security Period except as the Agent may, with the authorisation of all Lenders, otherwise permit.
12.2 Maintenance of status. The Borrower will maintain its separate corporate existence under the laws of, and the centre of its main interests in, Singapore.
12.3 No change of business. The Borrower will not change its principal activity from its current industrial sector at the date of this Agreement or operate outside the scope of its Articles of Association.
12.4 No merger etc. The Borrower shall not, and shall procure that none of its subsidiaries will, enter into any form of merger, sub-division, amalgamation or other reorganisation (for the purposes of this Clause the sale of up to 40 per cent. of the shares of the Borrower in the London Stock Exchange or the Singapore Stock Exchange in connection with an initial public offering (IPO) of the Borrower shall be disregarded).
12.5 Financial Covenants. The Borrower will ensure that the consolidated financial position of the Borrowers Group shall at all times during the Security Period be such that:
(a) Market Adjusted Tangible Net Worth is not less than $300,000,000;
(b) Liquidity is not less than $40,000,000 (of which at least $15,000,000 shall be in cash or cash equivalents);
(c) the ratio of Debt to Market Adjusted Tangible Fixed Assets shall be not more than 70 per cent.; and
(d) the ratio of Net Debt to EBITDA shall be not more than 5.5 times.
In this Clause 12.5:
Cash and Cash Equivalents means the cash and cash equivalents set out in the Latest Accounts;
Market Adjusted Tangible Net Worth means the aggregate amount (without double counting) of the following:
(a) the amounts paid up, or credited as paid up, on the issued share capital of the Borrowers Group;
(b) any credit balance on the consolidated profit and loss account of the Borrowers Group; and
(c) any amount standing to the credit of any other consolidated capital and revenue reserves of the Borrowers Group including any share premium account and capital redemption reserve,
less the aggregate amount (without double counting) of the following:
(a) any debt balance on the consolidated profit and loss account of the Borrowers Group; and
(b) any reserves attributable to interests of minority shareholders in any subsidiary (whether direct or indirect) of the Borrowers Group,
all as determined in accordance with IFRS applied in the preparation of the Latest Accounts but adjusted by:
(i) deducting any dividend or other distribution declared, recommended or made by the Borrowers Group;
(ii) deducting any amount attributable to goodwill or any other intangible asset;
(iii) reflecting any variation required to be made to the asset value attributable to any ship owned by the Borrowers Group in order to reflect the fair value of any such ship;
(iv) excluding any amount attributable to deferred taxation;
(v) excluding any amount attributable to minority interests; and
(vi) eliminating inconsistencies (if any) between the accounting principles;
Liquidity means the aggregate of (i) Cash and Cash Equivalents and (ii) freely available revolving credit facilities unrestricted by conditions relating to drawdown and with a remaining maturity of minimum 6 months as shown in the Latest Accounts;
Debt means the aggregate (without double counting) of secured or unsecured bank loans, finance lease obligations, bonds and any other financial obligations included as a liability on the balance sheet in terms of IFRS, but excluding the mark to market of swaps and other derivative instruments and excluding contingent liabilities as shown in the Latest Accounts;
Net Debt means the Debt as reduced by the amount of the cash and cash equivalents as shown in the Latest Accounts;
EBITDA means the profit before tax having added back the amount of interest paid, accrued tax, depreciation, amortisation and losses on disposal of assets and deducted the amount of interest earned and profit on disposal of assets as such amount is determined in accordance with the Latest Accounts (where such Latest Accounts are delivered pursuant to Clause 11.5(a)) or as calculated on a rolling 12 month basis (where such Latest Accounts are delivered pursuant to Clause 11.5(b));
Latest Accounts means, at any date, the audited consolidated accounts of the Borrowers Group most recently delivered to the Agent under Clause 11.5(a) or (b); and
Market Adjusted Tangible Fixed Assets means the aggregate of the book value of:
(a) ships (including ships under construction) either wholly or partially owned by the Borrowers Group; and
(b) land and buildings either wholly or partially owned by the Borrowers Group,
as stated in the Latest Accounts adjusted by such amount to reflect the current open market value of such assets evidenced to the Agents satisfaction and acceptable to the Lenders.
In the event that the Borrower agrees more favourable financial covenants to a particular lender or lenders in relation to any other facility, the financial covenants in this Clause 12.5 shall be amended to reflect those more favourable financial covenants.
12.6 Change of accounting period . The Borrower shall not change its fiscal year end date.
12.7 Restrictions on dividends . The Borrower shall not pay any dividend or make any other form of distribution or effect any form of redemption or return of share capital Provided that the Borrower may pay a dividend or make a distribution subject to the following conditions:
(a) no Event of Default or Potential Event of Default has occurred and is continuing or would result from the payment of such dividend or distribution or redemption or return of share capital; and
(b) the payment of such dividend or distribution or redemption or return of share capital would not cause any breach of any of the financial covenants set out in Clause 12.5.
13 INSURANCE
13.1 General. The Borrower also undertakes with each Creditor Party to procure that each Owner (from the date on which a Mortgage is granted over that Ship) shall comply with the following provisions of this Clause 13 at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.
13.2 Maintenance of obligatory insurances. The Borrower shall procure that each Owner shall keep the Ship owned by it insured at the expense of that Owner against:
(a) fire and usual marine risks (including hull and machinery and excess risks);
(b) war risks (including London Blocking and Trapping addendum or similar arrangements);
(c) protection and indemnity risks (including liability for oil pollution for an amount of not less than $1,000,000,000); and
(d) any other risks against which the Security Trustee considers, having regard to practices and other circumstances prevailing at the relevant time, it would in the reasonable opinion of the Security Trustee be reasonable for the Owners or any of them to insure and which are specified by the Security Trustee by notice to the relevant Owner or Owners.
13.3 Terms of obligatory insurances. The Borrower shall procure that each Owner shall effect such insurances:
(a) in Dollars;
(b) in the case of fire and usual marine risks and war risks, in an amount on an agreed value basis at least the greater of (i) when aggregated with such insurances on the other Ships subject to a Mortgage, (A) prior to the first Revolving Drawdown Date 120 per cent. of the aggregate of the Term Loan and the Swap Exposure and (B) following the first Revolving Drawdown Date 120 per cent. of the aggregate of the Term Loan, Total Revolving Commitment and the Swap Exposure and (ii) the Fair Market Value of that Ship;
(c) in the case of oil pollution liability risks, for an aggregate amount equal to the highest level of cover from time to time available under basic protection and indemnity club entry and in the international marine insurance market;
(d) in relation to protection and indemnity risks in respect of that Ships full tonnage;
(e) on approved terms; and
(f) through approved brokers and with approved insurance companies and/or underwriters or, in the case of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations.
13.4 Further protections for the Creditor Parties. In addition to the terms set out in Clause 13.3, the Borrower shall procure that each Owner shall procure that the obligatory insurances shall:
(a) subject always to paragraph (b), name the Owner of that Ship as the sole named assured unless the interest of every other named assured is limited:
(i) in respect of any obligatory insurances for hull and machinery and war risks;
(A) to any provable out-of-pocket expenses that it has incurred and which form part of any recoverable claim on underwriters; and
(B) to any third party liability claims where cover for such claims is provided by the policy (and then only in respect of discharge of any claims made against it); and
(ii) in respect of any obligatory insurances for protection and indemnity risks, to any recoveries it is entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against it;
and every other named assured has undertaken in writing to the Security Trustee (in such form as it requires) that any deductible shall be apportioned between the Owner of that Ship and every other named assured in proportion to the gross claims made or paid by each of them and that it shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;
(b) whenever the Security Trustee requires, name (or be amended to name) the Security Trustee as additional named assured for its rights and interests, warranted no operational interest and with full waiver of rights of subrogation against the Security Trustee, but without the Security Trustee thereby being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance;
(c) name the Security Trustee as loss payee with such directions for payment as the Security Trustee may specify;
(d) provide that all payments by or on behalf of the insurers under the obligatory insurances to the Security Trustee shall be made without set-off, counterclaim or deductions or condition whatsoever;
(e) provide that such obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Security Trustee or any other Creditor Party; and
(f) provide that the Security Trustee may make proof of loss if the Owner of that Ship fails to do so.
13.5 Renewal of obligatory insurances. The Borrower shall procure that each Owner in relation to the Ship owned by it shall:
(a) at least 21 days before the expiry of any obligatory insurance:
(i) notify the Security Trustee of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom that Owner proposes to renew that obligatory insurance and of the proposed terms of renewal; and
(ii) obtain the Security Trustees approval to the matters referred to in paragraph (i);
(b) at least 14 days before the expiry of any obligatory insurance, renew that obligatory insurance in accordance with the Security Trustees approval pursuant to paragraph (a); and
(c) procure that the approved brokers and/or the war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal notify the Security Trustee in writing of the terms and conditions of the renewal.
13.6 Copies of policies; letters of undertaking. The Borrower shall procure that each Owner shall ensure that all approved brokers provide the Security Trustee with pro forma copies of all policies relating to the obligatory insurances which they are to effect or renew and of a letter or letters or undertaking in a form required by the Security Trustee and including undertakings by the approved brokers that:
(a) they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of Clause 13.4;
(b) they will hold such policies, and the benefit of such insurances, to the order of the Security Trustee in accordance with the said loss payable clause;
(c) they will advise the Security Trustee immediately of any material change to the terms of the obligatory insurances;
(d) they will notify the Security Trustee, not less than 14 days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from that Owner or its agents and, in the event of their receiving instructions to renew, they will promptly notify the Security Trustee of the terms of the instructions; and
(e) they will not set off against any sum recoverable in respect of a claim relating to a Ship under such obligatory insurances any premiums or other amounts due to them or any other person whether in respect of that Ship or otherwise, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums or other amounts, and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of that Ship forthwith upon being so requested by the Security Trustee.
13.7 Copies of certificates of entry. The Borrower shall procure that each Owner shall ensure that any protection and indemnity and/or war risks associations in which the Ship owned by it is entered provides the Security Trustee with:
(a) a certified copy of the certificate of entry for that Ship;
(b) a letter or letters of undertaking in such form as may be required by the Security Trustee; and
(c) a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to that Ship.
13.8 Deposit of original policies. The Borrower shall procure that each Owner shall ensure that all policies relating to obligatory insurances are deposited with the approved brokers through which the insurances are effected or renewed.
13.9 Payment of premiums. The Borrower shall procure that each Owner shall punctually pay all premiums or other sums payable in respect of the obligatory insurances and produce all relevant receipts when so required by the Security Trustee.
13.10 Guarantees. The Borrower shall procure that each Owner shall ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect.
13.11 Compliance with terms of insurances. The Borrower shall procure that no Owner shall do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part; and, in particular:
(a) the Borrower shall procure that each Owner shall take all necessary action and comply with all requirements which may from time to time be applicable to the obligatory insurances, and (without limiting the obligation contained in Clause 13.6(c)) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Security Trustee has not given its prior approval;
(b) the Borrower shall procure that no Owner shall make any changes relating to the classification or classification society or manager or operator of the Ship owned by it approved by the underwriters of the obligatory insurances;
(c) the Borrower shall procure that each Owner shall make (and promptly supply copies to the Agent upon its request of) all quarterly or other voyage declarations which may be required by the protection and indemnity risks association in which the Ship owned by it is entered to maintain cover for trading to the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990 or any other applicable legislation) and shall procure that each Owner shall provide a copy of its Certificate of Financial Responsibility, if applicable; and
(d) the Borrower shall procure that no Owner shall employ the Ship owned by it, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.
13.12 Alteration to terms of insurances. The Borrower shall procure that no Owner shall either make or agree to any alteration to the terms of any obligatory insurance nor waive any right relating to any obligatory insurance.
13.13 Settlement of claims. The Borrower shall procure that no Owner shall settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty, and shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.
13.14 Provision of copies of communications. The Borrower shall procure that each Owner shall provide the Security Trustee, at the time of each such communication, copies of all written communications between that Owner and:
(a) the approved brokers;
(b) the approved protection and indemnity and/or war risks associations; and
(c) the approved insurance companies and/or underwriters, which relate directly or indirectly to:
(i) that Owners obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and
(ii) any credit arrangements made between that Owner and any of the persons referred to in paragraphs (a) or (b) relating wholly or partly to the effecting or maintenance of the obligatory insurances.
13.15 Provision of information . In addition, the Borrower shall procure that each Owner shall promptly provide the Security Trustee (or any persons which it may designate) with any information which the Security Trustee (or any such designated person) requests for the purpose of:
(a) obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurances effected or proposed to be effected; and/or
(b) effecting, maintaining or renewing any such insurances as are referred to in Clause 13.16 or dealing with or considering any matters relating to any such insurances,
and the Borrower shall, forthwith upon demand, indemnify the Security Trustee in respect of all fees and other expenses incurred by or for the account of the Security Trustee in connection with any such report as is referred to in paragraph (a).
13.16 Mortgagees interest and additional perils insurances. The Security Trustee shall be entitled from time to time to effect, maintain and renew a mortgagees interest additional perils insurance and a mortgagees interest marine insurance in such amounts, on such terms, through such insurers and generally in such manner as the Security Trustee may from time to time consider appropriate and the Borrower shall upon demand fully indemnify the Security Trustee in respect of all premiums and other expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any such insurance or dealing with, or considering, any matter arising out of any such insurance.
14 SHIP COVENANTS
14.1 General. The Borrower also undertakes with each Creditor Party to procure that each Owner (from the date on which a Mortgage is granted over that Ship) shall comply with the following provisions of this Clause 14 at all times during the Security Period except as the Agent, with the authorisation of the Majority Lenders, may otherwise permit and, in the case of Clauses 14.2, 14.3(b) and 14.12(e) such consent not to be unreasonably withheld or delayed.
14.2 Ships name and registration. The Borrower shall procure that each Owner shall keep the Ship owned by it registered in its name on the flag indicated in Schedule 6; shall procure that each Owner shall not do, omit to do or allow to be done anything as a result of which such registration might be cancelled or imperilled; and shall not change the name or port of registry of the Ship owned by it Provided that the Borrower may transfer the Ships to another Approved Flag subject to:
(a) the Borrower executing a replacement Mortgage, Deed of Covenant (if applicable), General Assignment, Charter Assignment (if applicable) and Shares Pledge in respect of that Ship at the time of transfer of that Ship;
(b) receipt by the Lenders of a legal opinion from Singapore lawyers and from lawyers in the jurisdiction of the Approved Flag in a form acceptable to the Lenders; and
(c) receipt by the Lenders of evidence satisfactory to the Lenders that the Borrower has received all approvals and consents as may be required for such transfer.
14.3 Repair and classification. The Borrower shall procure that each Owner shall keep the Ship owned by it in a good and safe condition and state of repair:
(a) consistent with first-class ship ownership and management practice;
(b) so as to maintain that Ships class notation at the date of this Agreement free of overdue recommendations and conditions affecting that Ships class with an Approved Classification Society; and
(c) so as to comply with all laws and regulations applicable to vessels registered in Singapore or to vessels trading to any jurisdiction to which that Ship may trade from time to time, including but not limited to the ISM Code and the ISPS Code.
14.4 Modification. The Borrower shall procure that no Owner shall make any modification or repairs to, or replacement of, the Ship owned by it or equipment installed on the Ship owned by it which would or might materially alter the structure, type or performance characteristics of the Ship owned by it or materially reduce its value.
14.5 Removal of parts. The Borrower shall procure that no Owner shall remove any material part of the Ship owned by it, or any item of equipment installed on, the Ship owned by it unless the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any Security Interest or any right in favour of any person other than the Security Trustee and becomes on installation on the Ship owned by it the property of that Owner and subject to the security constituted by the Mortgage Provided that an Owner may install equipment owned by a third party if the equipment can be removed without any risk of damage to the Ship owned by it.
14.6 Surveys. The Borrower shall procure that each Owner shall submit the Ship owned by it regularly to all periodical or other surveys which may be required for classification purposes and, if so required by the Security Trustee provide the Security Trustee, with copies of all survey reports.
14.7 Inspection. The Borrower shall procure that each Owner shall permit the Security Trustee (by surveyors or other persons appointed by it for that purpose and at the
Borrowers cost) to board the Ship (and in the case of the New Ships listed as Ships 7 to 9 in Schedule 6 also during the construction period) owned by it at all reasonable times to inspect its condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections. If an inspection indicates that a Ship is deficient in any way, it shall be a condition to the ongoing availability of the Term Loan and Revolving Loan that the Borrower shall procure that the Owner of that Ship will ensure that that Ship is adequately repaired or modified to the satisfaction of the Majority Lenders as evidenced by a further inspection.
14.8 Prevention of and release from arrest. The Borrower shall procure that each Owner shall promptly discharge:
(a) all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against the Ship owned by it, its Earnings or the Insurances;
(b) all taxes, dues and other amounts charged in respect of the Ship owned by it, its Earnings or the Insurances; and
(c) all other outgoings whatsoever in respect of the Ship owned by it, its Earnings or the Insurances,
and, forthwith upon receiving notice of the arrest of the Ship owned by it, or of its detention in exercise or purported exercise of any lien or claim, that Owner shall procure its release by providing bail or otherwise as the circumstances may require.
14.9 Compliance with laws etc. The Borrower shall procure that each Owner shall:
(a) comply, or procure compliance with the ISM Code, the ISPS Code, all Environmental Laws and all other laws or regulations relating to the Ship owned by it, its ownership, operation and management or to the business of that Owner;
(b) not employ the Ship owned by it nor allow its employment in any manner contrary to any law or regulation in any relevant jurisdiction including but not limited to the ISM Code and the ISPS Code;
(c) in the event of hostilities in any part of the world (whether war is declared or not), not cause or permit the Ship owned by it to enter or trade to any zone which is declared a war zone by any government or by the Ships war risks insurers unless the prior written consent of the Security Trustee has been given and that Owner has (at its expense) effected any special, additional or modified insurance cover which the Security Trustee may require; and
(d) not employ the Ship owned by it nor permit the Ship to be employed in breach of any embargo or sanctions or prohibitions order (or any similar order or directive) of the United States of America or the European Union as if the relevant Owner were a national of the United States of America or the European Union.
14.10 Provision of information. The Borrower shall procure that each Owner shall promptly provide the Security Trustee with any information which it requests regarding:
(a) the Ship owned by it, its employment, position and engagements;
(b) the Earnings and payments and amounts due to that Ships master and crew;
(c) any expenses incurred, or likely to be incurred, in connection with the operation, maintenance or repair of the Ship owned by it and any payments made in respect of the Ship owned by it;
(d) any towages and salvages; and
(e) the Borrowers, the Owners, the Approved Managers or that Ships compliance with the ISM Code and the ISPS Code;
and, upon the Security Trustees request, provide copies of any current charter relating to that Ship, of any current charter guarantee and copies of the Borrowers, the Owners or the Approved Managers Document of Compliance.
14.11 Notification of certain events. The Borrower shall procure that each Owner shall immediately notify the Security Trustee by fax, confirmed forthwith, by letter of:
(a) any casualty which is or is likely to be or to become a Major Casualty;
(b) any occurrence as a result of which the Ship owned by it has become or is, by the passing of time or otherwise, likely to become a Total Loss;
(c) any requirement or recommendation which, in either case, is material and made by any insurer or classification society or by any competent authority which is not immediately complied with;
(d) any arrest or detention of the Ship owned by it, any exercise or purported exercise of any lien on the Ship owned by it or the Earnings or any requisition of the Ship owned by it for hire;
(e) any intended dry docking of the Ship owned by it;
(f) any Environmental Claim made against that Owner or in connection with the Ship owned by it, or any Environmental Incident;
(g) any claim for breach of the ISM Code or the ISPS Code being made against the Borrower, that Owner, the Approved Manager or otherwise in connection with the Ship owned by it; or
(h) any other matter, event or incident, actual or threatened, the effect of which will or could lead to the ISM Code or the ISPS Code not being complied with,
and the Borrower shall procure that each Owner shall keep the Security Trustee advised in writing on a regular basis and in such detail as the Security Trustee shall require of that Owners, the Approved Managers or any other persons response to any of those events or matters.
14.12 Restrictions on chartering, appointment of managers etc. The Borrower shall procure that no Owner shall:
(a) let the Ship owned by it on demise charter for any period;
(b) enter into any time or consecutive voyage charter in respect of the Ship for a term which exceeds, or which by virtue of any optional extensions may exceed, 12 months plus or minus 30 days;
(c) enter into any charter in relation to the Ship owned by it under which more than 2 months hire (or the equivalent) is payable in advance;
(d) charter the Ship owned by it otherwise than on bona fide arms length terms at the time when the Ship owned by it is fixed;
(e) appoint a manager of the Ship owned by it other than the Approved Manager or agree to any alteration to the terms of the Approved Managers appointment;
(f) de-activate or lay up the Ship owned by it; or
(g) put the Ship owned by it into the possession of any person for the purpose of work being done upon it in an amount exceeding or likely to exceed $250,000 (or the equivalent in any other currency) unless that person has first given to the Security Trustee and in terms satisfactory to it a written undertaking not to exercise any lien on the Ship owned by it or the Earnings for the cost of such work or for any other reason or unless the Borrower has first provided the Agent with additional security acceptable to the Agent (acting with the authorisation of the Lenders) in respect of such costs.
14.13 Notice of Mortgage. The Borrower shall procure that each Owner shall keep the Mortgage registered against the Ship owned by it as a valid first preferred or priority mortgage (as the case may be), carry on board the Ship owned by it a certified copy of the Mortgage and place and maintain in a conspicuous place in the navigation room and that Masters cabin of the Ship owned by it a framed printed notice stating that the Ship owned by it is mortgaged by that Owner to the Security Trustee.
14.14 Sharing of Earnings. The Borrower shall procure that each Owner shall not enter into any agreement or arrangement for the sharing of any Earnings.
14.15 ISPS Code. The Borrower shall procure that each Owner shall comply with the ISPS Code and in particular, without limitation, shall:
(a) procure that the Ship owned by it and the company responsible for that Ships compliance with the ISPS Code comply with the ISPS Code; and
(b) maintain for the Ship owned by it an ISSC; and
(c) notify the Agent immediately in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC.
14.16 Classification society undertaking. The Borrower shall procure that each Owner shall instruct the classification societies referred to in Clause 14.3 (and procure that each classification society undertakes with the Security Trustee):
(a) to send to the Security Trustee, following receipt of a written request from the Security Trustee, certified true copies of all original class records held by the classification society in relation to each Ship;
(b) to allow the Security Trustee (or its agents), at any time and from time to time, to inspect the original class and related records of that Owner and that Ship at the offices of the classification society and to take copies of them;
(c) to notify the Security Trustee immediately in writing if the classification society:
(i) receives notification from that Owner or any person that that Ships classification society is to be changed; or
(ii) becomes aware of any facts or matters which may result in or have resulted in a change, suspension, discontinuance, withdrawal or expiry of that Ships class under the rules or terms and conditions of that Owners or that Ships membership of the classification society; and
(d) following receipt of a written request from the Security Trustee:
(i) to confirm that that Owner is not in default of any of its contractual obligations or liabilities to the classification society and, without limiting the foregoing, that it has paid in full all fees or other charges due and payable to the classification society; or
(ii) if that Owner is in default of any of its contractual obligations or liabilities to the classification society, to specify to the Security Trustee in reasonable detail the facts and circumstances of such default, the consequences of such default, and any remedy period agreed or allowed by the classification society.
15 SECURITY COVER
15.1 Minimum required security cover. Clause 15.2 applies if the Agent notifies the Borrower that the aggregate of the Term Loan, the Revolving Loan and the Swap Exposure is greater than:
(a) on or before 31 March 2012, 65 per cent. of; or
(b) at all other times, 80 per cent. of:
(i) the aggregate of the Fair Market Values (determined as provided in Clause 15.3) of each Ship subject to a Mortgage and which the Lenders have found to be satisfactory as evidenced by an inspection carried our pursuant to Clause 14.7; plus
(ii) the net realisable value of any additional security previously provided under this Clause 15.
The Borrower shall provide (at its own cost) the valuation of each Ship which is required to determine its Fair Market Value pursuant to Clause 15.3 on each Drawdown Date, on the first Term Repayment Date and quarterly thereafter throughout the Security Period and, after the occurrence of an Event of Default which is continuing, whenever requested by the Agent.
15.2 Provision of additional security; prepayment. If the Agent serves a notice on the Borrower under Clause 15.1, the Borrower shall, within 1 month after the date on which the Agents notice is served, either:
(a) provide, or ensure that a third party provides, additional security which, in the opinion of the Lenders, has a net realisable value at least equal to the shortfall and is documented in such terms as the Agent may, with the authorisation of all Lenders, approve or require; or
(b) prepay such part (at least) firstly of the Revolving Loan and secondly of the Term Loan which will eliminate the shortfall.
15.3 Valuation of Ships. The Fair Market Value of a Ship at any date is that shown by a valuation prepared:
(a) firstly:
(i) as at the date of the most recent quarterly valuation received on 31 March, 30 June, 30 August or 31 December;
(ii) by Clarksons Shipbrokers provided that such valuation is (i) provided on the letter head of Clarksons Shipbrokers and (ii) addressed to the Agent;
(iii) with or without physical inspection of that Ship (as the Agent may require);
(iv) on the basis of a sale for prompt delivery for cash on normal arms length commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment;
(v) after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale; and
(b) secondly, where alternative valuations are required pursuant to this Agreement:
(i) as at a date not more than 14 Business Days previously;
(ii) by an Approved Shipbroker;
(iii) with or without physical inspection of that Ship (as the Agent may require);
(iv) on the basis of a sale for prompt delivery for cash on normal arms length commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment;
(v) after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale;
In the event that the Majority Lenders or the Borrower do not agree with the valuation provided pursuant to Clause 15.3(a), the party disagreeing with such valuation shall appoint an Approved Shipbroker to conduct a valuation in accordance with this Clause 15.3 and the market value shall be the average of the two valuations.
In the event that Clarksons Shipbrokers do not provide the valuation referred to in Clause 15.3(a), the Agent shall appoint an Approved Shipbroker to provide such valuation. In the event that the Borrower or Lenders do not agree with the valuation provided pursuant to this paragraph, the Agent shall appoint a second Approved Shipbroker to conduct a valuation in accordance with this Clause 15.3 and the market value shall be the average of the two valuations.
15.4 Value of additional vessel security. The net realisable value of any additional security which is provided under Clause 15.2 and which consists of a Security Interest over a vessel shall be that shown by a valuation complying with the requirements of Clause 15.3.
15.5 Valuations binding. Any valuation under Clause 15.2, 15.3 or 15.4 shall be binding and conclusive, as shall be any valuation which the Majority Lenders make of any additional security which does not consist of or include a Security Interest.
15.6 Provision of information. The Borrower shall promptly provide the Agent and any shipbroker or expert acting under Clause 15.3 or 15.4 with any information which the Agent or the shipbroker or expert may reasonably request for the purposes of its valuation.
15.7 Payment of valuation expenses. Without prejudice to the generality of the Borrowers obligations under Clauses 20.2, 20.3 and 21.3, the Borrower shall, on demand, pay the Agent the amount of the fees and expenses of any shipbroker or expert instructed by the Agent under this Clause and all legal and other expenses incurred by any Creditor Party in connection with any matter arising out of this Clause.
15.8 Application of prepayment. Clauses 8.7, 8.10, 8.11 and 8.12 shall apply in relation to any prepayment pursuant to Clause 15.2(b).
16 PAYMENTS AND CALCULATIONS
16.1 Currency and method of payments. All payments to be made by the Lenders or by the Borrower under a Finance Document shall be made to the Agent or to the Security Trustee, in the case of an amount payable to it:
(a) by not later than 11.00 a.m. (New York City time) on the due date;
(b) in same day Dollar funds settled through the New York Clearing House Interbank Payments System (or in such other Dollar funds and/or settled in such other manner as the Agent shall specify as being customary at the time for the settlement of international transactions of the type contemplated by this Agreement);
(c) in the case of an amount payable by a Lender to the Agent or by the Borrower to the Agent or any Lender, to such account with such bank as the Agent may from time to time notify to the Borrower and the other Creditor Parties; and
(d) in the case of an amount payable to the Security Trustee, to such account as it may from time to time notify to the Borrower and the other Creditor Parties.
16.2 Payment on non-Business Day. If any payment by the Borrower under a Finance Document would otherwise fall due on a day which is not a Business Day:
(a) the due date shall be extended to the next succeeding Business Day; or
(b) if the next succeeding Business Day falls in the next calendar month, the due date shall be brought forward to the immediately preceding Business Day;
and interest shall be payable during any extension under paragraph (a) at the rate payable on the original due date.
16.3 Basis for calculation of periodic payments. All interest and commitment fee and any other payments under any Finance Document which are of an annual or periodic nature shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a 360 day year.
16.4 Distribution of payments to Creditor Parties. Subject to Clauses 16.5, 16.6 and 16.7:
(a) any amount received by the Agent under a Finance Document for distribution or remittance to a Lender, a Swap Bank or the Security Trustee shall be made available by the Agent to that Lender, that Swap Bank or, as the case may be, the Security Trustee by payment, with funds having the same value as the funds received, to such account as the Lender, the Swap Bank or the Security Trustee may have notified to the Agent not less than 5 Business Days previously; and
(b) amounts to be applied in satisfying amounts of a particular category which are due to the Lenders and/or the Swap Bank generally shall be distributed by the Agent to each Lender and the Swap Bank pro rata to the amount in that category which is due to it.
16.5 Permitted deductions by Agent. Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent may, before making an amount available to a Lender or a Swap Bank, deduct and withhold from that amount any sum which is then due and payable to the Agent from that Lender or that Swap Bank under any Finance Document or any sum which the Agent is then entitled under any Finance Document to require that Lender or that Swap Bank to pay on demand.
16.6 Agent only obliged to pay when monies received. Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent shall not be obliged to make available to the Borrower or any Lender or a Swap Bank any sum which the Agent is expecting to receive for remittance or distribution to the Borrower or that Lender or that Swap Bank until the Agent has satisfied itself that it has received that sum.
16.7 Refund to Agent of monies not received. If and to the extent that the Agent makes available a sum to the Borrower or a Lender or a Swap Bank, without first having received that sum, the Borrower or (as the case may be) the Lender or the Swap Bank concerned shall, on demand:
(a) refund the sum in full to the Agent; and
(b) pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding or other loss, liability or expense incurred by the Agent as a result of making the sum available before receiving it.
16.8 Agent may assume receipt. Clause 16.7 shall not affect any claim which the Agent has under the law of restitution, and applies irrespective of whether the Agent had any form of notice that it had not received the sum which it made available.
16.9 Creditor Party accounts. Each Creditor Party shall maintain accounts showing the amounts owing to it by the Borrower and each Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrower and any Security Party.
16.10 Agents memorandum account. The Agent shall maintain a memorandum account showing the amounts advanced by the Lenders and all other sums owing to the Agent, the Security Trustee and each Lender from the Borrower and each Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrower and any Security Party.
16.11 Accounts prima facie evidence. If any accounts maintained under Clauses 16.9 and 16.10 show an amount to be owing by the Borrower or a Security Party to a Creditor Party, those accounts shall be prima facie evidence that that amount is owing to that Creditor Party.
17 APPLICATION OF RECEIPTS
17.1 Normal order of application. Except as any Finance Document may otherwise provide, any sums which are received or recovered by any Creditor Party under or by virtue of any Finance Document shall be applied:
(a) FIRST: in or towards satisfaction of any amounts then due and payable under the Finance Documents and any Master Agreement in the following order and proportions:
(i) first, in or towards satisfaction pro rata of all amounts then due and payable to the Creditor Parties under the Finance Documents and the Master Agreements other than those amounts referred to at paragraphs (ii) and (iii) (including, but without limitation, all amounts payable by the Borrower under Clauses 20, 21 and 22 of this Agreement or by the Borrower or any Security Party under any corresponding or similar provision in the other Finance Documents or in any Master Agreement (and amounts in relation to the Master Agreements shall be applied pro-rata);
(ii) secondly, in or towards satisfaction pro rata of any and all amounts of interest or default interest payable to the Creditor Parties under the Finance Documents and any Master Agreement (and amounts in relation to the Master Agreements shall be applied pro-rata) (and, for this purpose, the expression interest shall include any net amount which the Borrower shall have become liable to pay or deliver under section 2(e) (Obligations) of that Master Agreement but shall have failed to pay or deliver to the relevant Swap Bank at the time of application or distribution under this Clause 17); and
(iii) thirdly, in or towards satisfaction pro rata of the Term Loan, the Revolving Loan and the Swap Exposure (in the case of the latter, calculated as at the actual Early Termination Date applying to each particular Transaction, or if no such Early Termination Date shall have occurred, calculated as if an Early Termination Date occurred on the date of application or distribution hereunder);
(b) SECONDLY: in retention of an amount equal to any amount not then due and payable under any Finance Document or any Master Agreement but which the Agent, by notice to the Borrower, the Security Parties and the other Creditor Parties, states in its opinion will either or may become due and payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction of them in accordance with the provisions of Clause 17.1(a); and
(c) THIRDLY: any surplus shall be paid to the Borrower or to any other person appearing to be entitled to it.
17.2 Variation of order of application. The Agent may, with the authorisation of all Lenders and the Swap Banks, by notice to the Borrower, the Security Parties and the other Creditor Parties provide for a different manner of application from that set out in Clause 17.1 (other than sub-clause (a)) either as regards a specified sum or sums or as regards sums in a specified category or categories.
17.3 Notice of variation of order of application. The Agent may give notices under Clause 17.2 from time to time; and such a notice may be stated to apply not only to sums which may be received or recovered in the future, but also to any sum which has been received or recovered on or after the third Business Day before the date on which the notice is served.
17.4 Appropriation rights overridden. This Clause 17 and any notice which the Agent gives under Clause 17.2 shall override any right of appropriation possessed, and any appropriation made, by the Borrower or any Security Party.
18 APPLICATION OF EARNINGS; SWAP PAYMENTS
18.1 Payment of Earnings and swap payments. The Borrower undertakes with each Creditor Party to ensure that, throughout the Security Period (and subject only to the provisions of the General Assignment):
(a) all the Earnings in relation to a Ship are paid to the Operating Account for that Ship; and
(b) all payments by a Swap Bank to the Borrower under each Designated Transaction are paid to the Retention Account.
18.2 Monthly retentions. The Borrower undertakes with each Creditor Party to ensure that, in each calendar month of the Security Period on such dates as the Agent may from time to time specify, there is transferred to the Retention Account out of the Earnings received in the Operating Accounts during the preceding calendar month:
(a) one-third of the amount of the repayment instalment falling due under Clause 8 on the next Term Repayment Date; and
(b) the relevant fraction of the aggregate amount of interest on the Term Loan and the Revolving Credit Facility which is payable on the next due date for payment of interest under this Agreement.
The relevant fraction is a fraction of which the numerator is 1 and the denominator the number of months comprised in the then current Interest Period (or, if the period is shorter, the number of months from the later of the commencement of the current Interest Period or the last due date for payment of interest to the next due date for payment of interest under this Agreement).
18.3 Shortfall in Earnings. If the aggregate Earnings received in the Operating Accounts are insufficient in any month for the required amount to be transferred to the Retention Account under Clause 18.2, the Borrower shall make up the amount of the insufficiency on demand from the Agent; but, without thereby prejudicing the Agents right to make such demand at any time, the Agent may, if so authorised by the Majority Lenders, permit the Borrower to make up all or part of the insufficiency by increasing the amount of any transfer under Clause 18.2 from the Earnings received in the next or subsequent months.
18.4 Application of retentions. Until an Event of Default or a Potential Event of Default occurs, the Agent shall on each Term Repayment Date and on each due date for the payment of interest under this Agreement distribute to the Lenders in accordance with Clause 16.4 so much of the then balance on the Retention Account as equals:
(a) the repayment instalment due on that Term Repayment Date; or
(b) the amount of interest payable on that interest payment date,
in discharge of the Borrowers liability for that repayment instalment or that interest.
18.5 Interest accrued on Retention Account. Any credit balance on the Retention Account shall bear interest at the rate from time to time offered by the Agent to its customers for Dollar deposits of similar amounts and for periods similar to those for which such balances appear to the Agent likely to remain on the Retention Account.
18.6 No release of accrued interest. Interest accruing under Clause 18.5 shall be credited to the Retention Account but shall not be released to the Borrower until the end of the Security Period unless otherwise agreed between the Borrower and the Agent.
18.7 Location of accounts. The Borrower shall promptly:
(a) comply with any requirement of the Agent as to the location or re-location of the Operating Accounts and the Retention Account (or any of them); and
(b) execute any documents which the Agent specifies to create or maintain in favour of the Security Trustee a Security Interest over (and/or rights of set-off, consolidation or other rights in relation to) the Operating Accounts and the Retention Account.
18.8 Debits for expenses etc. The Agent shall be entitled (but not obliged) from time to time to debit any Operating Account or the Retention Account without prior notice in order to discharge any amount due and payable under Clause 20 or 21 to a Creditor Party or payment of which any Creditor Party has become entitled to demand under Clause or 20 or 21.
18.9 Borrowers obligations unaffected. The provisions of this Clause 18 (as distinct from a distribution effected under Clause 18.4) do not affect:
(a) the liability of the Borrower to make payments of principal and interest on the due dates; or
(b) any other liability or obligation of the Borrower or any Security Party under any Finance Document.
19 EVENTS OF DEFAULT
19.1 Events of Default. An Event of Default occurs if:
(a) the Borrower or any Security Party fails to pay when due any sum payable under a Finance Document or under any document relating to a Finance Document; or
(b) any breach occurs of Clause 9.2, 11.2, 11.3, 12.2, 12.3, 12.4 or 15.2; or
(c) any breach by the Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach covered by paragraph (a) or (b)), which in the opinion of the Majority Lenders, is capable of remedy, and such default continues unremedied 10 days (or such longer period as the Agent may, in its entire discretion, permit) after written notice from the Agent requesting action to remedy the same; or
(d) (subject to any applicable grace period specified in the Finance Document) any breach by the Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach falling within paragraphs (a), (b) or (c)); or
(e) any representation, warranty or statement made or repeated by, or by an officer of, the Borrower or a Security Party in a Finance Document or in a Drawdown Notice or any other notice or document relating to a Finance Document is untrue or misleading when it is made or repeated and, in the opinion of the Lenders, such representation, warranty or statement is material; or
(f) any of the following occurs in relation to any Financial Indebtedness of a Relevant Person:
(i) any Financial Indebtedness of a Relevant Person is not paid when due; or
(ii) any Financial Indebtedness of a Relevant Person becomes due and payable or capable of being declared due and payable prior to its stated maturity date as a consequence of any event of default; or
(iii) a lease, hire purchase agreement or charter creating any Financial Indebtedness of a Relevant Person is terminated by the lessor or owner or becomes capable of being terminated as a consequence of any termination event; or
(iv) any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or other facility, or any swap or other derivative contract or transaction, relating to any Financial Indebtedness of a Relevant Person ceases to be available or becomes capable of being terminated as a result of any event of default, or cash cover is required, or becomes capable of being required, in respect of such a facility as a result of any event of default; or
(v) any Security Interest securing any Financial Indebtedness of a Relevant Person becomes enforceable; or
(g) any of the following occurs in relation to a Relevant Person:
(i) a Relevant Person becomes, in the opinion of the Majority Lenders, unable to pay its debts as they fall due; or
(ii) any assets of a Relevant Person are subject to any form of execution, attachment, arrest, sequestration or distress in respect of a sum of, or sums aggregating, $100,000 or more or the equivalent in another currency; or
(iii) any administrative or other receiver is appointed over any asset of a Relevant Person; or
(iv) an administrator is appointed (whether by the court or otherwise) in respect of a Relevant Person; or
(v) any formal declaration of bankruptcy or any formal statement to the effect that a Relevant Person is insolvent or likely to become insolvent is made by a Relevant Person or by the directors of a Relevant Person or, in any proceedings, by a lawyer acting for a Relevant Person; or
(vi) a provisional liquidator is appointed in respect of a Relevant Person, a winding up order is made in relation to a Relevant Person or a winding up resolution is passed by a Relevant Person; or
(vii) a resolution is passed, an administration notice is given or filed, an application or petition to a court is made or presented or any other step is taken by (aa) a Relevant Person, (bb) the members or directors of a Relevant Person, (cc) a holder of Security Interests which together relate to all or substantially all of the assets of a Relevant Person, or (dd) a government minister or public or regulatory authority of a Pertinent Jurisdiction for or with a view to the winding up of that or another Relevant Person or the appointment of a provisional liquidator or administrator in respect of that or another Relevant Person, or that or another Relevant Person ceasing or suspending business operations or payments to creditors, save that this paragraph does not apply to a fully solvent winding up of a Relevant Person other than the Borrower or an Owner which is, or is to be, effected for the purposes of an amalgamation or reconstruction previously approved by the Majority Lenders and effected not later than 3 months after the commencement of the winding up; or
(viii) an administration notice is given or filed, an application or petition to a court is made or presented or any other step is taken by a creditor of a Relevant Person (other than a holder of Security Interests which together relate to all or substantially all of the assets of a Relevant Person) for the winding up of a Relevant Person or the appointment of a provisional liquidator or administrator in respect of a Relevant Person in any Pertinent Jurisdiction, unless the proposed winding up, appointment of a provisional liquidator or administration is being contested in good faith, on substantial grounds and not with a view to some other insolvency law procedure being implemented instead and either (aa) the application or petition is dismissed or withdrawn within 30 days of being made or presented, or (bb) within 30 days of the administration notice being given or filed, or the other relevant steps being taken, other action is taken which will ensure that there will be no administration and (in both cases (aa) or (bb)) the Relevant Person will continue to carry on business in the ordinary way and without being the subject of any actual, interim or pending insolvency law procedure; or
(ix) a Relevant Person or its directors take any steps (whether by making or presenting an application or petition to a court, or submitting or presenting a document setting out a proposal or proposed terms, or otherwise) with a view to obtaining, in relation to that or another Relevant Person, any form of moratorium, suspension or deferral of payments, reorganisation of debt (or certain debt) or arrangement with all or a substantial proportion (by number or value) of creditors or of any class of them or any such moratorium, suspension or deferral of payments, reorganisation or arrangement is effected by court order, by the filing of documents with a court, by means of a contract or in any other way at all; or
(x) any meeting of the members or directors, or of any committee of the board or senior management, of a Relevant Person is held or summoned for the purpose of
considering a resolution or proposal to authorise or take any action of a type described in paragraphs (iv) to (ix) or a step preparatory to such action, or (with or without such a meeting) the members, directors or such a committee resolve or agree that such an action or step should be taken or should be taken if certain conditions materialise or fail to materialise; or
(xi) in a Pertinent Jurisdiction other than England, any event occurs, any proceedings are opened or commenced or any step is taken which, in the opinion of the Majority Lenders is similar to any of the foregoing; or
(h) the Borrower ceases or suspends carrying on its business or a part of its business which, in the opinion of the Majority Lenders, is material in the context of this Agreement; or
(i) it becomes unlawful in any Pertinent Jurisdiction or impossible:
(i) for the Borrower or any Security Party to discharge any liability under a Finance Document or to comply with any other obligation which the Majority Lenders consider material under a Finance Document; or
(ii) for the Agent, the Security Trustee, the Lenders or the Swap Banks to exercise or enforce any right under, or to enforce any Security Interest created by, a Finance Document; or
(j) any official consent necessary to enable each Owner to own, operate or charter the Ship owned by it or to enable the Borrower or any Security Party to comply with any provision which the Majority Lenders consider material of a Finance Document is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent is not fulfilled; or
(k) it appears to the Majority Lenders that, without their prior consent, a change has occurred or probably has occurred after the date of this Agreement in the beneficial ownership of any of the shares in the Borrower or an Owner or in the ultimate control of the voting rights attaching to any of the shares in the Borrower or an Owner; or
(l) any provision which the Majority Lenders consider material of a Finance Document proves to have been or becomes invalid or unenforceable, or a Security Interest created by a Finance Document proves to have been or becomes invalid or unenforceable or such a Security Interest proves to have ranked after, or loses its priority to, another Security Interest or any other third party claim or interest; or
(m) the security constituted by a Finance Document is in any way imperilled or in jeopardy; or
(n) an Event of Default (as defined in section 5 of the Master Agreements) occurs; or
(o) any Master Agreement is terminated, cancelled, suspended, rescinded or revoked or otherwise ceases to remain in full force and effect for any reason except with the consent of the Agent, acting with the authorisation of the Majority Lenders; or
(p) any other event occurs or any other circumstances arise or develop including, without limitation:
(i) a change in the financial position, state of affairs or prospects of any Relevant Person; or
(ii) any accident or other event involving a Ship or another vessel owned, chartered or operated by a Relevant Person;
in the light of which the Majority Lenders consider that there is a significant risk that the Borrower is, or will later become, unable to discharge its liabilities under the Finance Documents as they fall due.
19.2 Actions following an Event of Default. On, or at any time after, the occurrence of an Event of Default:
(a) the Agent may, and if so instructed by the Majority Lenders, the Agent shall:
(i) serve on the Borrower a notice stating that the Term Commitments, the Revolving Commitments and all other obligations of each Lender to the Borrower under this Agreement are terminated; and/or
(ii) serve on the Borrower a notice stating that the Term Loan, the Revolving Loan, all accrued interest and all other amounts accrued or owing under this Agreement are immediately due and payable or are due and payable on demand; and/or
(iii) take any other action which, as a result of the Event of Default or any notice served under paragraph (i) or (ii), the Agent and/or the Lenders and/or the Swap Counterparties are entitled to take under any Finance Document or any applicable law; and/or
(b) the Security Trustee may, and if so instructed by the Agent, acting with the authorisation of the Majority Lenders, the Security Trustee shall take any action which, as a result of the Event of Default or any notice served under paragraph (a) (i) or (ii), the Security Trustee, the Agent and/or the Lenders and/or the Swap Banks are entitled to take under any Finance Document or any applicable law.
19.3 Termination of Commitments. On the service of a notice under Clause 19.2(a)(i), the Term Commitments, the Revolving Commitments and all other obligations of each Lender to the Borrower under this Agreement shall terminate.
19.4 Acceleration of Facility. On the service of a notice under Clause 19.2(a)(ii), the Term Loan, the Revolving Loan, all accrued interest and all other amounts accrued or owing from the Borrower or any Security Party under this Agreement and every other Finance Document shall become immediately due and payable or, as the case may be, payable on demand.
19.5 Multiple notices; action without notice. The Agent may serve notices under Clauses 19.2(a)(i) and (ii) simultaneously or on different dates and it and/or the Security Trustee may take any action referred to in Clause 19.2 if no such notice is served or simultaneously with or at any time after the service of both or either of such notices.
19.6 Notification of Creditor Parties and Security Parties. The Agent shall send to each Lender, the Swap Banks, the Security Trustee and each Security Party a copy or the text of any notice which the Agent serves on the Borrower under Clause 19.2; but the notice shall become effective when it is served on the Borrower, and no failure or delay by the
Agent to send a copy or the text of the notice to any other person shall invalidate the notice or provide the Borrower or any Security Party with any form of claim or defence.
19.7 Creditor Party rights unimpaired. Nothing in this Clause shall be taken to impair or restrict the exercise of any right given to individual Lenders or Swap Counterparties under a Finance Document, a Master Agreement or the general law; and, in particular, this Clause is without prejudice to Clause 3.1.
19.8 Exclusion of Creditor Party liability. No Creditor Party, and no receiver or manager appointed by the Security Trustee, shall have any liability to the Borrower or a Security Party:
(a) for any loss caused by an exercise of rights under, or enforcement of a Security Interest created by, a Finance Document or by any failure or delay to exercise such a right or to enforce such a Security Interest; or
(b) as mortgagee in possession or otherwise, for any income or principal amount which might have been produced by or realised from any asset comprised in such a Security Interest or for any reduction (however caused) in the value of such an asset;
except that this does not exempt a Creditor Party or a receiver or manager from liability for losses shown to have been directly and mainly caused by the dishonesty or the wilful misconduct of such Creditor Partys own officers and employees or (as the case may be) such receivers or managers own partners or employees.
In no event shall any Creditor Party be liable on any theory of liability for any special, indirect, consequential or punitive damages and the Borrower hereby waives, releases and agrees not to sue upon any such claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favour.
19.9 Relevant Persons. In this Clause 19 a Relevant Person means the Borrower, a Security Party or any other member of the Borrowers Group, but excluding any company which is dormant and the value of whose gross assets is $50,000 or less.
19.10 Interpretation. In Clause 19.1(f) references to an event of default or a termination event include any event, howsoever described, which is similar to an event of default in a facility agreement or a termination event in a finance lease; and in Clause 19.1(g) petition includes an application.
19.11 Position of Swap Banks. Neither the Agent nor the Security Trustee shall be obliged, in connection with any action taken or proposed to be taken under or pursuant to the foregoing provisions of this Clause 19, to have any regard to the requirements of a Swap Bank except to the extent that such Swap Bank has executed and remains a party to the Agency and Trust Deed. In addition, the Swap Banks agree that if an Event of Default or a Potential Event of Default occurs and is continuing any payments due to the Swap Banks in relation to Swap Exposure under a Master Agreement shall be paid in accordance with Clause 17.
20 FEES AND EXPENSES
20.1 Fees. The Borrower shall pay to the Agent:
(a) on the date of this Agreement or as otherwise agreed, the fees in amounts previously agreed in writing between the Agent and the Borrower; and
(b) quarterly in arrears and on the end of the Availability Period for the Term Loan Facility or the Revolving Credit Facility (as the case may be) during the period from the date of this Agreement to the end of such Availability Period, for the account of the Lenders, a commitment fee at the rate of 0.90 per cent. per annum on the aggregate of (i) the Total Available Term Commitments and (ii) the Total Available Revolving Commitments, for distribution among the Lenders pro rata to their Commitments.
20.2 Costs of negotiation, preparation etc. The Borrower shall pay to the Agent on its demand the amount of all expenses incurred by the Agent or the Security Trustee in connection with the negotiation, preparation, execution or registration of any Finance Document or any related document or with any transaction contemplated by a Finance Document or a related document.
20.3 Costs of variations, amendments, enforcement etc. The Borrower shall pay to the Agent, on the Agents demand, for the account of the Creditor Party concerned the amount of all expenses incurred by a Creditor Party in connection with:
(a) any amendment or supplement to a Finance Document or any proposal for such an amendment to be made;
(b) any consent or waiver by the Lenders, the Swap Banks, the Majority Lenders or the Creditor Party concerned under or in connection with a Finance Document, or any request for such a consent or waiver;
(c) the valuation of any security provided or offered under Clause 15 or any other matter relating to such security; or
(d) any step taken by the Creditor Party concerned with a view to the protection, exercise or enforcement of any right or Security Interest created by a Finance Document or for any similar purpose.
There shall be recoverable under paragraph (d) the full amount of all legal expenses, whether or not such as would be allowed under rules of court or any taxation or other procedure carried out under such rules.
20.4 Documentary taxes. The Borrower shall promptly pay any tax payable on or by reference to any Finance Document, and shall, on the Agents demand, fully indemnify each Creditor Party against any claims, expenses, liabilities and losses resulting from any failure or delay by the Borrower to pay such a tax.
20.5 Certification of amounts. A notice which is signed by 2 officers of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 20 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.
21 INDEMNITIES
21.1 Indemnities regarding borrowing and repayment of Term Loan and Revolving Loan. The Borrower shall fully indemnify the Agent and each Lender on the Agents
demand and the Security Trustee on its demand in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by that Creditor Party, or which that Creditor Party reasonably and with due diligence estimates that it will incur, as a result of or in connection with:
(a) a Term Advance or a Revolving Advance not being borrowed on the date specified in the relevant Drawdown Notice for any reason other than a default by the Lender claiming the indemnity;
(b) the receipt or recovery of all or any part of the Term Loan or the Revolving Loan or an overdue sum otherwise than on the last day of the applicable Term Interest Period, the applicable Revolving Interest Period or other relevant period;
(c) any failure (for whatever reason) by the Borrower to make payment of any amount due under a Finance Document on the due date or, if so payable, on demand (after giving credit for any default interest paid by the Borrower on the amount concerned under Clause 7);
(d) the occurrence and/or continuance of an Event of Default or a Potential Event of Default and/or the acceleration of repayment of the Term Loan and the Revolving Loan under Clause 19;
and in respect of any tax (other than tax on its overall net income) for which a Creditor Party is liable in connection with any amount paid or payable to that Creditor Party (whether for its own account or otherwise) under any Finance Document.
21.2 Breakage costs. Without limiting its generality, Clause 21.1 covers any claim, liability, expense or loss incurred by a Lender in liquidating or employing deposits from third parties acquired or arranged to fund or maintain all or any part of its Term Contribution and/or its Revolving Contribution and/or any overdue amount (or an aggregate amount which includes its Term Contribution, its Revolving Contribution or any overdue amount).
21.3 Miscellaneous indemnities. The Borrower shall fully indemnify each Creditor Party severally on their respective demands in respect of all claims, expenses, liabilities and losses which may be made or brought against or incurred by a Creditor Party, in any country, as a result of or in connection with:
(a) any action taken, or omitted or neglected to be taken, under or in connection with any Finance Document by the Agent, the Security Trustee or any other Creditor Party or by any receiver appointed under a Finance Document; or
(b) any other Pertinent Matter;
other than claims, expenses, liabilities and losses which are shown to have been directly or mainly caused by the dishonesty or wilful misconduct of the officers or employees of the Creditor Party concerned.
Without prejudice to its generality, this Clause 21.3 covers any claims, expenses, liabilities and losses which arise, or are asserted, under or in connection with any law relating to safety at sea, the ISM Code, the ISPS Code or any Environmental Law.
21.4 Currency indemnity. If any sum due from the Borrower or any Security Party to a Creditor Party under a Finance Document or under any order or judgment relating to a Finance Document has to be converted from the currency in which the Finance Document provided for the sum to be paid (the Contractual Currency ) into another currency (the Payment Currency ) for the purpose of:
(a) making or lodging any claim or proof against the Borrower or any Security Party, whether in its liquidation, any arrangement involving it or otherwise; or
(b) obtaining an order or judgment from any court or other tribunal; or
(c) enforcing any such order or judgment;
the Borrower shall indemnify the Creditor Party concerned against the loss arising when the amount of the payment actually received by that Creditor Party is converted at the available rate of exchange into the Contractual Currency.
In this Clause 21.4, the available rate of exchange means the rate at which the Creditor Party concerned is able at the opening of business (London time) on the Business Day after it receives the sum concerned to purchase the Contractual Currency with the Payment Currency.
This Clause 21.4 creates a separate liability of the Borrower which is distinct from its other liabilities under the Finance Documents and which shall not be merged in any judgment or order relating to those other liabilities.
21.5 Application to Master Agreements. For the avoidance of doubt, Clause 21.4 does not apply in respect of sums due from the Borrower to a Swap Bank under or in connection with a Master Agreement as to which sums the provisions of section 8 (Contractual Currency) of that Master Agreement shall apply.
21.6 Certification of amounts. A notice which is signed by 2 officers of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 21 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.
21.7 Sums deemed due to a Lender. For the purposes of this Clause 21, a sum payable by the Borrower to the Agent or the Security Trustee for distribution to a Lender shall be treated as a sum due to that Lender.
22 NO SET-OFF OR TAX DEDUCTION
22.1 No deductions. All amounts due from the Borrower under a Finance Document shall be paid:
(a) without any form of set-off, cross-claim or condition; and
(b) free and clear of any tax deduction except a tax deduction which the Borrower is required by law to make.
22.2 Grossing-up for taxes. Subject as provided in Clause 26.17, if the Borrower is required by law to make a tax deduction from any payment:
(a) the Borrower shall notify the Agent as soon as it becomes aware of the requirement;
(b) the Borrower shall pay the tax deducted to the appropriate taxation authority promptly, and in any event before any fine or penalty arises;
(c) the amount due in respect of the payment shall be increased by the amount necessary to ensure that each Creditor Party receives and retains (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which it would otherwise have received.
22.3 Evidence of payment of taxes. Promptly, and in any event within 1 month after making any tax deduction, the Borrower shall deliver to the Agent for the Creditor Party entitled to the payment an original document (or certified copy thereof) satisfactory to that Creditor Party evidencing that the tax had been paid to the appropriate taxation authority and the Agent shall promptly forward such document to the Creditor Party entitled to the payment.
22.4 Exclusion of tax on overall net income. In this Clause 22 tax deduction means any deduction or withholding for or on account of any present or future tax except tax on a Creditor Partys overall net income.
22.5 Tax credit. A Creditor Party which receives for its own account a repayment or credit in respect of tax on account of which the Borrower has made an increased payment under Clause 22.2 shall pay to the Borrower a sum equal to the proportion of the repayment or credit which that Creditor Party allocates to the amount due from the Borrower in respect of which the Borrower made the increased payment:
(a) the Creditor Party shall not be obliged to allocate to this transaction any part of a tax repayment or credit which is referable to a class or number of transactions;
(b) nothing in this Clause 22.4 shall oblige a Creditor Party to arrange its tax affairs in any particular manner, to claim any type of relief, credit, allowance or deduction instead of, or in priority to, another or to make any such claim within any particular time;
(c) nothing in this Clause 22.4 shall oblige a Creditor Party to make a payment which would leave it in a worse position than it would have been in if the Borrower had not been required to make a tax deduction from a payment; and
(d) any allocation or determination made by a Creditor Party under or in connection with this Clause 22.4 shall be conclusive and binding on the Borrower and the other Creditor Parties.
22.6 Application to Master Agreements. For the avoidance of doubt, Clause 22 does not apply in respect of sums due from the Borrower to a Swap Bank under or in connection with a Master Agreement as to which sums the provisions of section 2(d) (Deduction or Withholding for Tax) of that Master Agreement shall apply.
23 ILLEGALITY, ETC
23.1 Illegality. This Clause 23 applies if a Lender (the Notifying Lender ) notifies the Agent that it has become, or will with effect from a specified date, become:
(a) unlawful or prohibited as a result of the introduction of a new law, an amendment to an existing law or a change in the manner in which an existing law is or will be interpreted or applied; or
(b) contrary to, or inconsistent with, any regulation,
for the Notifying Lender to maintain or give effect to any of its obligations under this Agreement in the manner contemplated by this Agreement.
23.2 Notification of illegality. The Agent shall promptly notify the Borrower, the Security Parties, the Security Trustee and the other Lenders of the notice under Clause 23.1 which the Agent receives from the Notifying Lender.
23.3 Prepayment; termination of Term Commitment and Revolving Commitment. On the Agent notifying the Borrower under Clause 23.2, the Notifying Lenders Term Commitment and Revolving Commitment shall terminate; and thereupon or, if later, on the date specified in the Notifying Lenders notice under Clause 23.1 as the date on which the notified event would become effective the Borrower shall prepay the Notifying Lenders Term Contribution and Revolving Contribution in accordance with Clause 8.
23.4 Mitigation . If circumstances arise which would result in a notification under Clause 23.1 then, without in any way limiting the rights of the Notifying Lender under Clause 23.3, the Notifying Lender shall use reasonable endeavours to transfer its obligations, liabilities and rights under this Agreement and the Finance Documents to another office or financial institution not affected by the circumstances but the Notifying Lender shall not be under any obligation to take any such action if, in its opinion, to do would or might:
(a) have an adverse effect on its business, operations or financial condition; or
(b) involve it in any activity which is unlawful or prohibited or any activity that is contrary to, or inconsistent with, any regulation; or
(c) involve it in any expense (unless indemnified to its satisfaction) or tax disadvantage.
24 INCREASED COSTS
24.1 Increased costs. This Clause 24 applies if a Lender (the Notifying Lender ) notifies the Agent that the Notifying Lender considers that as a result of:
(a) the introduction or alteration after the date of this Agreement of a law or an alteration after the date of this Agreement in the manner in which a law is interpreted or applied (disregarding any effect which relates to the application to payments under this Agreement of a tax on the Lenders overall net income); or
(b) complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Notifying Lender allocates capital resources to its obligations under this Agreement) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Agreement,
the Notifying Lender (or a parent company of it) has incurred or will incur an increased cost .
24.2 Meaning of increased cost. In this Clause 24, increased cost means, in relation to a Notifying Lender:
(a) an additional or increased cost incurred as a result of, or in connection with, the Notifying Lender having entered into, or being a party to, this Agreement or a Transfer Certificate, of funding or maintaining its Term Commitment, Revolving Commitment, Term Contribution or Revolving Contribution or performing its obligations under this Agreement, or of having outstanding all or any part of its Term Contribution, Revolving Contribution or other unpaid sums;
(b) a reduction in the amount of any payment to the Notifying Lender under this Agreement or in the effective return which such a payment represents to the Notifying Lender or on its capital;
(c) an additional or increased cost of funding all or maintaining all or any of the advances comprised in a class of advances formed by or including the Notifying Lenders Term Contribution or Revolving Contribution or (as the case may require) the proportion of that cost attributable to its Term Contribution or Revolving Contribution; or
(d) a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received or receivable by the Notifying Lender under this Agreement;
but not an item attributable to a change in the rate of tax on the overall net income of the Notifying Lender (or a parent company of it) or an item covered by the indemnity for tax in Clause 21.1 or by Clause 22 or an item arising directly out of the implementation or application of or compliance with the International Convergence of Capital Measurement and Capital Standards, a Revised Framework published by the Basel Committee on Banking Supervision in June 2004, in the form existing on the date of this Agreement ( Basel II ) or any other law or regulation which implements Basel II (whether such implementation, application or compliance is by a government, regulator, Creditor Party or any of its affiliates) Provided that the exclusion in this paragraph shall not include Basel III irrespective of whether that is implemented or applied pursuant to Basel II.
For the purposes of this Clause 24.2 the Notifying Lender may in good faith allocate or spread costs and/or losses among its assets and liabilities (or any class of its assets and liabilities) on such basis as it considers appropriate.
24.3 Notification to Borrower of claim for increased costs. The Agent shall promptly notify the Borrower and the Security Parties of the notice which the Agent received from the Notifying Lender under Clause 24.1.
24.4 Payment of increased costs. The Borrower shall pay to the Agent, on the Agents demand, for the account of the Notifying Lender the amounts which the Agent from time to time notifies the Borrower that the Notifying Lender has specified to be necessary to compensate the Notifying Lender for the increased cost.
24.5 Notice of prepayment. If the Borrower is not willing to continue to compensate the Notifying Lender for the increased cost under Clause 24.4, the Borrower may give the Agent not less than 15 Business Days notice of its intention to prepay the Notifying Lenders Term Contribution and Revolving Contribution or to procure a Transferee lender.
24.6 Prepayment; termination of Term Commitment and Revolving Commitment. A notice of prepayment under Clause 24.5 shall be irrevocable; the Agent shall promptly notify the Notifying Lender of the Borrowers notice of intended prepayment; and:
(a) on the date on which the Agent serves that notice, the Term Commitment and the Revolving Commitment of the Notifying Lender shall be cancelled; and
(b) on the date specified in its notice of intended prepayment, the Borrower shall prepay (without premium or penalty) the Notifying Lenders Term Contribution and Revolving Contribution, together with accrued interest thereon at the applicable rate plus the applicable Margin.
24.7 Application of prepayment. Clauses 8.7, 8.10, 8.11 and 8.12 shall apply in relation to the prepayment.
25 SET-OFF
25.1 Application of credit balances. Each Creditor Party may, at any time, without prior notice:
(a) apply any balance (whether or not then due) which at any time stands to the credit of any account in the name of the Borrower at any office in any country of that Creditor Party in or towards satisfaction of any sum then due from the Borrower to that Creditor Party under any of the Finance Documents; and
(b) for that purpose:
(i) break, or alter the maturity of, all or any part of a deposit of the Borrower;
(ii) convert or translate all or any part of a deposit or other credit balance into Dollars;
(iii) enter into any other transaction or make any entry with regard to the credit balance which the Creditor Party concerned considers appropriate.
25.2 Existing rights unaffected. No Creditor Party shall be obliged to exercise any of its rights under Clause 25.1; and those rights shall be without prejudice and in addition to any right of set-off, combination of accounts, charge, lien or other right or remedy to which a Creditor Party is entitled (whether under the general law or any document).
25.3 Sums deemed due to a Lender. For the purposes of this Clause 25, a sum payable by the Borrower to the Agent or the Security Trustee for distribution to, or for the account of, a Lender shall be treated as a sum due to that Lender; and each Lenders proportion of a sum so payable for distribution to, or for the account of, the Lenders shall be treated as a sum due to such Lender.
25.4 No Security Interest. This Clause 25 gives the Creditor Parties a contractual right of set-off only and does not create any equitable charge or other Security Interest over any credit balance of the Borrower.
26 TRANSFERS AND CHANGES IN LENDING OFFICES
26.1 Transfer by Borrower. The Borrower may not, without the consent of the Agent given on the instructions of all the Lenders, transfer any of its rights, liabilities or obligations under any Finance Document.
26.2 Transfer by a Lender. Subject to Clause 26.4, a Lender (the Transferor Lender ) may, with the prior written consent of the Borrower (not to be unreasonably withheld or delayed), such consent deemed to be given if not explicitly refused by the Borrower within 5 Business Days of such request, or without the consent of the Borrower if an Event of Default or a Potential Event of Default has occurred and is continuing, cause:
(a) its rights in respect of all or pro rata parts of its Term Contribution and its Revolving Contribution; or
(b) its obligations in respect of all or pro rata parts of its Term Commitment and its Revolving Commitment; or
(c) a combination of (a) and (b);
to be (in the case of its rights) transferred to, or (in the case of its obligations) assumed by, another bank or financial institution or a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (a Transferee Lender ) by delivering to the Agent a completed certificate in the form set out in Schedule 5 with any modifications approved or required by the Agent (a Transfer Certificate ) executed by the Transferor Lender and the Transferee Lender Provided that :
(i) a Lender will not be permitted to make such transfer to Grindrod Bank;
(ii) a Lender may make such transfer to any wholly owned subsidiary of it, to its parent company or to another subsidiary of its parent company without the consent of the Borrower and the fee referred to in Clause 26.11 shall not apply in relation to any such transfer.
However any rights and obligations of the Transferor Lender in its capacity as Agent or Security Trustee will have to be dealt with separately in accordance with the Agency and Trust Deed.
26.3 Transfer Certificate, delivery and notification. As soon as reasonably practicable after a Transfer Certificate is delivered to the Agent, it shall (unless it has reason to believe that the Transfer Certificate may be defective):
(a) sign the Transfer Certificate on behalf of itself, the Borrower, the Security Parties, the Security Trustee, each of the other Lenders and each of the Swap Banks;
(b) on behalf of the Transferee Lender, send to the Borrower and each Security Party letters or faxes notifying them of the Transfer Certificate and attaching a copy of it;
(c) send to the Transferee Lender copies of the letters or faxes sent under paragraph (b) above,
but the Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Transferor Lender once it is satisfied it has complied with all necessary know your customer or other similar checks under all applicable laws and regulations in relation to the transfer to that Transferee Lender.
26.4 Effective Date of Transfer Certificate. A Transfer Certificate becomes effective on the date, if any, specified in the Transfer Certificate as its effective date Provided that it is signed by the Agent under Clause 26.3 on or before that date.
26.5 No transfer without Transfer Certificate. No assignment or transfer of any right or obligation of a Lender under any Finance Document is binding on, or effective in relation to, the Borrower, any Security Party, the Agent or the Security Trustee unless it is effected, evidenced or perfected by a Transfer Certificate.
26.6 Lender re-organisation; waiver of Transfer Certificate. However, if a Lender enters into any merger, de-merger or other reorganisation as a result of which all its rights or obligations vest in another person (the successor ), the Agent may, if it sees fit, by notice to the successor and the Borrower and the Security Trustee waive the need for the execution and delivery of a Transfer Certificate; and, upon service of the Agents notice, the successor shall become a Lender with the same Term Commitment, Revolving Commitment, Term Contribution or Revolving Contribution as were held by the predecessor Lender. Upon service of the Agents notice, a Transfer Certificate will be deemed to have been given and the provisions of Clause 26.7 will apply as if a Transfer Certificate was given.
26.7 Effect of Transfer Certificate. A Transfer Certificate takes effect in accordance with English law as follows:
(a) to the extent specified in the Transfer Certificate, all rights and interests (present, future or contingent) which the Transferor Lender has under or by virtue of the Finance Documents are assigned to the Transferee Lender absolutely, free of any defects in the Transferor Lenders title and of any rights or equities which the Borrower or any Security Party had against the Transferor Lender;
(b) the Transferor Lenders Term Commitment and Revolving Commitment are each discharged to the extent specified in the Transfer Certificate;
(c) the Transferee Lender becomes a Lender with a Term Contribution and a Revolving Contribution and with a Term Commitment and Revolving Commitment of the amounts specified in the Transfer Certificate;
(d) the Transferee Lender becomes bound by all the provisions of the Finance Documents which are applicable to the Lenders generally, including those about pro-rata sharing and the exclusion of liability on the part of, and the indemnification of, the Agent and the Security Trustee and, to the extent that the Transferee Lender becomes bound by those provisions (other than those relating to exclusion of liability), the Transferor Lender ceases to be bound by them;
(e) any part of the Term Facility or the Revolving Credit Facility which the Transferee Lender advances after the Transfer Certificates effective date ranks in point of priority and security in the same way as it would have ranked had it been advanced by the
transferor, assuming that any defects in the transferors title and any rights or equities of the Borrower or any Security Party against the Transferor Lender had not existed;
(f) the Transferee Lender becomes entitled to all the rights under the Finance Documents which are applicable to the Lenders generally, including but not limited to those relating to the Majority Lenders and those under Clause 5.7 and Clause 20, and to the extent that the Transferee Lender becomes entitled to such rights, the Transferor Lender ceases to be entitled to them; and
(g) in respect of any breach of a warranty, undertaking, condition or other provision of a Finance Document or any misrepresentation made in or in connection with a Finance Document, the Transferee Lender shall be entitled to recover damages by reference to the loss incurred by it as a result of the breach or misrepresentation, irrespective of whether the original Lender would have incurred a loss of that kind or amount.
The rights and equities of the Borrower or any Security Party referred to above include, but are not limited to, any right of set off and any other kind of cross-claim.
26.8 Maintenance of register of Lenders. During the Security Period the Agent shall maintain a register in which it shall record the name, Term Commitment, Revolving Commitment, Term Contribution, Revolving Contribution and administrative details (including the lending office) from time to time of each Lender holding a Transfer Certificate and the effective date (in accordance with Clause 26.4) of the Transfer Certificate; and the Agent shall make the register available for inspection by any Lender, the Security Trustee and the Borrower during normal banking hours, subject to receiving at least 3 Business Days prior notice.
26.9 Reliance on register of Lenders. The entries on that register shall, in the absence of manifest error, be conclusive in determining the identities of the Lenders and the amounts of their Term Commitment, Revolving Commitment, Term Contribution and Revolving Contribution and the effective dates of Transfer Certificates and may be relied upon by the Agent and the other parties to the Finance Documents for all purposes relating to the Finance Documents.
26.10 Authorisation of Agent to sign Transfer Certificates. The Borrower, the Security Trustees, each Lender and each Swap Bank irrevocably authorise the Agent to sign Transfer Certificates on its behalf.
26.11 Registration fee. In respect of any Transfer Certificate, the Agent shall be entitled to recover a registration fee of $3,500 from the Transferor Lender or (at the Agents option) the Transferee Lender.
26.12 Sub-participation; subrogation assignment. A Lender may sub-participate all or any part of its rights and/or obligations under or in connection with the Finance Documents without the consent of, or any notice to, the Borrower, any Security Party, the Agent or the Security Trustee; and the Lenders may assign, in any manner and terms agreed by the Majority Lenders, the Agent and the Security Trustee, all or any part of those rights to an insurer or surety who has become subrogated to them.
26.13 Disclosure of information. Any Creditor Party and its officers and agents may disclose to :
(a) the head office of that Creditor Party, any of its subsidiaries or any subsidiary of its parent company, any affiliate, any representative, branch or regional office in any jurisdiction of that Creditor Party (together with that Creditor Party, the Permitted Parties );
(b) the professional advisers and service providers of any Permitted Party who are under a duty of confidentiality to that Permitted Party;
(c) any Transferee Lender, actual or potential assignee, novatee, transferee, participant or sub-participant in relation to any of that Creditor Partys rights and/or obligations under any agreement (or any agent or adviser of any of the foregoing) or persons who have entered into or who are proposing to enter into contractual arrangements with that Creditor Party in relation to the banking facilities between the Security Party and that Creditor Party;
(d) any rating agency, insurer or insurance broker of, or direct or indirect provider of credit protection to any Permitted Party;
(e) any regulatory, supervisory, governmental or quasi-governmental agency or authority or supranational entity or body, or administrative, fiscal or judicial body, courts and tribunals or any other authorities of whatsoever nature (in each case whether within or outside Singapore) with jurisdiction over the Permitted Parties and to any person to whom information is required to be disclosed by law, regulation or directive; and
(f) any other Creditor Party and any Security Party,
any information about a Security Party, the Facility, the Finance Documents or the Master Agreement (including but not limited to details of the Security Partys account relationship with the Creditor Party and any other customer information (as defined in the Banking Act, (Cap. 19) of Singapore (the Banking Act ) as that Creditor Party shall consider appropriate in connection with the Facilities or services provided or to be provided by that Creditor Party or facilitating the Creditor Partys management of the banking relationship between that Creditor Party, and/or its affiliate and the Security Parties provided that in each case referred to in paragraphs (c) and (d) above, the person to whom the information is to be given is under a duty of confidentiality to that Creditor Party and further provided that any rating issued by a person referred to in clause (d) above shall not be published. Nothing in this paragraph shall constitute, nor be deemed to constitute, an express or implied agreement by the Creditor Parties and the Security Parties for a higher degree of confidentiality than that prescribed in Section 47 of the Banking Act and in the Third Schedule thereto. This consent shall survive and continue in full force and effect for the benefit of the Creditor Parties notwithstanding the repayment, cancellation or termination of the Facilities or any part thereof and/or the termination of one or more types of banker-customer relationships between the Security Parties and the Creditor Parties.
26.14 Change of lending office. A Lender may change its lending office by giving notice to the Agent and the change shall become effective on the later of:
(a) the date on which the Agent receives the notice; and
(b) the date, if any, specified in the notice as the date on which the change will come into effect.
26.15 Notification. On receiving such a notice, the Agent shall notify the Borrower and the Security Trustee; and, until the Agent receives such a notice, it shall be entitled to assume that a Lender is acting through the lending office of which the Agent last had notice.
26.16 Replacement of Reference Bank. If any Reference Bank ceases to be a Lender or is unable on a continuing basis to supply quotations for the purposes of Clause 5 then, unless the Borrower, the Agent and the Majority Lenders otherwise agree, the Agent, acting on the instructions of the Majority Lenders, and after consulting the Borrower, shall appoint another bank (whether or not a Lender) to be a replacement Reference Bank; and, when that appointment comes into effect, the first-mentioned Reference Banks appointment shall cease to be effective.
26.17 Tax indemnity, tax gross-up and increased costs on assignment, transfer and change of lending office. If:
(a) a Lender assigns or transfers any rights or obligations under the Finance Documents pursuant to Clauses 26.2 or 26.6 or changes its lending office; and
(b) as a result of circumstances existing at the date the assignment, transfer or change occurs the Borrower would be obliged to make a payment to the Transferee Lender or Lender acting through its new lending office under Clause 21.1 in respect of any tax, Clause 22 or Clause 24,
then the Transferee Lender or the Lender acting through its new lending office is only entitled to receive payment under those Clauses to the same extent as the Transferor Lender or the Lender acting through its previous lending office would have been if the assignment, transfer or change had not occurred.
26.18 Breakage costs. Without limiting its generality, Clause 21.1 covers any claim, expense, liability or loss, including a loss of a prospective profit, incurred by a Lender:
(a) in liquidating or employing deposits from third parties acquired or arranged to fund or maintain all or any part of its Contribution and/or any overdue amount (or an aggregate amount which includes its Term Contribution and/or its Revolving Contribution or any overdue amount); and
(b) in terminating, or otherwise in connection with, any interest and/or currency swap or any other transaction entered into (whether with another legal entity or with another office or department of the Lender concerned) to hedge any exposure arising under this Agreement or that part which the Lender concerned 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.
27 VARIATIONS AND WAIVERS
27.1 Variations, waivers etc. by Majority Lenders. Subject to Clause 27.2, a document shall be effective to vary, waive, suspend or limit any provision of a Finance Document, or any Creditor Partys rights or remedies under such a provision or the general law, only if the document is signed, or specifically agreed to by fax, by the Borrower, by the Agent on behalf of the Majority Lenders, by the Swap Banks, by the Agent and the Security
Trustee in their own rights, and, if the document relates to a Finance Document to which a Security Party is party, by that Security Party.
27.2 Variations, waivers etc. requiring agreement of all Lenders. However, as regards the following, Clause 27.1 applies as if the words by the Agent on behalf of the Majority Lenders were replaced by the words by or on behalf of every Lender:
(a) a change in the Margin or in the definition of LIBOR;
(b) a change to the date for, the amount of, any payment of principal, interest, fees, or other sum payable under this Agreement;
(c) a change to the Total Commitments;
(d) a change to the definition of Majority Lenders or Finance Documents;
(e) a change to the preamble or to Clause 2, 3, 4, 5.1, 9, 17, 18, 19 or 30;
(f) a change to this Clause 27;
(g) any release of, or material variation to, a Security Interest, guarantee, indemnity or subordination arrangement set out in a Finance Document; and
(h) any other change or matter as regards which this Agreement or another Finance Document expressly provides that each Lenders consent is required.
27.3 Exclusion of other or implied variations. Except for a document which satisfies the requirements of Clauses 27.1 and 27.2, no document, and no act, course of conduct, failure or neglect to act, delay or acquiescence on the part of the Creditor Parties or any of them (or any person acting on behalf of any of them) shall result in the Creditor Parties or any of them (or any person acting on behalf of any of them) being taken to have varied, waived, suspended or limited, or being precluded (permanently or temporarily) from enforcing, relying on or exercising:
(a) a provision of this Agreement or another Finance Document; or
(b) an Event of Default; or
(c) a breach by the Borrower or a Security Party of an obligation under a Finance Document or the general law; or
(d) any right or remedy conferred by any Finance Document or by the general law;
and there shall not be implied into any Finance Document any term or condition requiring any such provision to be enforced, or such right or remedy to be exercised, within a certain or reasonable time.
28 NOTICES
28.1 General. Unless otherwise specifically provided, any notice under or in connection with any Finance Document shall be given by letter or fax and references in the Finance Documents to written notices, notices in writing and notices signed by particular persons shall be construed accordingly.
28.2 Addresses for communications. A notice shall be sent:
(a) to the Borrower: Grindrod Shipping Pte Ltd
200 Cantonment Road
#06-04, Southpoint
Singapore
089763
Fax No: +65 63 23 0046
Attn: Financial Manager
With a copy to: Grindrod Shipping (South Africa) (Pty) Ltd.
8th Floor Grindrod House
108 Margaret Mncadi (Victoria Embankment)
Durban 4001
South Africa
Fax No: +27 31 302 1815
Attn: Financial Manager
(b) to a Lender: At the address below its name in Schedule 1 or (as the
case may require) in the relevant Transfer Certificate.
(c) to a Swap Bank At the address below its name in Schedule 2
(d) to the Agent and 9, quai du Président Paul Doumer
Security Trustee: 92920 Paris La Défense Cedex
France
Fax No: 00 331 41 89 2987
Attn: Shipping Department
with a copy to: Crédit Agricole Corporate and Investment Bank
London Ship Finance
Broadwalk House
5 Appold Street
London EC2A 2DA
Fax No: +44 (0)207 214 6689
Attn: Head of London Ship Finance
or to such other address as the relevant party may notify the Agent or, if the relevant party is the Agent or the Security Trustee, the Borrower, the Lenders, the Swap Banks and the Security Parties.
28.3 Effective date of notices. Subject to Clauses 28.4 and 28.5:
(a) a notice which is delivered personally or posted shall be deemed to be served, and shall take effect, at the time when it is delivered;
(b) a notice which is sent by fax shall be deemed to be served, and shall take effect, 2 hours after its transmission is completed.
28.4 Service outside business hours. However, if under Clause 28.3 a notice would be deemed to be served:
(a) on a day which is not a business day in the place of receipt; or
(b) on such a business day, but after 5 p.m. local time;
the notice shall (subject to Clause 28.5) be deemed to be served, and shall take effect, at 9 a.m. (local time) on the next day which is such a business day.
28.5 Illegible notices. Clauses 28.3 and 28.4 do not apply if the recipient of a notice notifies the sender within 1 hour after the time at which the notice would otherwise be deemed to be served that the notice has been received in a form which is illegible in a material respect.
28.6 Valid notices. A notice under or in connection with a Finance Document shall not be invalid by reason that its contents or the manner of serving it do not comply with the requirements of this Agreement or, where appropriate, any other Finance Document under which it is served if:
(a) the failure to serve it in accordance with the requirements of this Agreement or other Finance Document, as the case may be, has not caused any party to suffer any significant loss or prejudice; or
(b) in the case of incorrect and/or incomplete contents, it should have been reasonably clear to the party on which the notice was served what the correct or missing particulars should have been.
28.7 Electronic communication. Any communication to be made between the Agent and a Lender under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Agent and the relevant Lender:
(a) agree that, unless and until notified to the contrary, this is to be an accepted form of communication;
(b) notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and
(c) notify each other of any change to their respective addresses or any other such information supplied to them.
Any electronic communication made between the Agent and a Lender will be effective only when actually received in readable form and, in the case of any electronic communication made by a Lender to the Agent, only if it is addressed in such a manner as the Agent shall specify for this purpose.
28.8 English language. Any notice under or in connection with a Finance Document shall be in English.
28.9 Meaning of notice. In this Clause 28, notice includes any demand, consent, authorisation, approval, instruction, waiver or other communication.
29 SUPPLEMENTAL
29.1 Rights cumulative, non-exclusive. The rights and remedies which the Finance Documents give to each Creditor Party are:
(a) cumulative;
(b) may be exercised as often as appears expedient; and
(c) shall not, unless a Finance Document explicitly and specifically states so, be taken to exclude or limit any right or remedy conferred by any law.
29.2 Severability of provisions. If any provision of a Finance Document is or subsequently becomes void, unenforceable or illegal, that shall not affect the validity, enforceability or legality of the other provisions of that Finance Document or of the provisions of any other Finance Document.
29.3 Counterparts. A Finance Document may be executed in any number of counterparts.
29.4 Third Party rights. 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.
30 LAW AND JURISDICTION
30.1 English law. This Agreement and any non contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.
30.2 Exclusive English jurisdiction. Subject to Clause 30.3, the courts of England shall have exclusive jurisdiction to settle any Dispute.
30.3 Choice of forum for the exclusive benefit of the Creditor Parties. Clause 30.2 is for the exclusive benefit of the Creditor Parties, each of which reserves the right:
(a) to commence proceedings in relation to any Dispute in the courts of any country other than England and which have or claim jurisdiction to that Dispute; and
(b) to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.
The Borrower shall not commence any proceedings in any country other than England in relation to a Dispute.
30.4 Process agent. The Borrower irrevocably appoints Grindrod Shipping Services UK Ltd. at its registered office for the time being, presently at St Magnus House, 8th Floor, East Wing, 3 Lower Thames Street, London EC3R 6HA, to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with a Dispute. The Borrower may appoint a replacement process agent in England or Wales provided that the Borrower gives the Agent not less than 30 days prior written notice and the Borrower delivers to the Agent on or prior to any such replacement a process agent letter from the replacement process agent in a form acceptable to the Agent.
30.5 Creditor Party rights unaffected. Nothing in this Clause 30 shall exclude or limit any right which any Creditor Party may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the
service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.
30.6 Meaning of proceedings. In this Clause 30, proceedings means proceedings of any kind, including an application for a provisional or protective measure and a Dispute means any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement.
THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.
SCHEDULE 1
LENDERS AND COMMITMENTS
Lender |
|
Lending Office |
|
Term Commitment
|
|
Revolving
|
|
Total
|
|
|
|
|
|
|
|
|
|
Crédit Agricole Corporate and Investment Bank, Singapore Branch |
|
168 Robinson Road #22-01 Capital Tower, Singapore 068912 |
|
18,250,000 |
|
12,500,000 |
|
30,750,000 |
|
|
|
|
|
|
|
|
|
BNP Paribas, Singapore Branch |
|
Tung Centre, 20 Collyer Quay, Singapore 049319
|
|
18,250,000 |
|
12,500,000 |
|
30,750,000 |
|
|
|
|
|
|
|
|
|
Standard Chartered Bank, Singapore Branch |
|
Marina Bay Financial Centre Tower 1, #27-01 8 Marina Boulevard Singapore 018981 |
|
18,250,000 |
|
12,500,000 |
|
30,750,000 |
|
|
|
|
|
|
|
|
|
DVB Group Merchant Bank (Asia) Ltd |
|
77 Robinson Road, #30-2 068896 Singapore
|
|
18,250,000 |
|
12,500,000 |
|
30,750,000 |
Lender |
|
Lending Office |
|
Term Commitment
|
|
Revolving
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Copy to:
|
|
|
|
|
|
|
SCHEDULE 2
SWAP BANKS
Lender |
|
Office |
|
|
|
Crédit Agricole Corporate and Investment Bank, Singapore Branch |
|
168 Robinson Road #22-01 Capital Tower, Singapore 068912 |
|
|
|
BNP Paribas, Singapore Branch |
|
Tung Centre, 20 Collyer Quay
|
|
|
|
Standard Chartered Bank, Singapore Branch |
|
Marina Bay Financial Centre Tower 1, #27-01 8 Marina Boulevard Singapore 018981 |
SCHEDULE 3
DRAWDOWN NOTICE
To: Crédit Agricole Corporate and Investment Bank
9, quai du Président Paul Doumer
92920 Paris La Defense Cedex
France
Attn: Loans Administration
[ · ]
DRAWDOWN NOTICE
1 We refer to the loan agreement (the Loan Agreement ) dated [ · ] 2011 and made between ourselves, as Borrower, the Lenders referred to therein, the Mandated Lead Arrangers referred to therein, the Swap Banks referred to therein and yourselves as Agent and Security Trustee in connection with a loan facility of US$123,000,000 comprising a Term Loan Facility of US$73,000,000 and a Revolving Credit Facility of US$50,000,000. Terms defined in the Loan Agreement have their defined meanings when used in this Drawdown Notice.
2 We request to borrow an Advance under the [Term Loan Facility] [Revolving Credit Facility] as follows:
(a) Amount: US$[ · ];
(b) Drawdown Date: [ · ];
(c) Duration of the [first] Interest Period shall be [ · ] months;
(d) Payment instructions: account of [ · ] and numbered [ · ] with [ · ] of [ · ].
3 We represent and warrant that:
(a) the representations and warranties in Clause 10 of the Loan Agreement would remain true and not misleading if repeated on the date of this notice with reference to the circumstances now existing;
(b) no Event of Default or Potential Event of Default has occurred or will result from the borrowing of the Advance.
4 This notice cannot be revoked without the prior consent of the Majority Lenders.
[Name of Signatory]
for and on behalf of
GRINDROD SHIPPING PTE. LTD.
SCHEDULE 4
CONDITION PRECEDENT DOCUMENTS
PART A
The following are the documents referred to in Clause 9.1(a).
1 A duly executed original of each Finance Document (other than those referred to in Part B of this Schedule) and each Master Agreement (and of each document required to be delivered by each Finance Document and each Master Agreement).
2 Copies of the certificate of incorporation and constitutional documents of the Borrower and each Security Party (other than the Owners of the New Ships).
3 Copies of resolutions of directors and, if required, the shareholders of the Borrower and each Security Party (other than the Owners of the New Ships) authorising the execution of each of the Finance Documents to which the Borrower or that Security Party is a party and, in the case of the Borrower, authorising named officers to give the Drawdown Notices and other notices under this Agreement.
4 The original of any power of attorney under which any Finance Document is executed on behalf of the Borrower or a Security Party (other than the Owners of the New Ships).
5 Copies of all consents which the Borrower or any Security Party (other than the Owners of the New Ships) requires to enter into, or make any payment under, any Finance Document and any Master Agreement including, but not limited to, all waivers and exemptions from Singapore withholding tax applicable to companies registered in Singapore.
6 The originals of any mandates or other documents required in connection with the opening or operation of the Operating Accounts or the Retention Account.
7 Copies of any Charters in relation to the Initial Ships and any guarantee in respect of any such Charter and of all documents signed or issued by the relevant Owner or charterer (or either of them) under or in connection therewith and each New Ship Shipbuilding Contract.
8 Documentary evidence that:
(a) the Initial Ships are definitively and permanently registered in the name of the relevant Owner under Singapore flag;
(b) the Initial Ships are in the absolute and unencumbered ownership of the relevant Owner save as contemplated by the Finance Documents;
(c) each Initial Ship maintains class acceptable to the Agent with an Approved Classification Society free of all overdue recommendations and condition;
(d) the Mortgages have been duly registered against each Initial Ship as valid first priority Singapore ship mortgages in accordance with the laws of Singapore; and
(e) the Initial Ships are insured in accordance with the provisions of this Agreement and all requirements therein in respect of insurances have been complied with.
9 Documents establishing that the Initial Ships will, as from the first Drawdown Date, be managed by the Approved Manager on terms acceptable to the Lenders, together with:
(a) a letter of undertaking executed by the Approved Manager in favour of the Agent in the terms required by the Agent agreeing certain matters in relation to the management of the Initial Ships and subordinating the rights of the Approved Manager against the Initial Ships, the relevant Owner and the Borrower to the rights of the Creditor Parties under the Finance Documents;
(b) copies of the Approved Managers Document of Compliance and of the Initial Ships Safety Management Certificate (together with any other details of the applicable safety management system which the Agent requires) and ISSC.
10 Survey reports addressed to the Agent and the Lenders, stated to be for the purposes of this Agreement and dated not earlier than 30 days before the first Drawdown Date from an independent marine surveyor selected by the Agent in respect of the physical condition of Ships 1, 5, 6 and 7.
11 Such documents and evidence as the Agent shall require in relation to the Borrower and each Security Party based on applicable law and regulations, and the Agents own internal guidelines, relating to the Agents knowledge of its customers.
12 Documentary evidence that the agent for service of process named in Clause 30 has accepted its appointment.
13 Evidence of the Fair Market Value of the Initial Ships.
14 Favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of Singapore, the Isle of Man and such other relevant jurisdictions as the Agent may require.
15 A favourable opinion from an independent insurance consultant acceptable to the Agent on such matters relating to the insurances for each Initial Ship as the Agent may require.
16 If the Agent so requires, in respect of any of the documents referred to above, a certified English translation prepared by a translator approved by the Agent.
PART B
The following are the documents referred to in Clause 9.1(b). In this Part B, the relevant New Ship means the New Ship to which the Term Advance to be drawndown relates and the relevant Owner means the Owner of that New Ship.
1 A duly executed original of the Guarantee, Mortgage, Deed of Covenant, General Assignment and Charter Assignment relating to the relevant New Ship (and of each document required to be delivered by those documents).
2 Copies of the certificate of incorporation and constitutional documents of the relevant Owner.
3 Copies of resolutions of directors and, if required, the shareholders of the relevant Owner authorising the execution of each of the Finance Documents to which the relevant Owner is a party.
4 The original of any power of attorney under which any Finance Document is executed on behalf of the relevant Owner.
5 Copies of all consents which the relevant Owner requires to enter into, or make any payment under, any Finance Document including, but not limited to, all waivers and exemptions from Singapore withholding tax applicable to companies registered in Singapore.
6 Copies of any Charters in relation to the relevant New Ship and any guarantee in respect of any such Charter and of all documents signed or issued by the relevant Owner or charterer (or either of them) under or in connection therewith.
7 Documentary evidence that:
(a) the relevant New Ship is definitively and permanently registered in the name of the relevant Owner under Singapore flag;
(b) the relevant New Ship is in the absolute and unencumbered ownership of the relevant Owner save as contemplated by the Finance Documents;
(c) the relevant New Ship maintains class acceptable to the Agent with an Approved Classification Society free of all overdue recommendations and condition;
(d) the Mortgage has been duly registered against the relevant New Ship as valid first priority Singapore ship mortgages in accordance with the laws of Singapore;
(e) the relevant New Ship is insured in accordance with the provisions of this Agreement and all requirements therein in respect of insurances have been complied with; and
8 Documents establishing that the relevant New Ship will, as from the first Drawdown Date, be managed by the Approved Manager on terms acceptable to the Lenders, together with:
(a) a letter of undertaking executed by the Approved Manager in favour of the Agent in the terms required by the Agent agreeing certain matters in relation to the management of the relevant New Ship and subordinating the rights of the Approved Manager against the that Ship, the relevant Owner and the Borrower to the rights of the Creditor Parties under the Finance Documents;
(b) copies of the Approved Managers Document of Compliance and of the relevant New Ships Safety Management Certificate (together with any other details of the applicable safety management system which the Agent requires) and ISSC.
9 Documentary evidence that the agent for service of process named in Clause 30 has accepted its appointment.
10 Evidence of the Fair Market Value of the relevant New Ship.
11 Favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of Singapore and such other relevant jurisdictions as the Agent may require.
12 A favourable opinion from an independent insurance consultant acceptable to the Agent on such matters relating to the insurances for the relevant New Ship as the Agent may require.
13 If the Agent so requires, in respect of any of the documents referred to above, a certified English translation prepared by a translator approved by the Agent.
Each of the documents specified in paragraphs 2, 3, 5 and 7 of Part A and Part B of this schedule and every other copy document delivered under this Schedule shall be certified as a true and up to date copy by a director or the secretary (or equivalent officer) of the Borrower.
SCHEDULE 5
TRANSFER CERTIFICATE
The Transferor and the Transferee accept exclusive responsibility for ensuring that this Certificate and the transaction to which it relates comply with all legal and regulatory requirements applicable to them respectively.
To: [Name of Agent] for itself and for and on behalf of the Borrower, each Security Party, the Security Trustee, each Lender, each Swap Bank and each Mandated Lead Arranger, as defined in the Loan Agreement referred to below.
1 This Certificate relates to a loan agreement (the Loan Agreement ) dated [ · ] 2011 and made between (1) Grindrod Shipping Pte. Ltd. (the Borrower ), (2) the banks and financial institutions named therein as Lenders, (3) the banks and financial institutions named therein as Mandated Lead Arrangers, (4) the banks and financial institutions named therein as Swap Banks, (5) Crédit Agricole Corporate and Investment Bank as Agent and (6) Crédit Agricole Corporate and Investment Bank as Security Trustee for a loan facility of US$123,000,000 comprising a term loan facility of US$73,000,000 and a revolving credit facility of US$50,000,000.
2 In this Certificate, terms defined in the Loan Agreement shall, unless the contrary intention appears, have the same meanings and:
Relevant Parties means the Agent, the Borrower, each Security Party, the Security Trustee, each Mandated Lead Arranger, each Lender and each Swap Bank;
Transferor means [full name] of [lending office]; and
Transferee means [full name] of [lending office].
3 The effective date of this Certificate is [ · ] Provided that this Certificate shall not come into effect unless it is signed by the Agent on or before that date.
4 The Transferor assigns to the Transferee absolutely all rights and interests (present, future or contingent) which the Transferor has as Lender under or by virtue of the Loan Agreement and every other Finance Document in relation to [ · ] per cent. of its Term Contribution and [ · ] per cent. of its Revolving Contribution, which percentages represent $[ · ], $[ · ] and $[ · ] respectively.
5 By virtue of this Transfer Certificate and Clause 26 of the Loan Agreement, the Transferor is discharged [entirely from its Term Commitment and Revolving Commitment which amount to $[ · ], $[ · ] and $[ · ] respectively] [from [ · ] per cent. of its Term Commitment and [ · ] per cent. of its Revolving Commitment, which percentages represent $[ · ], $[ · ] and $[ · ] respectively] and the Transferee acquires a Term Commitment and a Revolving Commitment of $[ · ], $[ · ] and $[ · ] respectively.
6 The Transferee undertakes with the Transferor and each of the Relevant Parties that the Transferee will observe and perform all the obligations under the Finance Documents which Clause 26 of the Loan Agreement provides will become binding on it upon this Certificate taking effect.
7 The Agent, at the request of the Transferee (which request is hereby made) accepts, for the Agent itself and for and on behalf of every other Relevant Party, this Certificate as a Transfer Certificate taking effect in accordance with Clause 26 of the Loan Agreement.
8 The Transferor:
(a) warrants to the Transferee and each Relevant Party that:
(i) the Transferor has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which are required in connection with this transaction; and
(ii) this Certificate is valid and binding as regards the Transferor;
(b) warrants to the Transferee that the Transferor is absolutely entitled, free of encumbrances, to all the rights and interests covered by the assignment in paragraph 4; and
(c) undertakes with the Transferee that the Transferor will, at its own expense, execute any documents which the Transferee reasonably requests for perfecting in any relevant jurisdiction the Transferees title under this Certificate or for a similar purpose.
9 The Transferee:
(a) confirms that it has received a copy of the Loan Agreement and each other Finance Document;
(b) agrees that it will have no rights of recourse on any ground against either the Transferor, the Agent, the Security Trustee, any Mandated Lead Arranger, any Lender or any Swap Bank in the event that:
(i) any of the Finance Documents prove to be invalid or ineffective,
(ii) the Borrower or any Security Party fails to observe or perform its obligations, or to discharge its liabilities, under any of the Finance Documents;
(iii) it proves impossible to realise any asset covered by a Security Interest created by a Finance Document, or the proceeds of such assets are insufficient to discharge the liabilities of the Borrower or Security Party under the Finance Documents;
(c) agrees that it will have no rights of recourse on any ground against the Agent, the Security Trustee, any Arranger, any Lender or any Swap Bank in the event that this Certificate proves to be invalid or ineffective;
(d) warrants to the Transferor and each Relevant Party that:
(i) it has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which it needs to take or obtain in connection with this transaction; and
(ii) this Certificate is valid and binding as regards the Transferee; and
(e) confirms the accuracy of the administrative details set out below regarding the Transferee.
10 The Transferor and the Transferee each undertake with the Agent and the Security Trustee severally, on demand, fully to indemnify the Agent and/or the Security Trustee in respect of any claim, proceeding, liability or expense (including all legal expenses) which they or either of them may incur in connection with this Certificate or any matter arising out of it, except such as are shown to have been mainly and directly caused by the gross and culpable negligence or dishonesty of the Agents or the Security Trustees own officers or employees.
11 The Transferee shall repay to the Transferor on demand so much of any sum paid by the Transferor under paragraph 10 as exceeds one-half of the amount demanded by the Agent or the Security Trustee in respect of a claim, proceeding, liability or expense which was not reasonably foreseeable at the date of this Certificate; but nothing in this paragraph shall affect the liability of each of the Transferor and the Transferee to the Agent or the Security Trustee for the full amount demanded by it.
[Name of Transferor] |
[Name of Transferee] |
|
|
By: |
By: |
|
|
Date: |
Date: |
Agent
Signed for itself and for and on behalf of itself
as Agent and for every other Relevant Party
[Name of Agent] |
|
By: |
|
Date: |
Administrative Details of Transferee
Name of Transferee:
Lending Office:
Contact Person
(Loan Administration Department):
Telephone:
Telex:
Fax:
Contact Person
(Credit Administration Department):
Telephone:
Telex:
Fax:
Account for payments:
Note : This Transfer Certificate alone may not be sufficient to transfer a proportionate share of the Transferors interest in the security constituted by the Finance Documents in the Transferors or Transferees jurisdiction. It is the responsibility of each Lender to ascertain whether any other documents are required for this purpose.
SCHEDULE 6
DETAILS OF SHIPS AND OWNERS
Ship |
|
Owner |
|
Ship Name |
|
Flag |
|
Type |
|
Company IMO
|
1 |
|
IVS Bulk 462 Pte. Ltd. |
|
IVS Kawana |
|
Singapore |
|
Handysize Bulk Carrier |
|
5596241 |
2 |
|
IVS Bulk 511 Pte. Ltd. |
|
IVS Knot |
|
Singapore |
|
Handysize Bulk Carrier |
|
5544932 |
3 |
|
IVS Bulk 512 Pte. Ltd. |
|
IVS Kinglet |
|
Singapore |
|
Handysize Bulk Carrier |
|
5608934 |
4 |
|
Unicorn Ross Pte. Ltd. |
|
Rhino |
|
Singapore |
|
Product Tanker IMO II/III |
|
5556419 |
5 |
|
Unicorn Baltic Pte. Ltd. |
|
Breede |
|
Singapore |
|
Product Tanker IMO II/III |
|
5573978 |
6 |
|
Unicorn Ionia Pte. Ltd. |
|
Kowie |
|
Singapore |
|
Product Tanker IMO II/III |
|
5573964 |
7 |
|
Unicorn Java Pte. Ltd. |
|
Gouritz |
|
Singapore |
|
Product Tanker IMO II/III |
|
5605047 |
8 |
|
Unicorn Marmara Pte. Ltd. |
|
Gamtoos |
|
Singapore |
|
Product Tanker IMO II/III |
|
5605051 |
9 |
|
Unicorn Scotia Pte. Ltd. |
|
Kei |
|
Singapore |
|
Product Tanker IMO II/III |
|
5473029 |
SCHEDULE 7
DESIGNATION NOTICE
To: |
Crédit Agricole Corporate and Investment Bank |
|
9, quai du Président Paul Doumer |
|
92920 Paris La Defense Cedex |
|
France |
[ date ]
Dear Sirs
Loan Agreement dated [ · ] 2011 made between (i) Grindrod Shipping Pte. Ltd. as Borrower, (ii) the Lenders as referred to therein, (iii) the Swap Banks as referred to therein, (iv) the Mandated Lead Arrangers as referred to therein and (iv) yourselves as Agent and Security Trustee for a loan facility of US$123,000,000 (the Loan Agreement)
We refer to:
1. the Loan Agreement;
2. the Master Agreement dated as of [ · ] made between Grindrod Shipping Pte. Ltd. and [ · ]; and
3. a Confirmation delivered pursuant to the said Master Agreement dated [ · ] and addressed by [ · ] to Grindrod Shipping Pte. Ltd..
In accordance with the terms of the Loan Agreement, we hereby give you notice of the said Confirmation and hereby confirm that the Transaction evidenced by it will be designated as a Designated Transaction for the purposes of the Loan Agreement and the Finance Documents.
Yours faithfully
|
|
|
|
for and on behalf of |
|
for and on behalf of |
|
GRINDROD SHIPPING PTE. LTD. |
|
[SWAP BANK] |
|
SCHEDULE 8
FORM OF CERTIFICATE OF COMPLIANCE
To: |
Crédit Agricole Corporate and Investment Bank |
|
9, quai du Président Paul Doumer |
|
92920 Paris La Defense Cedex |
|
France, |
|
|
From: |
Grindrod Shipping Pte Limited |
OFFICERS CERTIFICATE
This Certificate is rendered pursuant to clause 11.5(c) of the loan agreement dated [ · ] 2011 (the Loan Agreement ) and entered into between (i) ourselves, Grindrod Shipping Pte. Ltd., as Borrower, (ii) the banks and financial institutions listed in Schedule 1 therein as Lenders, (iii) the banks and financial institutions defined therein as Mandated Lead Arrangers, (iv) the banks and financial institutions defined therein as Swap Banks, (v) Crédit Agricole Corporate and Investment Bank as Agent and (vi) Crédit Agricole Corporate and Investment Bank as Security Trustee, relating to a loan facility of US$123,000,000 comprising a term loan facility of US$73,000,000 and a revolving credit facility of US$50,000,000. Words and expressions defined in the Loan Agreement shall have the same meanings when used herein.
I, the [Chief Financial Officer] [a director] of the Borrower, hereby certify that:
1 Attached to this Certificate [are][is] the latest [audited consolidated accounts of the Borrowers Group and audited individual accounts of the Borrower for the financial year ending on [ · ]] [unaudited consolidated financial statement of the Borrowers Group and the unaudited individual financial statement of the Borrower in relation to the [first] [second] half of the financial year ending on [ · ]] (the Accounts ).
2 Set out below are the respective amounts, in US Dollars, of the Market Adjusted Tangible Net Worth, Debt, EBITDA, Market Adjusted Tangible Fixed Assets and Net Debt of the Borrowers Group as at [ · ]:
|
US Dollars |
Market Adjusted Tangible Net Worth |
[ · ] |
Debt |
[ · ] |
EBITDA |
[ · ] |
Market Adjusted Tangible Fixed Assets |
[ · ] |
Net Debt |
[ · ] |
3 Accordingly, as at the date of this Certificate the financial covenants set out in Clause 12.5 of the Loan Agreement [are] [are not] complied with, in that as at [ · ]:
(b) Market Adjusted Tangible Net Worth is [ · ];
(c) Liquidity is [ · ] (of which [ · ] is in cash or cash equivalents);
(d) the ratio of Debt to Market Adjusted Tangible Fixed Assets is [ · ]; and
(e) the ratio of Net Debt to EBITDA is [ · ] times.
[ or, as the case may be, specify in what respect any of the financial covenants are not complied with. ]
4 As at [ · ] no Event of Default has occurred and is continuing.
[ or, specify/identify any Event of Default ]
The Borrower is in compliance with Clause 15.1 of the Loan Agreement.
[ If not, specify this and what is proposed as regards Clause 15.2 ]
The Fair Market Value of the Ships which are subject to a Mortgage is as follows as at [ date ]:
Name of Ship |
|
Name of first shipbroker
|
|
Name of second shipbroker
|
|
Average market value (if
|
[ · ] |
|
[ · ] |
|
[ · ] |
|
[ · ] |
|
|
Chief financial officer |
|
GRINDROD SHIPPING PTE. LTD. |
EXECUTION PAGES
BORROWER |
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SIGNED by |
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) |
/s/ Melody Cheng Attorney-in-fact |
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) |
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for and on behalf of |
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) |
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GRINDROD SHIPPING PTE. LTD. |
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) |
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in the presence of: |
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) |
/s/ Frederick Phillips |
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LENDERS |
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SIGNED by |
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) |
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) |
/s/ Dilman Sebastian Attorney-in-fact |
for and on behalf of |
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) |
/s/ Justin Lande Attorney-in-fact |
CRÉDIT AGRICOLE CORPORATE |
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) |
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AND INVESTMENT BANK, |
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) |
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SINGAPORE BRANCH |
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) |
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in its capacity as a Lender |
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) |
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in the presence of: |
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) |
/s/ Frederick Phillips |
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SIGNED by |
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) |
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) |
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for and on behalf of |
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) |
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STANDARD CHARTERED BANK, |
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) |
/s/ Knut Mathiassen |
SINGAPORE BRANCH |
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) |
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in its capacity as a Lender |
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) |
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in the presence of: |
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) |
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SIGNED by |
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) |
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) |
/s/ Michael ODonnell Attorney-in-fact |
for and on behalf of |
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) |
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DVB GROUP MERCHANT BANK |
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) |
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(ASIA) LTD |
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) |
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in its capacity as a Lender |
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) |
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in the presence of: |
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) |
/s/ Frederick Phillips |
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SIGNED by |
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) |
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) |
/s/ Michael ODonnell Attorney-in-fact |
for and on behalf of |
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) |
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BNP PARIBAS, SINGAPORE BRANCH |
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) |
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in its capacity as a Lender |
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) |
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in the presence of: |
|
) |
/s/ Frederick Phillips |
MANDATED LEAD ARRANGERS |
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SIGNED by |
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) |
||
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) |
/s/ Dilman Sebastian Attorney-in-fact |
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for and on behalf of |
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) |
/s/ Justin Lande Attorney-in-fact |
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CRÉDIT AGRICOLE CORPORATE |
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) |
||
AND INVESTMENT BANK |
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) |
||
in its capacity as a Mandated Lead Arranger |
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) |
||
in the presence of: |
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) |
/s/ Frederick Phillips |
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SIGNED by |
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) |
||
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) |
||
for and on behalf of |
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) |
/s/ Knut Mathiassen |
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STANDARD CHARTERED BANK, |
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) |
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SINGAPORE BRANCH |
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) |
||
in its capacity as a Mandated Lead Arranger |
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) |
||
in the presence of: |
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) |
/s/ Maria Martin |
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SIGNED by |
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) |
||
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) |
||
for and on behalf of |
|
) |
/s/ Michael ODonnell Attorney-in-fact |
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DVB GROUP MERCHANT BANK |
|
) |
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(ASIA) LTD |
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) |
||
in its capacity as a Mandated Lead Arranger |
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) |
||
in the presence of: |
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) |
/s/ Frederick Phillips |
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SIGNED by |
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) |
||
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) |
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for and on behalf of |
|
) |
/s/ Michael ODonnell Attorney-in-fact |
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BNP PARIBAS, SINGAPORE BRANCH |
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) |
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in its capacity as a Mandated Lead Arranger |
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) |
||
in the presence of: |
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) |
/s/ Frederick Phillips |
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SWAP BANKS |
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SIGNED by |
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) |
||
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) |
||
for and on behalf of |
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) |
/s/ Dilman Sebastian Attorney-in-fact |
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CRÉDIT AGRICOLE CORPORATE |
|
) |
/s/ Justin Lande Attorney-in-fact |
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AND INVESTMENT BANK, |
|
) |
||
SINGAPORE BRANCH |
|
) |
||
in its capacity as a Swap Bank |
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) |
||
in the presence of: |
|
) |
/s/ Frederick Phillips |
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SIGNED by |
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) |
||
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) |
||
for and on behalf of |
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) |
/s/ Knut Mathiassen |
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STANDARD CHARTERED BANK, |
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) |
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SINGAPORE BRANCH |
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) |
||
in its capacity as a Swap Bank |
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) |
||
in the presence of: |
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) |
/s/ Maria Martin |
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SIGNED by |
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) |
||
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) |
||
for and on behalf of |
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) |
/s/ Michael ODonnell Attorney-in-fact |
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BNP PARIBAS, SINGAPORE BRANCH |
|
) |
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in its capacity as a Swap Bank |
|
) |
||
in the presence of: |
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) |
/s/ Frederick Phillips |
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AGENT |
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SIGNED by |
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) |
||
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) |
/s/ Dilman Sebastian Attorney-in-fact |
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for and on behalf of |
|
) |
/s/ Justin Lande Attorney-in-fact |
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CRÉDIT AGRICOLE CORPORATE |
|
) |
||
AND INVESTMENT BANK |
|
) |
||
in its capacity as Agent |
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) |
||
in the presence of: |
|
) |
/s/ Frederick Phillips |
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SECURITY TRUSTEE |
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SIGNED by |
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) |
||
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|
) |
/s/ Dilman Sebastian Attorney-in-fact |
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for and on behalf of |
|
) |
/s/ Justin Lande Attorney-in-fact |
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CRÉDIT AGRICOLE CORPORATE |
|
) |
||
AND INVESTMENT BANK |
|
) |
||
in its capacity as Security Trustee |
|
) |
||
in the presence of: |
|
) |
/s/ Frederick Phillips |
|
Execution Version
SUPPLEMENTAL LETTER
To:
Grindrod Shipping Pte. Ltd.
200 Cantonment Road
#03-01 Southpoint
Singapore, 089763
as Borrower
IVS Bulk 462 Pte. Ltd.
IVS Bulk 511 Pte. Ltd.
IVS Bulk 512 Pte. Ltd.
Unicorn Ross Pte. Ltd.
Unicorn Baltic Pte. Ltd.
Unicorn Ionia Pte. Ltd.
Unicorn Scotia Pte. Ltd.
IVS Bulk 430 Pte. Ltd.
each of
200 Cantonment Road
#03-01 Southpoint
Singapore, 089763
as Owners
Grindrod Shipping Limited
4 th Floor
Standard Bank House
1 Circular Road
Douglas
Isle of Man, IM99 3NZ
as Shareholder
20 August 2013
Dear Sirs
Loan Agreement dated 7 July 2011 made between (i) Grindrod Shipping Pte. Ltd as Borrower, (ii) the banks and financial institutions listed in Schedule 1 to the Loan Agreement as Lenders, (iii) the banks and financial institutions listed in Schedule 2 to the Loan Agreement as Swap Banks, (iv) Crédit Agricole Corporate and Investment Bank, Standard Chartered Bank, Singapore Branch, DVB Group Merchant Bank (Asia) Ltd and BNP Paribas, Singapore Branch as Mandated Lead Arrangers and (v) Crédit Agricole Corporate and Investment Bank as Agent and Security Trustee in relation to a loan facility of US$123,000,000 comprising (a) a term loan facility of US$73,000,000 and (b) a revolving credit facility of US$50,000,000 (the Loan Agreement).
1 We refer to the Loan Agreement. Words and expressions defined in the Loan Agreement shall have the same meanings when used herein.
2 The Borrower hereby notifies the Lenders that Unicorn Java Pte. Ltd. has changed its name to IVS Bulk 430 Pte. Ltd..
3 The Borrower has requested the consent of the Creditor Parties to:
(a) replace the New Ships listed as Ships 7 and 8 in Schedule 6 to the Loan Agreement (m.v. GOURITZ owned or to be owned by IVS Bulk 430 Pte. Ltd. (formerly known as Unicorn Java Pte. Ltd.) ( IVS Bulk 430 ) and m.v. GAMTOOS owned or to be owned by Unicorn Marmara Pte. Ltd) with m.v. IVS KITE to be owned by IVS Bulk 430 and IVS MERLION to be owned by IVS Bulk 611 Pte. Ltd. (the New Owner ); and
(b) the appointment of (i) Sandigan Ship Management Pte. Ltd. or, in the alternative, Grindrod Ship Management, a division of Grindrod Shipping Pte. Ltd. as Approved Manager of IVS KITE and (ii) Grindrod Ship Management, a division of Grindrod Shipping Pte. Ltd. as Approved Manager of IVS MERLION.
4 The Lenders confirm their agreement to the Borrowers requests in paragraph 3 on and with effect from the date on which the Agent receives the following in form and substance satisfactory to it (the Effective Date ):
(a) for the Borrower, each Owner (including IVS Bulk 430), the New Owner and the Shareholder, documents of the kind specified in Schedule 4, Part A, paragraphs 2, 3, 4 and 5 of the Loan Agreement as amended and supplemented by this letter and updated with appropriate modifications to refer to this letter and the documents referred to in paragraph 4(e) of this letter (or, in the case of those documents previously provided pursuant to Schedule 4, Part A, paragraph 2 of the Loan Agreement, confirmation they have not been amended and remain in full force and effect);
(b) an executed original of this letter;
(c) the originals of any mandates or other documents required in connection with the opening or operation of the Operating Accounts by the New Owner and IVS Bulk 430;
(d) evidence that the New Owner and IVS Bulk 430 (in relation to the ships owned or to be owned by them) have satisfied the conditions precedent set out in Part B of Schedule 4 to the Loan Agreement;
(e) a duly executed original of the following documents, each in the Agreed Form:
(i) Shares Pledge in respect of the New Owner granted by the Borrower in favour of the Security Trustee (and of each document required to be delivered by the Shares Pledge); and
(ii) Account Security Deed granted by the New Owner and IVS Bulk 430 in favour of the Agent and Security Trustee (and of each document required to be delivered by each Account Security Deed);
(f) such documents and evidence as the Agent shall require in relation to the New Owner and IVS Bulk 430 based on applicable law and regulations, and the Agents own internal guidelines, relating to the Agents knowledge of its customers;
(g) documentary evidence that each agent for service of process nominated by the New Owner has accepted its appointment; and
(h) favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of Singapore and such other relevant jurisdictions as the Agent may require.
5 On and from the Effective Date, the Loan Agreement shall be amended as follows:
(a) the New Owner shall replace Unicorn Marmara Pte. Ltd. as one of the Owners;
(b) Unicorn Java Pte. Ltd. shall be referred to as IVS Bulk 430 Pte. Ltd.;
(c) the definition of Approved Manager shall be amended so that the Approved Manager in relation to:
(i) Ship 7 shall be Sandigan Ship Management Pte. Ltd. of 9/F Salustiano D Ty Tower, 104 paseo de Roxas, corner Perea Street, Legaspi Village, Makati City , 1299, Philippines or, with prior written notice to the Agent, Grindrod Ship Management, a division of Grindrod Shipping Pte. Ltd. of 200 Cantonment Road, #03-01, Southpoint, Singapore, 089763 provided that the Borrower has provided to the Agent documents similar to those provided for Sandigan Ship Management Pte. Ltd. as set out in paragraph 8 of Part B to Schedule 4 of the Loan Agreement;
(ii) Ship 8 shall be Grindrod Ship Management, a division of Grindrod Shipping Pte. Ltd. of 200 Cantonment Road, #03-01, Southpoint, Singapore, 089763;
(d) by deleting Schedule 6 to the Loan Agreement and replacing it with the schedule in the form attached as the appendix to this letter;
(e) clause 11.20 of the Loan Agreement shall not apply to either of Ship 7 or Ship 8;
(f) clauses 11.19 and 11.21 of the Loan Agreement shall not apply to Ship 7 and the General Assignment to be provided in respect of Ship 7 shall not include an assignment of Warranties; and
(g) by construing all references in the Loan Agreement to this Agreement and all references in the other Finance Document to the Loan Agreement as references to the Loan Agreement as amended and supplemented by this letter.
6 On the Effective Date, the Agent (on behalf of the Creditor Parties) shall enter into a deed of release and reassignment in respect of the Shares Pledge provided by the Borrower in relation to Unicorn Marmara Pte. Ltd..
7 All other terms and conditions of the Loan Agreement, the other Finance Documents and the Master Agreements are to remain in full force and effect.
8 This letter may be executed in any number of counterparts.
9 This letter shall be governed by, and construed in accordance with, English Law. The provisions of clause 30.2 and 30.6 (inclusive) of the Loan Agreement shall be incorporated into this letter as if set out in full herein with references to this Agreement construed as references to this letter.
Please confirm your agreement to this letter by signing below.
/s/ Charlotte Bown Attorney-in-Fact |
|
for and on behalf of
Crédit Agricole Corporate and Investment Bank
as Agent for the Creditor Parties
We hereby acknowledge receipt of the above letter and confirm our agreement to the terms hereof and confirm that the Finance Documents to which we are a party (and as amended in accordance with the terms of this letter) shall remain in full force and effect and shall continue to stand as security for our obligations under the Loan Agreement, the Finance Documents and the Master Agreements.
/s/ Alice Bushell Attorney-in-Fact |
|
|
|
for and on behalf of |
|
Grindrod Shipping Pte. Ltd. |
|
as Borrower |
|
20 August 2013 |
|
We hereby confirm and acknowledge that we have read and understood the terms and conditions of the above letter and agree in all respects to the same and confirm that the Finance Documents, including for the avoidance of doubt the Guarantees, to which we are each a party (and as amended in accordance with the terms of this letter) shall remain in full force and effect and shall continue to secure the obligations of the Borrower under the Master Agreements, the Loan Agreement and Finance Documents as amended by this letter.
/s/ Alice Bushell Attorney-in-Fact |
|
|
|
for and on behalf of |
|
IVS Bulk 462 Pte. Ltd. |
|
as an Owner |
|
20 August 2013 |
|
|
|
|
|
/s/ Alice Bushell Attorney-in-Fact |
|
|
|
for and on behalf of |
|
IVS Bulk 511 Pte. Ltd. |
|
as an Owner |
|
20 August 2013 |
|
|
|
|
|
/s/ Alice Bushell Attorney-in-Fact |
|
|
|
for and on behalf of |
|
IVS Bulk 512 Pte. Ltd. |
|
as an Owner |
|
20 August 2013 |
|
|
|
|
|
/s/ Alice Bushell Attorney-in-Fact |
|
|
|
for and on behalf of |
|
Unicorn Ross Pte. Ltd. |
|
as an Owner |
|
20 August 2013 |
|
|
|
|
|
/s/ Alice Bushell Attorney-in-Fact |
|
|
|
for and on behalf of |
|
Unicorn Baltic Pte. Ltd. |
|
as an Owner |
|
20 August 2013 |
|
|
|
|
|
/s/ Alice Bushell Attorney-in-Fact |
|
|
|
for and on behalf of |
|
Unicorn Ionia Pte. Ltd. |
|
as an Owner |
|
20 August 2013 |
|
|
|
|
|
/s/ Alice Bushell Attorney-in-Fact |
|
|
|
for and on behalf of |
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Unicorn Scotia Pte. Ltd. |
|
as an Owner |
|
20 August 2013 |
|
|
|
|
|
/s/ Alice Bushell Attorney-in-Fact |
|
|
|
for and on behalf of |
|
IVS Bulk 430 Pte. Ltd. |
|
(formerly known as Unicorn Java Pte. Ltd.) |
|
as an Owner |
|
20 August 2013 |
|
We hereby confirm and acknowledge that we have read and understood the terms and conditions of the above letter and agree in all respects to the same and confirm that the Negative Pledge to which we are a party (and as amended in accordance with the terms of this letter) shall remain in full force and effect.
/s/ Martyn Richard Wade |
|
|
|
for and on behalf of |
|
Grindrod Shipping Limited |
|
as Shareholder |
|
21 August 2013 |
|
APPENDIX
SCHEDULE 6
DETAILS OF SHIPS AND OWNERS
Ship |
|
Owner |
|
Ship Name |
|
Flag |
|
Type |
|
Company IMO
|
1 |
|
IVS Bulk 462 Pte. Ltd. |
|
IVS Kawana |
|
Singapore |
|
Handysize Bulk Carrier |
|
5596241 |
2 |
|
IVS Bulk 511 Pte. Ltd. |
|
IVS Knot |
|
Singapore |
|
Handysize Bulk Carrier |
|
5544932 |
3 |
|
IVS Bulk 512 Pte. Ltd. |
|
IVS Kinglet |
|
Singapore |
|
Handysize Bulk Carrier |
|
5608934 |
4 |
|
Unicorn Ross Pte. Ltd. |
|
Rhino |
|
Singapore |
|
Product Tanker IMO II/III |
|
5556419 |
5 |
|
Unicorn Baltic Pte. Ltd. |
|
Breede |
|
Singapore |
|
Product Tanker IMO II/III |
|
5573978 |
6 |
|
Unicorn Ionia Pte. Ltd. |
|
Kowie |
|
Singapore |
|
Product Tanker IMO II/III |
|
5573964 |
7 |
|
IVS Bulk 430 Pte. Ltd. (formerly known as Unicorn Java Pte. Ltd.) |
|
IVS Kite |
|
Singapore |
|
Handysize Bulk Carrier |
|
5605047 |
8 |
|
IVS Bulk 611 Pte. Ltd. |
|
IVS Merlion |
|
Singapore |
|
Handysize Bulk Carrier |
|
5608948 |
9 |
|
Unicorn Scotia Pte. Ltd. |
|
Kei |
|
Singapore |
|
Product Tanker IMO II/III |
|
5473029 |
Execution version
SUPPLEMENTAL LETTER
To:
Grindrod Shipping Pte. Ltd.
200 Cantonment Road
#03-01 Southpoint
Singapore, 089763
as Borrower
IVS Bulk 462 Pte. Ltd.
IVS Bulk 511 Pte. Ltd.
IVS Bulk 512 Pte. Ltd.
Unicorn Ross Pte. Ltd.
Unicorn Baltic Pte. Ltd.
Unicorn Ionia Pte. Ltd.
IVS Bulk 430 Pte. Ltd.
IVS Bulk 611 Pte. Ltd.
each of
200 Cantonment Road
#03-01 Southpoint
Singapore, 089763
as Owners
Grindrod Limited
Quadrant House
115 Margaret Mncadi Avenue
Durban
South Africa
as Shareholder
27 August 2015
Dear Sirs
Loan Agreement dated 7 July 2011 (as supplemented by a supplemental letter dated 20 August 2013) made between (i) Grindrod Shipping Pte. Ltd as Borrower, (ii) the banks and financial institutions listed in Schedule 1 to the Loan Agreement as Lenders, (iii) the banks and financial institutions listed in Schedule 2 to the Loan Agreement as Swap Banks, (iv) Crédit Agricole Corporate and Investment Bank, Standard Chartered Bank, Singapore Branch, DVB Group Merchant Bank (Asia) Ltd and BNP Paribas, Singapore Branch as Mandated Lead Arrangers and (v) Crédit Agricole Corporate and Investment Bank as Agent and Security Trustee in relation to a loan facility of US$123,000,000 comprising (a) a term loan facility of US$73,000,000 and (b) a revolving credit facility of US$50,000,000 (the Loan Agreement).
1 We refer to the Loan Agreement. Words and expressions defined in the Loan Agreement shall have the same meanings when used herein.
2 Pursuant to paragraph (b) of Clause 8.9 (M andatory prepayment on a sale or Total Loss ) of the Loan Agreement, Unicorn Scotia Pte. Ltd. (the Outgoing Owner ) has sold the ship listed as Ship 9 in Schedule 6 to the Loan Agreement (m.v. KEI) (the Sold Ship ) and the proceeds of sale in the amount of US$13,050,000 plus any interest earned on that amount (the Sale Proceeds ) are held by the Security Trustee.
3 The Borrower has therefore requested the consent of the Creditor Parties to:
(a) replace the Sold Ship with m.v. IVS KINGBIRD (the Substitute Ship ) owned by IVS Bulk 475 Pte. Ltd. (the New Owner ));
(b) the appointment of Grindrod Ship Management, a division of Grindrod Shipping Pte. Ltd. as Approved Manager in its capacity as technical manager of the Substitute Ship;
(c) the appointment of Island View Shipping, a division of Grindrod Shipping Pte. Ltd. as Approved Manager in its capacity as commercial manager of the Substitute Ship;
(d) the replacement of Grindrod Shipping Limited with Grindrod Limited as Shareholder; and
(e) the release of the Sale Proceeds to the Outgoing Owner.
4 The Lenders confirm their agreement to the Borrowers requests in paragraph 2 on and with effect from the date on which the Agent receives the following in form and substance satisfactory to it (the Effective Date ):
(a) for the Borrower, each Owner, the New Owner and the Shareholder, documents of the kind specified in Schedule 4, Part A, paragraphs 2, 3, 4 and 5 of the Loan Agreement as amended and supplemented by this letter and updated with appropriate modifications to refer to this letter and the documents referred to in paragraph 4(e) of this letter (or, in the case of those documents previously provided pursuant to Schedule 4, Part A, paragraph 2 of the Loan Agreement, confirmation they have not been amended and remain in full force and effect);
(b) an executed original of this letter;
(c) the originals of any mandates or other documents required in connection with the opening or operation of the Operating Account by the New Owner;
(d) evidence that the New Owner has satisfied the conditions precedent set out in Part B of Schedule 4 to the Loan Agreement;
(e) a duly executed original of the following documents, each in the Agreed Form:
(i) Shares Pledge in respect of the New Owner granted by the Borrower in favour of the Security Trustee (and of each document required to be delivered by the Shares Pledge); and
(ii) Account Security Deed in relation to the Operating Account of the New Owner granted by the New Owner in favour of the Agent and Security Trustee (and of each document required to be delivered by the Account Security Deed);
(f) such documents and evidence as the Agent shall require in relation to the New Owner based on applicable law and regulations, and the Agents own internal guidelines, relating to the Agents knowledge of its customers;
(g) documentary evidence that each agent for service of process nominated by the New Owner has accepted its appointment;
(h) favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of Singapore and such other relevant jurisdictions as the Agent may require; and
(i) evidence that the fees, costs and expenses due from the Borrower in connection with the this letter and any of the transactions contemplated by this letter have been paid or will be paid by the Effective Date.
5 On and from the Effective Date, the Loan Agreement shall be amended as follows:
(a) the New Owner shall replace the Outgoing Owner as one of the Owners;
(b) the definition of Approved Manager shall be amended so that the Approved Manager in relation to Ship 9 shall be each of:
(i) Grindrod Ship Management, a division of Grindrod Shipping Pte. Ltd. of 200 Cantonment Road, #03-01, Southpoint, Singapore, 089763; and
(ii) Island View Shipping, a division of Grindrod Shipping Pte. Ltd. of 200 Cantonment Road, #03-01, Southpoint, Singapore, 089763;
(c) by deleting Schedule 6 to the Loan Agreement and replacing it with the schedule in the form attached as the appendix to this letter;
(d) the definition of Shareholder shall be amended to read:
Shareholder means Grindrod Limited, a company incorporated in South Africa whose registered office is at Quadrant House, 115 Margaret Mncadi Avenue, Durban, South Africa;
(e) clauses 11.19, 11.20 and 11.21 of the Loan Agreement shall not apply to Ship 9 and the General Assignment to be provided in respect of Ship 9 shall not include an assignment of Warranties; and
(f) by construing all references in the Loan Agreement to this Agreement and all references in the other Finance Document to the Loan Agreement as references to the Loan Agreement as amended and supplemented by this letter.
6 On the Effective Date:
(a) the Agent (on behalf of the Creditor Parties) shall enter into a deed of release and reassignment in respect of the Shares Pledge provided by the Borrower in relation to the Outgoing Owner and the other Security Interests in relation to the Sold Ship; and
(b) the Security Trustee shall release the Sale Proceeds to the Outgoing Owner.
7 All other terms and conditions of the Loan Agreement, the other Finance Documents and the Master Agreements are to remain in full force and effect.
8 This letter may be executed in any number of counterparts.
9 This letter shall be governed by, and construed in accordance with, English Law. The provisions of Clauses 30.2 and 30.6 (inclusive) of the Loan Agreement shall be incorporated into this letter as if set out in full herein with references to this Agreement construed as references to this letter.
Please confirm your agreement to this letter by signing below.
/s/ Gareth Lond Attorney-in-fact |
|
|
|
for and on behalf of |
|
Crédit Agricole Corporate and Investment Bank |
|
as Agent for the Creditor Parties |
|
We hereby acknowledge receipt of the above letter and confirm our agreement to the terms hereof and confirm that the Finance Documents to which we are a party (and as amended in accordance with the terms of this letter) shall remain in full force and effect and shall continue to stand as security for our obligations under the Loan Agreement, the Finance Documents and the Master Agreements.
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
Grindrod Shipping Pte. Ltd. |
|
as Borrower |
|
27 August 2015 |
|
We hereby confirm and acknowledge that we have read and understood the terms and conditions of the above letter and agree in all respects to the same and confirm that the Finance Documents, including for the avoidance of doubt the Guarantees, to which we are each a party (and as amended in accordance with the terms of this letter) shall remain in full force and effect and shall continue to secure the obligations of the Borrower under the Master Agreements, the Loan Agreement and Finance Documents as amended by this letter.
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 462 Pte. Ltd. |
|
as an Owner |
|
27 August 2015 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 511 Pte. Ltd. |
|
as an Owner |
|
27 August 2015 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 512 Pte. Ltd. |
|
as an Owner |
|
27 August 2015 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
Unicorn Ross Pte. Ltd. |
|
as an Owner |
|
27 August 2015 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
Unicorn Baltic Pte. Ltd. |
|
as an Owner |
|
27 August 2015 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
Unicorn Ionia Pte. Ltd. |
|
as an Owner |
|
27 August 2015 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 430 Pte. Ltd. |
|
as an Owner |
|
27 August 2015 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 611 Pte. Ltd. |
|
as an Owner |
|
27 August 2015 |
|
We hereby confirm and acknowledge that we have read and understood the terms and conditions of the above letter and agree in all respects to the same and confirm that the Negative Pledge to which we are a party (and as amended in accordance with the terms of this letter) shall remain in full force and effect.
/s/ Andrew Geard Waller |
|
|
|
for and on behalf of |
|
Grindrod Limited |
|
as Shareholder |
|
27 August 2015 |
|
APPENDIX
SCHEDULE 6
DETAILS OF SHIPS AND OWNERS
Ship |
|
Owner |
|
Ship Name |
|
Flag |
|
Type |
|
Company IMO
|
1 |
|
IVS Bulk 462 Pte. Ltd. |
|
IVS Kawana |
|
Singapore |
|
Handysize Bulk Carrier |
|
5596241 |
2 |
|
IVS Bulk 511 Pte. Ltd. |
|
IVS Knot |
|
Singapore |
|
Handysize Bulk Carrier |
|
5544932 |
3 |
|
IVS Bulk 512 Pte. Ltd. |
|
IVS Kinglet |
|
Singapore |
|
Handysize Bulk Carrier |
|
5608934 |
4 |
|
Unicorn Ross Pte. Ltd. |
|
Rhino |
|
Singapore |
|
Product Tanker IMO II/III |
|
5556419 |
5 |
|
Unicorn Baltic Pte. Ltd. |
|
Breede |
|
Singapore |
|
Product Tanker IMO II/III |
|
5573978 |
6 |
|
Unicorn Ionia Pte. Ltd. |
|
Kowie |
|
Singapore |
|
Product Tanker IMO II/III |
|
5573964 |
7 |
|
IVS Bulk 430 Pte. Ltd. |
|
IVS Kite |
|
Singapore |
|
Handysize Bulk Carrier |
|
5605047 |
8 |
|
IVS Bulk 611 Pte. Ltd. |
|
IVS Merlion |
|
Singapore |
|
Handysize Bulk Carrier |
|
5608948 |
9 |
|
IVS Bulk 475 Pte. Ltd. |
|
IVS Kingbird |
|
Singapore |
|
Handysize Bulk Carrier |
|
9336757 |
SUPPLEMENTAL LETTER
Change to Financial Covenants
To:
Grindrod Shipping Pte. Ltd.
200 Cantonment Road
#03-01 Southpoint
Singapore, 089763
as Borrower
IVS Bulk 462 Pte. Ltd.
IVS Bulk 511 Pte. Ltd.
IVS Bulk 512 Pte. Ltd.
Unicorn Ross Pte. Ltd.
Unicorn Baltic Pte. Ltd.
Unicorn Ionia Pte. Ltd.
IVS Bulk 430 Pte. Ltd.
IVS Bulk 611 Pte. Ltd.
IVS Bulk 475 Pte. Ltd.
each of
200 Cantonment Road
#03-01 Southpoint
Singapore, 089763
as Owners
Grindrod Limited
Quadrant House
115 Margaret Mncadi Avenue
Durban
South Africa
as Shareholder
12 January 2017
Dear Sirs
Loan Agreement dated 7 July 2011 made between (i) Grindrod Shipping Pte. Ltd as Borrower, (ii) the banks and financial institutions listed in Schedule 1 to the Loan Agreement as Lenders, (iii) the banks and financial institutions listed in Schedule 2 to the Loan Agreement as Swap Banks, (iv) Crédit Agricole Corporate and Investment Bank, Standard Chartered Bank, Singapore Branch, DVB Group Merchant Bank (Asia) Ltd and BNP Paribas, Singapore Branch as Mandated Lead Arrangers and (v) Crédit Agricole Corporate and Investment Bank as Agent and Security Trustee in relation to a loan facility of, originally, US$123,000,000 comprising (a) a term loan facility of US$73,000,000 and (b) a revolving credit facility of US$50,000,000 (as supplemented and amended, the Loan Agreement)
1 We refer to the Loan Agreement. Words and expressions defined in the Loan Agreement shall have the same meanings when used herein.
2 The Borrower has requested the consent of the Lenders to certain amendments to the financial covenants as set out in clause 12.5 of the Loan Agreement.
3 We, as Agent for the Lenders, confirm the agreement of the Lenders to change the financial covenants to those set out in paragraph 4 of this letter on and with effect from the date on which the Agent receives the following in form and substance satisfactory to it (the Effective Date ) and subject to the amendments referred to in paragraph 4 of this letter:
(a) for the Borrower, each Owner and the Shareholder, documents of the kind specified in Schedule 4, Part A, paragraphs 2, 3, 4 and 5 of the Loan Agreement as amended and supplemented by this letter and updated with appropriate modifications to refer to this letter (or, in the case of those documents previously provided pursuant to Schedule 4, Part A, paragraph 2 of the Loan Agreement, confirmation they have not been amended and remain in full force and effect);
(b) an executed original of this letter;
(c) documentary evidence that each agent for service of process nominated by the Borrower, each Owner and the Shareholder has accepted its appointment under this letter;
(d) favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of Singapore and such other relevant jurisdictions as the Agent may require;
(e) evidence that the Borrower has paid to the Agent a work fee of $60,000 for distribution to the Lenders ($15,000 for each Lender); and
(f) evidence that any fees, costs and expenses due from the Borrower in connection with this letter and any of the transactions contemplated by this letter have been paid or will be paid by the Effective Date.
4 On and from the Effective Date, the Loan Agreement shall be amended as follows:
(a) by deleting the definition of Margin and replacing it with the following:
Margin means 2.50 per cent per annum;;
(b) by amending clause 12.5 as follows for the period 31 December 2016 to 31 December 2017 (inclusive) whereupon clause 12.5, excluding the Cash and Cash Equivalents covenant, shall revert to the wording prior to the Effective Date:
12.5 Financial Covenants . The Borrower will ensure that the consolidated financial position of the Borrowers Group shall at all times during the Security Period be such that:
(a) Book Value Net Worth is not less than $275,000,000 in 2016 and not less than $250,000,000 in 2017;
(b) Cash and Cash Equivalents of not less than $35,000,000; and
(c) the ratio of Debt to Market Adjusted Tangible Fixed Assets shall be not more than 75 per cent.
In this Clause 12.5:
Book Value Net Worth means the aggregate amount (without double counting) of the book value of the following:
(a) the amounts paid up, or credited as paid up, on the issued share capital of the Borrowers Group;
(b) any credit balance on the consolidated profit and loss account of the Borrowers Group; and
(c) any amount standing to the credit of any other consolidated capital and revenue reserves of the Borrowers Group including any share premium account and capital redemption reserve,
less the aggregate amount (without double counting) of the following:
(a) any debt balance on the consolidated profit and loss account of the Borrowers Group; and
(b) any reserves attributable to interests of minority shareholders in any subsidiary (whether direct or indirect) of the Borrowers Group,
all as determined in accordance with IFRS applied in the preparation of the Latest Accounts but adjusted by:
(i) deducting any dividend or other distribution declared, recommended or made by the Borrowers Group;
(ii) deducting any amount attributable to goodwill or any other intangible asset;
(iii) reflecting any variation required to be made to the asset value attributable to any ship owned by the Borrowers Group in order to reflect the book value of any such ship;
(iv) excluding any amount attributable to deferred taxation;
(v) excluding any amount attributable to minority interests; and
(vi) eliminating inconsistencies (if any) between the accounting principles;
Cash and Cash Equivalents means the cash and cash equivalents set out in the Latest Accounts;
Debt means the aggregate (without double counting) of secured or unsecured bank loans, finance lease obligations, bonds and any other financial obligations included as a liability on the balance sheet in terms of IFRS, but excluding the mark to market of swaps and other derivative instruments and excluding contingent liabilities as shown in the Latest Accounts;
Latest Accounts means, at any date, the audited consolidated accounts of the Borrowers Group most recently delivered to the Agent under Clause 11.5(a) or (b); and
Market Adjusted Tangible Fixed Assets means the aggregate of the book value of:
(a) ships (including ships under construction) either wholly or partially owned by the Borrowers Group; and
(b) land and buildings either wholly or partially owned by the Borrowers Group,
as stated in the Latest Accounts adjusted by such amount to reflect the current open market value of such assets evidenced to the Agents satisfaction and acceptable to the Lenders.
If, in the opinion of the Lenders, the Borrower agrees more favourable financial covenants to a particular lender or lenders in relation to any other facility, the financial covenants in this Clause 12.5 shall be amended to reflect those more favourable financial covenants.
(c) by construing all references in the Loan Agreement to this Agreement and all references in the other Finance Document to the Loan Agreement as references to the Loan Agreement as amended and supplemented by this letter.
5 This letter is a Finance Document.
6 All other terms and conditions of the Loan Agreement, the other Finance Documents and the Master Agreements are to remain in full force and effect.
7 This letter may be executed in any number of counterparts.
8 This letter shall be governed by, and construed in accordance with, English Law. The provisions of Clauses 30.2 and 30.6 (inclusive) of the Loan Agreement shall be incorporated into this letter as if set out in full herein with references to this Agreement construed as references to this letter.
Please confirm your agreement to this letter by signing below.
/s/ Justin Lande |
|
|
|
for and on behalf of |
|
Crédit Agricole Corporate and Investment Bank |
|
as Agent for the Lenders |
|
We hereby acknowledge receipt of the above letter and confirm our agreement to the terms hereof and confirm that the Finance Documents to which we are a party (and as amended in accordance with the terms of this letter) shall remain in full force and effect and shall continue to stand as security for our obligations under the Loan Agreement, the other Finance Documents and the Master Agreements.
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
Grindrod Shipping Pte. Ltd. |
|
as Borrower |
|
12 January 2017 |
|
We hereby confirm and acknowledge that we have read and understood the terms and conditions of the above letter and agree in all respects to the same and confirm that the Finance Documents, including for the avoidance of doubt the Guarantees, to which we are each a party (and as amended in accordance with the terms of this letter) shall remain in full force and effect and shall continue to secure the obligations of the Borrower under the Master Agreements, the Loan Agreement and the other Finance Documents as amended by this letter.
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 462 Pte. Ltd. |
|
as an Owner |
|
12 January 2017 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 511 Pte. Ltd. |
|
as an Owner |
|
12 January 2017 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 512 Pte. Ltd. |
|
as an Owner |
|
12 January 2017 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
Unicorn Ross Pte. Ltd. |
|
as an Owner |
|
12 January 2017 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
Unicorn Baltic Pte. Ltd. |
|
as an Owner |
|
12 January 2017 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
Unicorn Ionia Pte. Ltd. |
|
as an Owner |
|
12 January 2017 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 430 Pte. Ltd. |
|
as an Owner |
|
12 January 2017 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 611 Pte. Ltd. |
|
as an Owner |
|
12 January 2017 |
|
/s/ Gerald Christopher Kingsley-Wilkins |
|
|
|
for and on behalf of |
|
IVS Bulk 475 Pte. Ltd. |
|
as an Owner |
|
12 January 2017 |
|
We hereby confirm and acknowledge that we have read and understood the terms and conditions of the above letter and agree in all respects to the same and confirm that the Negative Pledge to which we are a party (and as amended in accordance with the terms of this letter) shall remain in full force and effect.
/s/ Andrew Geard Waller |
|
|
|
for and on behalf of |
|
Grindrod Limited |
|
as Shareholder |
|
12 January 2017 |
|
EXECUTION VERSION
Dated 30 March 2017
$21,000,000
TERM LOAN FACILITY
UNICORN ATLANTIC PTE. LTD.
UNICORN CASPIAN PTE. LTD.
IVS BULK 609 PTE. LTD.
as joint and several Borrowers
and
GRINDROD SHIPPING PTE. LTD.
as Parent Guarantor
and
CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK
as Arranger
and
CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK
as Facility Agent
and
CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK
as Security Agent
FACILITY AGREEMENT
relating to
the refinancing of m.v.s. INYALA, UMGENI and IVS ORCHARD
Index
Clause |
|
Page |
|
|
|
Section 1 Interpretation |
2 |
|
1 |
Definitions and Interpretation |
2 |
Section 2 The Facility |
24 |
|
2 |
The Facility |
24 |
3 |
Purpose |
25 |
4 |
Conditions of Utilisation |
25 |
Section 3 Utilisation |
27 |
|
5 |
Utilisation |
27 |
Section 4 Repayment, Prepayment and Cancellation |
29 |
|
6 |
Repayment |
29 |
7 |
Prepayment and Cancellation |
29 |
Section 5 Costs of Utilisation |
32 |
|
8 |
Interest |
32 |
9 |
Interest Periods |
33 |
10 |
Changes to the Calculation of Interest |
34 |
11 |
Fees |
35 |
Section 6 Additional Payment Obligations |
36 |
|
12 |
Tax Gross Up and Indemnities |
36 |
13 |
Increased Costs |
40 |
14 |
Other Indemnities |
41 |
15 |
Mitigation by the Finance Parties |
44 |
16 |
Costs and Expenses |
44 |
Section 7 Guarantees and Joint and Several Liability of Borrowers |
46 |
|
17 |
Guarantee and Indemnity Parent Guarantor |
46 |
18 |
Joint and Several Liability of the Borrowers |
48 |
Section 8 Representations, Undertakings and Events of Default |
51 |
|
19 |
Representations |
51 |
20 |
Information Undertakings |
57 |
21 |
Financial Covenants |
61 |
22 |
General Undertakings |
62 |
23 |
Insurance Undertakings |
68 |
24 |
General Ship Undertakings |
73 |
25 |
Security Cover |
78 |
26 |
Accounts and application of Earnings |
79 |
27 |
Events of Default |
80 |
Section 9 Changes to Parties |
86 |
|
28 |
Changes to the Lenders |
86 |
29 |
Changes to the Obligors |
90 |
Section 10 The Finance Parties |
92 |
|
30 |
The Facility Agent, the Arranger and the Reference Banks |
92 |
31 |
The Security Agent |
102 |
32 |
Conduct of Business by the Finance Parties |
116 |
33 |
Sharing among the Finance Parties |
116 |
Section 11 Administration |
118 |
|
34 |
Payment Mechanics |
118 |
35 |
Set-Off |
121 |
36 |
Bail-In |
121 |
37 |
Notices |
121 |
38 |
Calculations and Certificates |
123 |
39 |
Partial Invalidity |
123 |
40 |
Remedies and Waivers |
124 |
41 |
Settlement or Discharge Conditional |
124 |
42 |
Irrevocable Payment |
124 |
43 |
Amendments and Waivers |
124 |
44 |
Confidential Information |
126 |
45 |
Confidentiality of Funding Rates and Reference Bank Quotations |
130 |
46 |
Counterparts |
131 |
Section 12 Governing Law and Enforcement |
132 |
|
47 |
Governing Law |
132 |
48 |
Enforcement |
132 |
|
|
|
Schedules |
|
|
|
|
|
Schedule 1 The Parties |
133 |
|
Part A The Obligors |
133 |
|
Part B The Original Lenders |
134 |
|
Part C The Servicing Parties |
135 |
|
Schedule 2 Conditions Precedent |
136 |
|
Part A Conditions Precedent to Utilisation Request |
136 |
|
Part B Conditions Precedent to Utilisation |
138 |
|
Schedule 3 Requests |
140 |
|
Part A Utilisation Request |
140 |
|
Part B Selection Notice |
142 |
|
Schedule 4 Form of Transfer Certificate |
143 |
|
Schedule 5 Form of Assignment Agreement |
145 |
|
Schedule 6 Form of Compliance Certificate |
148 |
|
Schedule 7 Details of the Ships |
149 |
|
Schedule 8 Timetables |
150 |
|
|
|
|
Execution |
|
|
|
|
|
Execution Pages |
151 |
THIS AGREEMENT is made on 30 March 2017
PARTIES
(1) UNICORN ATLANTIC PTE. LTD. , a company incorporated in Singapore with company registration number 201015026N whose registered office is at 200 Cantonment Road, #03-01 Southpoint, Singapore 089763 as a borrower ( Borrower A )
(2) UNICORN CASPIAN PTE. LTD. , a company incorporated in Singapore with company registration number 201110907M whose registered office is at 200 Cantonment Road, #03-01 Southpoint, Singapore 089763 as a borrower ( Borrower B )
(3) IVS BULK 609 PTE. LTD. , a company incorporated in Singapore with company registration number 201101546M whose registered office is at 200 Cantonment Road, #03-01 Southpoint, Singapore 089763 as a borrower ( Borrower C )
(4) GRINDROD SHIPPING PTE. LTD. a company incorporated in in Singapore with company registration number 200407212K whose registered office is at 200 Cantonment Road, #03-01 Southpoint, Singapore 089763 as guarantor (the Parent Guarantor )
(5) CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK as arranger (the Arranger )
(6) THE FINANCIAL INSTITUTIONS listed in Part B of Schedule 1 ( The Parties ) as lenders (the Original Lenders )
(7) CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK as agent of the other Finance Parties (the Facility Agent )
(8) CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK as security agent for the Secured Parties (the Security Agent )
BACKGROUND
(A) The Lenders have agreed to make available to the Borrowers a facility of up to $21,000,000 for the purposes of refinancing the Existing Indebtedness in respect of Ship A, Ship B and Ship C and for general corporate and working capital purposes by way of a loan in a principal amount not exceeding $21,000,000.
OPERATIVE PROVISIONS
SECTION 1
INTERPRETATION
1 DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement:
Account Bank means Crédit Agricole Corporate and Investment Bank acting through its office at 92547, 12 Place des États Unis, 92120 Montrouge, France or any replacement bank or other financial institution as may be approved by the Facility Agent acting with the authorisation of the Majority Lenders.
Accounts means the Earnings Accounts and the Retention Account.
Account Security means a document creating Security over any Account in agreed form.
Advance means a borrowing of all or part of a Tranche under this Agreement.
Affiliate means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
Approved Brokers means any firm or firms of insurance brokers approved in writing by the Facility Agent, acting with the authorisation of the Lenders.
Approved Classification means, in relation to a Ship, as at the date of this Agreement, the classification in relation to that Ship specified in Schedule 7 ( Details of the Ships ) with the classification in relation to that Ship specified in Schedule 7 ( Details of the Ships ) or the equivalent classification with another Approved Classification Society.
Approved Classification Society means, in relation to a Ship, as at the date of this Agreement, the classification society in relation to that Ship specified in Schedule 7 ( Details of the Ships ) or any other classification society approved in writing by the Facility Agent acting with the authorisation of the Lenders and which authorisation shall not be withheld in the case of any classification society which is a member of the International Association of Classification Societies.
Approved Commercial Manager means, in relation to a Ship, as at the date of this Agreement, the manager specified as the approved commercial manager in relation to that Ship in Schedule 7 ( Details of the Ships ) or any other person approved in writing by the Facility Agent acting with the authorisation of the Lenders as the commercial manager of that Ship.
Approved Flag means, in relation to a Ship, as at the date of this Agreement, the flag in relation to that Ship specified in Schedule 7 ( Details of the Ships ) or such other flag approved in writing by the Facility Agent acting with the authorisation of the Lenders.
Approved Manager means, in relation to a Ship, the Approved Commercial Manager or the Approved Technical Manager of that Ship.
Approved Technical Manager in relation to a Ship, as at the date of this Agreement, the manager specified as the approved technical manager in relation to that Ship in Schedule 7 ( Details of the Ships ) or any other person approved in writing by the Facility Agent acting with the authorisation of the Majority Lenders as the technical manager of that Ship.
Approved Valuer means Clarksons, Braemar ACM, Gibsons, Simpson Spence Young and Fearnleys (or any Affiliate of such person through which valuations are commonly issued) and any other firm or firms of independent sale and purchase shipbrokers approved in writing by the Facility Agent, acting with the authorisation of the Lenders.
Assignment Agreement means an agreement substantially in the form set out in Schedule 5 ( Form of Assignment Agreement ) or any other form agreed between the relevant assignor and assignee.
Authorisation means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation, legalisation or registration.
Availability Period means the period from and including the date of this Agreement to and including in relation to each Tranche, 14 April 2017.
Available Commitment means a Lenders Commitment minus:
(a) the amount of its participation in the outstanding Loan; and
(b) in relation to any proposed Utilisation, the amount of its participation in any Advance that is due to be made on or before the proposed Utilisation Date.
Available Facility means the aggregate for the time being of each Lenders Available Commitment.
Bail-In Action means the exercise of any Write-down and Conversion Powers.
Bail-In Legislation means:
(a) in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and
(b) in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation.
Borrower means Borrower A, Borrower B or Borrower C.
Borrower A Subordinated Loan Agreement means the agreement by the Parent Guarantor to loan Borrower A an amount of $4,429,553.
Borrower C Subordinated Loan Agreement means the agreement by the Parent Guarantor to loan Borrower C an amount of $33,320,459.
Break Costs means the amount (if any) by which:
(a) the interest (excluding the Margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in the Loan or an Unpaid Sum to the last day of the current Interest Period in relation to the Loan, the relevant part of the Loan or that Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;
exceeds
(b) the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.
Business Day means a day (other than a Saturday or Sunday) on which banks are open for general business in London, Paris, Singapore and New York.
Charter means, in relation to a Ship, any charter relating to that Ship, or other contract for its employment, whether or not already in existence.
Charter Guarantee means any guarantee, bond, letter of credit or other instrument (whether or not already issued) supporting a Charter.
CISADA means the United States Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 as it applies to non-US persons.
Code means the US Internal Revenue Code of 1986.
Commercial Management Agreement means the agreement entered into between a Borrower and the Approved Commercial Manager regarding the commercial management of a Ship.
Commitment means:
(a) in relation to an Original Lender, the amount set opposite its name under the heading Commitment in Part B of Schedule 1 ( The Parties ) and the amount of any other Commitment transferred to it under this Agreement; and
(b) in relation to any other Lender, the amount of any Commitment transferred to it under this Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
Compliance Certificate means a certificate in the form set out in Schedule 6 ( Form of Compliance Certificate ) or in any other form agreed between the Parent Guarantor and the Facility Agent.
Confidential Information means all information relating to any Transaction Obligor, the Group, the Finance Documents or the Facility of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Facility from either:
(a) any member of the Group or any of its advisers; or
(b) another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any member of the Group or any of its advisers,
in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes:
(i) information that:
(A) is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 44 ( Confidential Information ); or
(B) is identified in writing at the time of delivery as non-confidential by any member of the Group or any of its advisers; or
(C) is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with the Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality; and
(ii) any Funding Rate or Reference Bank Quotation.
Confidentiality Undertaking means a confidentiality undertaking in substantially the appropriate form recommended by the LMA from time to time or in any other form agreed between the Borrowers and the Facility Agent.
Corresponding Debt means any amount, other than any Parallel Debt, which an Obligor owes to a Secured Party under or in connection with the Finance Documents.
Deed of Covenant means, in relation to a Ship, the deed of covenant collateral to the Mortgage over that Ship in agreed form.
Deed of Release means a deed releasing the Existing Security in a form acceptable to the Facility Agent.
Default means an Event of Default or a Potential Event of Default.
Delegate means any delegate, agent, attorney or co-trustee appointed by the Security Agent.
Disruption Event means either or both of:
(a) a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or
(b) the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other, Party:
(i) from performing its payment obligations under the Finance Documents; or
(ii) from communicating with other Parties in accordance with the terms of the Finance Documents,
and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
Document of Compliance has the meaning given to it in the ISM Code.
dollars and $ mean the lawful currency, for the time being, of the United States of America.
Earnings means, in relation to a Ship, all moneys whatsoever which are now, or later become, payable (actually or contingently) to a Borrower or the Security Agent and which
arise out of or in connection with or relate to the use or operation of that Ship, including (but not limited to):
(a) the following, save to the extent that any of them is, with the prior written consent of the Facility Agent, pooled or shared with any other person:
(i) all freight, hire and passage moneys including, without limitation, all moneys payable under, arising out of or in connection with a Charter or a Charter Guarantee;
(ii) the proceeds of the exercise of any lien on sub-freights;
(iii) compensation payable to a Borrower or the Security Agent in the event of requisition of that Ship for hire or use;
(iv) remuneration for salvage and towage services;
(v) demurrage and detention moneys;
(vi) without prejudice to the generality of sub-paragraph (i) above, damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of that Ship;
(vii) all moneys which are at any time payable under any Insurances in relation to loss of hire;
(viii) all monies which are at any time payable to a Borrower in relation to general average contribution; and
(b) if and whenever that Ship is employed on terms whereby any moneys falling within sub-paragraphs (i) to (viii) of paragraph (a) above are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to that Ship.
Earnings Account means, in relation to each Borrower:
(a) an account in the name of that Borrower with the Account Bank designated [ name of Borrower ] - Earnings Account;
(b) any other account in the name of that Borrower with the Account Bank which may, with the prior written consent of the Facility Agent, be opened in the place of the account referred to in paragraph (a) above, irrespective of the number or designation of such replacement account; or
(c) any sub-account of any account referred to in paragraphs (a) or (b) above.
EEA Member Country means any member state of the European Union, Iceland, Liechtenstein and Norway.
Environmental Approval means any present or future permit, ruling, variance or other Authorisation required under Environmental Laws.
Environmental Claim means any claim by any governmental, judicial or regulatory authority or any other person which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law and, for this purpose, claim includes a claim for damages, compensation, contribution, injury, fines, losses and penalties or any other payment of any kind, including in relation to clean-up and removal, whether or not similar to the foregoing; an order or direction to take, or not to take, certain
action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.
Environmental Incident means:
(a) any release, emission, spill or discharge of Environmentally Sensitive Material whether within a Ship or from a Ship into any other vessel or into or upon the air, sea, land or soils (including the seabed) or surface water; or
(b) any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water from a vessel other than any Ship and which involves a collision between any Ship and such other vessel or some other incident of navigation or operation, in either case, in connection with which a Ship is actually or potentially liable to be arrested, attached, detained or injuncted and/or a Ship and/or any Obligor and/or any operator or manager of a Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or
(c) any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water otherwise than from a Ship and in connection with which a Ship is actually or potentially liable to be arrested and/or where any Obligor and/or any operator or manager of a Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action, other than in accordance with an Environmental Approval.
Environmental Law means any present or future law relating to pollution or protection of human health or the environment, to conditions in the workplace, to the carriage, generation, handling, storage, use, release or spillage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material.
Environmentally Sensitive Material means and includes all contaminants, oil, oil products, toxic substances and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous.
EU Bail-In Legislation Schedule means the document described as such and published by the Loan Market Association (or any successor person) from time to time.
Event of Default means any event or circumstance specified as such in Clause 27 ( Events of Default ).
Existing Facility Agent A means the Agent as such term is defined in the Existing Facility Agreement A.
Existing Facility Agreement A means the facility agreement dated 17 December 2010 and entered into between Borrower A as borrower and Crédit Agricole Corporate and Investment Bank as agent and security trustee to finance part of the purchase price of Ship A.
Existing Facility Agreement B means the facility agreement dated 27 November 2014 and entered into between Borrower B and Borrower C as joint and several borrowers and the Existing Facility Lender to finance Ship B and Ship C.
Existing Facility Lender means Bank of America, N.A., Singapore Branch as Lender in the Existing Facility Agreement B.
Existing Indebtedness means Existing Indebtedness A and Existing Indebtedness B.
Existing Indebtedness A means, at any date, the outstanding Financial Indebtedness of Borrower A on that date under the Existing Facility Agreement A.
Existing Indebtedness B means, at any date, the outstanding Financial Indebtedness of Borrower B and Borrower C on that date under the Existing Facility Agreement B or, as appropriate, the amount required to reimburse Borrower B and Borrower C in respect of the payment already made by Borrower B and Borrower C to the Existing Facility Lender.
Existing Security means any Security created to secure the Existing Indebtedness.
Facility means the term loan facility made available under this Agreement as described in Clause 2 ( The Facility ).
Facility Office means the office or offices notified by a Lender to the Facility Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than 5 Business Days written notice) as the office or offices through which it will perform its obligations under this Agreement.
FATCA means:
(a) sections 1471 to 1474 of the Code or any associated regulations;
(b) any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or
(c) any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.
FATCA Application Date means:
(a) in relation to a withholdable payment described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014;
(b) in relation to a withholdable payment described in section 1473(1)(A)(ii) of the Code (which relates to gross proceeds from the disposition of property of a type that can produce interest from sources within the US), 1 January 2019; or
(c) in relation to a passthru payment described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2019,
or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.
FATCA Deduction means a deduction or withholding from a payment under a Finance Document required by FATCA.
FATCA Exempt Party means a Party that is entitled to receive payments free from any FATCA Deduction.
Fee Letter means any letter or letters dated on or about the date of this Agreement between any of the Arranger, the Facility Agent and the Security Agent and any Obligor setting out any of the fees referred to in Clause 11 ( Fees ).
Finance Document means:
(a) this Agreement;
(b) any Fee Letter;
(c) each Utilisation Request;
(d) any Security Document;
(e) any Subordination Deed;
(f) any other document which is executed for the purpose of establishing any priority or subordination arrangement in relation to the Secured Liabilities; or
(g) any other document designated as such by the Facility Agent and the Borrowers.
Finance Party means the Facility Agent, the Security Agent, the Arranger or a Lender.
Financial Indebtedness means any indebtedness for or in relation to:
(a) moneys borrowed;
(b) any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;
(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
(d) the amount of any liability in relation to any lease or hire purchase contract which would, in accordance with IFRS, be treated as a finance or capital lease;
(e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);
(f) any amount raised under any other transaction (including any forward sale or purchase agreement) of a type not referred to in any other paragraph of this definition having the commercial effect of a borrowing under IFRS;
(g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that derivative transaction, that amount) shall be taken into account);
(h) any counter-indemnity obligation in relation to a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and
(i) the amount of any liability in relation to any guarantee or indemnity for any of the items referred to in paragraphs (a) to (h) above.
Funding Rate means any individual rate notified by a Lender to the Facility Agent pursuant to sub-paragraph (ii) of paragraph (a) of Clause 10.4 ( Cost of funds ).
General Assignment means, in relation to a Ship, the general assignment creating Security over that Ships Earnings, its Insurances and any Requisition Compensation in relation to that
Ship and over any Charter in excess of 12 months in relation to that Ship and any supporting guarantee of such Charter, in agreed form.
Group means the Parent Guarantor and its Subsidiaries for the time being.
Holding Company means, in relation to a person, any other person in relation to which it is a Subsidiary.
IFRS means international accounting standards within the meaning of the IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements.
Indemnified Person has the meaning given to it in Clause 14.2 ( Other indemnities ).
Insurances means, in relation to a Ship:
(a) all policies and contracts of insurance, including entries of that Ship in any protection and indemnity or war risks association, effected in relation to that Ship, that Ships Earnings or otherwise in relation to that Ship whether before, on or after the date of this Agreement; and
(b) all rights and other assets relating to, or derived from, any of such policies, contracts or entries, including any rights to a return of premium and any rights in relation to any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Agreement.
Interest Payment Date has the meaning given to it in paragraph (a) of Clause 8.2 ( Payment of interest ).
Interest Period means, in relation to the Loan or any part of the Loan, each period determined in accordance with Clause 9 ( Interest Periods ) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 ( Default interest ).
Interpolated Screen Rate means, in relation to the Loan or any part of the Loan, the rate (rounded to the same number of decimal places as the two relevant Screen Rates) which results from interpolating on a linear basis between:
(a) the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period of the Loan or that part of the Loan; and
(b) the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of the Loan or that part of the Loan,
each as of the Specified Time for dollars.
ISM Code means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (including the guidelines on its implementation), adopted by the International Maritime Organisation, as the same may be amended or supplemented from time to time.
ISPS Code means the International Ship and Port Facility Security (ISPS) Code as adopted by the International Maritime Organizations (IMO) Diplomatic Conference of December 2002, as the same may be amended or supplemented from time to time.
ISSC means an International Ship Security Certificate issued under the ISPS Code.
Legal Reservations means:
(a) the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors;
(b) the time barring of claims under the Limitation Acts, the possibility that an undertaking to assume liability for or indemnify a person against non-payment of UK stamp duty may be void and defences of set-off or counterclaim;
(c) similar principles, rights and defences under the laws of any Relevant Jurisdiction; and
(d) any other matters which are set out as qualifications or reservations as to matters of law of general application in any legal opinion delivered pursuant to Clause 4 ( Conditions of Utilisation ).
Lender means:
(a) any Original Lender; and
(b) any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 28 ( Changes to the Lenders ),
which in each case has not ceased to be a Party in accordance with this Agreement.
LIBOR means, in relation to the Loan or any part of the Loan:
(a) the applicable Screen Rate as of the Specified Time for dollars and for a period equal in length to the Interest Period of the Loan or that part of the Loan; or
(b) as otherwise determined pursuant to Clause 10.1 ( Unavailability of Screen Rate )
and if, in either case, that rate is less than zero, LIBOR shall be deemed to be zero.
Limitation Acts means the Limitation Act 1980 and the Foreign Limitation Periods Act 1984.
LMA means the Loan Market Association.
Loan means the loan to be made available under the Facility or the aggregate principal amount outstanding for the time being of the borrowings under the Facility and a part of the Loan means an Advance, a Tranche or any other part of the Loan as the context may require.
Major Casualty means, in relation to a Ship, any casualty to that Ship in relation to which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $500,000 or the equivalent in any other currency.
Majority Lenders means:
(a) if no Advance has yet been made, a Lender or Lenders whose Commitments aggregate more than 66 2 / 3 per cent. of the Total Commitments; or
(b) at any other time, a Lender or Lenders whose participations in the Loan aggregate more than 66 2 / 3 per cent. of the amount of the Loan then outstanding or, if the Loan has been repaid or prepaid in full, a Lender or Lenders whose participations in the
Loan immediately before repayment or prepayment in full aggregate more than 66 2 / 3 per cent. of the Loan immediately before such repayment.
Management Agreement means a Technical Management Agreement or a Commercial Management Agreement.
Managers Undertaking means the letter of undertaking from the Approved Technical Manager and the letter of undertaking from the Approved Commercial Manager subordinating the rights of the Approved Technical Manager and the Approved Commercial Manager respectively against each Ship and each Borrower to the rights of the Finance Parties in agreed form.
Margin means 2.65 per cent. per annum.
Market Value means, in relation to a Ship or any other vessel, at any date, the market value of that Ship or vessel shown by a valuation prepared:
(a) as at a date not more than 14 days previously;
(b) by an Approved Valuer;
(c) with or without physical inspection of that Ship or vessel (as the Facility Agent may require); and
(d) on the basis of a sale for prompt delivery for cash on normal arms length commercial terms as between a willing seller and a willing buyer, free of any Charter,
after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale.
Material Adverse Effect means a material adverse effect on:
(a) the business, operations, property, condition (financial or otherwise) or prospects of any member of the Group or the Group as a whole; or
(b) the ability of any Transaction Obligor to perform its obligations under any Finance Document; or
(c) the validity or enforceability of, or the effectiveness or ranking of any Security granted or intended to be granted pursuant to any of, the Finance Documents or the rights or remedies of any Finance Party under any of the Finance Documents.
Month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:
(a) (subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;
(b) if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and
(c) if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.
The above rules will only apply to the last Month of any period.
Mortgage means, in relation to a Ship, a first priority Singapore ship mortgage on that Ship in agreed form.
Obligor means a Borrower or the Parent Guarantor.
Original Financial Statements means:
(a) in relation to the Parent Guarantor, the audited consolidated financial statements of the Group for its financial year ended 31 December 2015; and
(b) in relation to each Borrower, its unaudited financial statements for its financial year ended 31 December 2015 certified by the chief financial officer of the relevant Borrower.
Original Jurisdiction means, in relation to an Obligor, the jurisdiction under whose laws that Obligor is incorporated as at the date of this Agreement.
Overseas Regulations means the Overseas Companies Regulations 2009 (SI 2009/1801).
Parallel Debt means any amount which an Obligor owes to the Security Agent under Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) ) or under that clause as incorporated by reference or in full in any other Finance Document.
Participating Member State means any member state of the European Union that has the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
Party means a party to this Agreement.
Perfection Requirements means the making or procuring of filings, stampings, registrations, notarisations, endorsements, translations and/or notifications of any Finance Document (and/or any Security created under it) necessary for the validity, enforceability (as against the relevant Obligor or any relevant third party) and/or perfection of that Finance Document.
Permitted Charter means, in relation to a Ship, a Charter:
(a) which is a time, voyage or consecutive voyage charter;
(b) the duration of which does not exceed and is not capable of exceeding, by virtue of any optional extensions, 12 months plus a redelivery allowance of not more than 30 days;
(c) which is entered into on bona fide arms length terms at the time at which that Ship is fixed; and
(d) in relation to which not more than two months hire is payable in advance,
and any other Charter which is approved in writing by the Facility Agent acting with the authorisation of the Lenders.
Permitted Financial Indebtedness means:
(a) any Financial Indebtedness incurred under the Finance Documents;
(b) any Financial Indebtedness that is subordinated to all Financial Indebtedness incurred under the Finance Documents pursuant to a Subordination Deed or otherwise and which is, in the case of any such Financial Indebtedness of a Borrower, the subject of Subordinated Debt Security; and
(c) any Financial Indebtedness reasonably incurred in connection with the normal commercial and technical operation of a Ship and administration of affairs of the relevant Borrower.
Permitted Security means:
(a) Security created by the Finance Documents;
(b) any netting or set-off arrangement entered into by any member of the Group in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;
(c) liens for unpaid masters and crews wages in accordance with first class ship ownership and management practice;
(d) liens for salvage;
(e) liens for masters disbursements incurred in the ordinary course of trading; and
(f) any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of any Ship and not as a result of any default or omission by any Borrower, provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested in good faith by appropriate steps) and subject, in the case of liens for repair or maintenance, to Clause 24.15 ( Restrictions on chartering, appointment of managers etc. ).
Pool Agreement A means the pool agreement in respect of Ship A dated 1 October 2016 and acceded to by Borrower A pursuant to an accession letter dated 4 January 2017 between Handytankers K/S as commercial manager and Borrower A.
Pool Agreement B means the pool agreement in respect of Ship B dated 1 July 2016 and acceded to by Borrower B pursuant to an accession letter dated 7 October 2016 between Broström K/S as commercial manager and Borrower B.
Pool Agreement C means the pool agreement in respect of Ship C dated 27 May 2014 and entered between amongst others Borrower C and the Parent Guarantor as pool manager.
Pool Agreements means Pool Agreement A, Pool Agreement B and Pool Agreement C together.
Potential Event of Default means any event or circumstance specified in Clause 27 ( Events of Default ) 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.
Prohibited Person means any person (whether designated by name or by reason of being included in a class of persons) against whom Sanctions are directed.
Protected Party has the meaning given to it in Clause 12.1 ( Definitions ).
Quotation Day means, in relation to any period for which an interest rate is to be determined, two Business Days before the first day of that period unless market practice differs in the Relevant Interbank Market in which case the Quotation Day will be determined
by the Facility Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).
Receiver means a receiver or receiver and manager or administrative receiver of the whole or any part of the Security Assets.
Reference Bank Quotation means any quotation supplied to the Facility Agent by a Reference Bank.
Reference Bank Rate means the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request by the Reference Banks:
(a) if:
(i) the Reference Bank is a contributor to the Screen Rate; and
(ii) it consists of a single figure,
as the rate (applied to the relevant Reference Bank and the relevant currency and period) which contributors to the Screen Rate are asked to submit to the relevant administrator; or
(b) in any other case, as the rate at which the relevant Reference Bank could fund itself in dollars for the relevant period with reference to the unsecured wholesale funding market.
Reference Banks means the principal London office of Crédit Agricole Corporate and Investment Bank and/or such other entities as may be appointed by the Facility Agent in consultation with the Borrowers.
Related Fund in relation to a fund (the first fund), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment manager or investment adviser of the first fund.
Relevant Interbank Market means the London interbank market.
Relevant Jurisdiction means, in relation to a Transaction Obligor:
(a) its Original Jurisdiction;
(b) any jurisdiction where any asset subject to, or intended to be subject to, any of the Transaction Security created, or intended to be created, by it is situated;
(c) any jurisdiction where it conducts its business; and
(d) the jurisdiction whose laws govern the perfection of any of the Security Documents entered into by it.
Repayment Date means each date on which a Repayment Instalment is required to be paid under Clause 6.1 ( Repayment of Loan ).
Repayment Instalment has the meaning given to it in Clause 6.1 ( Repayment of Loan ).
Repeating Representation means each of the representations set out in Clause 19 ( Representations ) except Clause 19.10 ( Insolvency ), Clause 19.11 ( No filing or stamp taxes )
and Clause 19.12 ( Deduction of Tax ) and any representation of any Transaction Obligor made in any other Finance Document that is expressed to be a Repeating Representation or is otherwise expressed to be repeated.
Representative means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.
Requisition means in relation to a Ship:
(a) any expropriation, confiscation, requisition (excluding a requisition for hire or use which does not involve a requisition for title) or acquisition of that Ship, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected (whether de jure or de facto ) by any government or official authority or by any person or persons claiming to be or to represent a government or official authority; and
(b) any capture or seizure of that Ship (including any hijacking or theft) by any person whatsoever.
Requisition Compensation includes all compensation or other moneys payable to a Borrower by reason of any Requisition or any arrest or detention of a Ship in the exercise or purported exercise of any lien or claim.
Resolution Authority means any body which has authority to exercise any Write-down and Conversion Powers.
Retention Account means:
(a) an account in the name of the Borrowers with the Account Bank designated Unicorn Atlantic Retention Account;
(b) any other account in the name of the Borrowers with the Account Bank which may, with the prior written consent of the Facility Agent, be opened in the place of the account referred to in paragraph (a) above, irrespective of the number or designation of such replacement account; or
(c) any sub-account of any account referred to in paragraphs (a) or (b) above.
Safety Management Certificate has the meaning given to it in the ISM Code.
Safety Management System has the meaning given to it in the ISM Code.
Sanctions means any sanctions, embargoes, freezing provisions, prohibitions or other restrictions relating to trading, doing business, investment, exporting, financing or making assets available (or other activities similar to or connected with any of the foregoing):
(a) imposed by law or regulation of the United Kingdom, the Council of the European Union, the United Nations or its Security Council or the United States of America regardless of whether the same is or is not binding on any Transaction Obligor; or
(b) otherwise imposed by any law or regulation binding on a Transaction Obligor or to which a Transaction Obligor is subject (which shall include without limitation, any extra-territorial sanctions imposed by law or regulation of the United States of America).
Screen Rate means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for dollars for the relevant period on pages LIBOR01 or LIBOR02 of the Thomson
Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters. If such page or service ceases to be available, the Facility Agent may specify another page or service displaying the relevant rate after consultation with the Borrowers.
Secured Liabilities means all present and future obligations and liabilities, (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of each Transaction Obligor to any Secured Party under or in connection with each Finance Document.
Secured Party means each Finance Party from time to time party to this Agreement, a Receiver or any Delegate.
Security means a mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security.
Security Assets means all of the assets of the Obligors which from time to time are, or are expressed to be, the subject of the Transaction Security.
Security Document means:
(a) any Shares Security;
(b) any Mortgage;
(c) any Deed of Covenant;
(d) any General Assignment;
(e) any Account Security;
(f) any Managers Undertaking;
(g) any Subordinated Debt Security;
(h) any other document (whether or not it creates Security) which is executed as security for the Secured Liabilities; or
(i) any other document designated as such by the Facility Agent and the Borrowers.
Security Period means the period starting on the date of this Agreement and ending on the date on which the Facility Agent is satisfied that there is no outstanding Commitment in force and that the Secured Liabilities have been irrevocably and unconditionally paid and discharged in full.
Security Property means:
(a) the Transaction Security expressed to be granted in favour of the Security Agent as trustee for the Secured Parties and all proceeds of that Transaction Security;
(b) all obligations expressed to be undertaken by a Transaction Obligor to pay amounts in relation to the Secured Liabilities to the Security Agent as trustee for the Secured Parties and secured by the Transaction Security together with all representations and warranties expressed to be given by a Transaction Obligor or any other person in favour of the Security Agent as trustee for the Secured Parties;
(c) the Security Agents interest in any turnover trust created under the Finance Documents;
(d) any other amounts or property, whether rights, entitlements, choses in action or otherwise, actual or contingent, which the Security Agent is required by the terms of the Finance Documents to hold as trustee on trust for the Secured Parties,
except:
(i) rights intended for the sole benefit of the Security Agent; and
(ii) any moneys or other assets which the Security Agent has transferred to the Facility Agent or (being entitled to do so) has retained in accordance with the provisions of this Agreement.
Selection Notice means a notice substantially in the form set out in Part B of Schedule 3 ( Requests ) given in accordance with Clause 9 ( Interest Periods ).
Servicing Party means the Facility Agent or the Security Agent.
Shareholder means the Parent Guarantor in its capacity as shareholder of each of the Borrowers.
Shares Security means, in relation to a Borrower, a document creating Security over the share capital in that Borrower in agreed form.
Ship means Ship A, Ship B or Ship C.
Ship A means m.v. INYALA, details of which are set out opposite its name in Schedule 7 ( Details of the Ships ).
Ship B means m.v. UMGENI, details of which are set out opposite its name in Schedule 7 ( Details of the Ships ).
Ship C means m.v. IVS ORCHARD, details of which are set out opposite its name in Schedule 7 ( Details of the Ships ).
Specified Time means a day or time determined in accordance with Schedule 8 ( Timetables ).
Subordinated Creditor means:
(a) a Transaction Obligor; or
(b) any other person who becomes a Subordinated Creditor in accordance with this Agreement.
Subordinated Debt Security means a Security over Subordinated Liabilities entered into or to be entered into by a Subordinated Creditor in favour of the Security Agent in an agreed form.
Subordinated Finance Document means:
(a) a Subordinated Loan Agreement; and
(b) any other document relating to or evidencing Subordinated Liabilities.
Subordinated Liabilities means all indebtedness owed or expressed to be owed by the Borrowers to a Subordinated Creditor whether under the Subordinated Finance Documents or otherwise.
Subordinated Loan Agreement means each of the Borrower A Subordinated Loan Agreement and the Borrower C Subordinated Loan Agreement.
Subordination Deed means a subordination deed entered into or to be entered into by a Subordinated Creditor and the Security Agent in agreed form.
Subsidiary means a subsidiary within the meaning of section 1159 of the Companies Act 2006.
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).
Tax Credit has the meaning given to it in Clause 12.1 ( Definitions ).
Tax Deduction has the meaning given to it in Clause 12.1 ( Definitions ).
Tax Payment has the meaning given to it in Clause 12.1 ( Definitions ).
Technical Management Agreement means the agreement entered into between a Borrower and the Approved Technical Manager regarding the technical management of a Ship.
Termination Date means 31 December 2017.
Third Parties Act has the meaning given to it in Clause 1.5 ( Third party rights ).
Total Commitments means the aggregate of the Commitments, of up to $21,000,000 at the date of this Agreement.
Total Loss means, in relation to a Ship:
(a) actual, constructive, compromised, agreed or arranged total loss of that Ship; or
(b) any Requisition of that Ship unless that Ship is returned to the full control of the relevant Borrower within 30 days of such Requisition.
Total Loss Date means, in relation to the Total Loss of a Ship:
(a) in the case of an actual loss of that Ship, the date on which it occurred or, if that is unknown, the date when that Ship was last heard of;
(b) in the case of a constructive, compromised, agreed or arranged total loss of that Ship, the earlier of:
(i) the date on which a notice of abandonment is given to the insurers; and
(ii) the date of any compromise, arrangement or agreement made by or on behalf of the relevant Borrower with that Ships insurers in which the insurers agree to treat that Ship as a total loss; and
(c) in the case of any other type of Total Loss, the date (or the most likely date) on which it appears to the Facility Agent that the event constituting the total loss occurred.
Tranche means Tranche A, Tranche B, or Tranche C.
Tranche A means that part of the Loan made or to be made available to Borrower A to refinance Existing Indebtedness A in a principal amount not exceeding $9,335,000.
Tranche B means that part of the Loan made or to be made available to Borrower B to refinance part of Existing Indebtedness B and for general and corporate working capital purposes in a principal amount not exceeding $7,300,000.
Tranche C means that part of the Loan made or to be made available to Borrower C to refinance part of Existing Indebtedness B and for general and corporate working capital purposes in a principal amount not exceeding $4,365,000.
Transaction Document means:
(a) a Finance Document;
(b) a Pool Agreement;
(c) a Subordinated Finance Document; or
(d) any other document designated as such by the Facility Agent and a Borrower.
Transaction Obligor means an Obligor, any Approved Manager who is a member of the Group, or any other member of the Group who executes a Transaction Document.
Transaction Security means the Security created or evidenced or expressed to be created or evidenced under the Security Documents.
Transfer Certificate means a certificate substantially in the form set out in Schedule 4 ( Form of Transfer Certificate ) or any other form agreed between the Facility Agent and the Borrowers.
Transfer Date means, in relation to an assignment or a transfer, the later of:
(a) the proposed Transfer Date specified in the relevant Assignment Agreement or Transfer Certificate; and
(b) the date on which the Facility Agent executes the relevant Assignment Agreement or Transfer Certificate.
UK Establishment means a UK establishment as defined in the Overseas Regulations.
Unpaid Sum means any sum due and payable but unpaid by a Transaction Obligor under the Finance Documents.
US means the United States of America.
Utilisation means a utilisation of the Facility.
Utilisation Date means the date of a Utilisation, being the date on which the relevant Advance is to be made.
Utilisation Request means a notice substantially in the form set out in Part A of Schedule 3 ( Requests ).
VAT means:
(a) any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112); and
(b) any other tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or levied in addition to, such tax referred to in paragraph (a) above, or imposed elsewhere.
Write-down and Conversion Powers means:
(a) in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule; and
(b) in relation to any other applicable Bail-In Legislation:
(i) any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and
(ii) any similar or analogous powers under that Bail-In Legislation.
1.2 Construction
(a) Unless a contrary indication appears, a reference in this Agreement to:
(i) the Account Bank , the Arranger , the Facility Agent , any Finance Party , any Lender , any Obligor , any Party , any Secured Party , the Security Agent , any Transaction Obligor or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under the Finance Documents;
(ii) assets includes present and future properties, revenues and rights of every description;
(iii) a liability which is contingent means a liability which is not certain to arise and/or the amount of which remains unascertained;
(iv) document includes a deed and also a letter, fax or telex;
(v) expense means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable Tax including VAT;
(vi) a Finance Document , a Security Document or Transaction Document or any other agreement or instrument is a reference to that Finance Document, Security Document or Transaction Document or other agreement or instrument as amended, novated, supplemented, extended or restated;
(vii) indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;
(viii) law includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;
(ix) proceedings means, in relation to any enforcement provision of a Finance Document, proceedings of any kind, including an application for a provisional or protective measure;
(x) a person includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium, partnership or other entity (whether or not having separate legal personality);
(xi) a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;
(xii) a provision of law is a reference to that provision as amended or re-enacted;
(xiii) a time of day is a reference to London time;
(xiv) any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall, in respect of a jurisdiction other than England, be deemed to include that which most nearly approximates in that jurisdiction to the English legal term;
(xv) words denoting the singular number shall include the plural and vice versa; and
(xvi) including and in particular (and other similar expressions) shall be construed as not limiting any general words or expressions in connection with which they are used.
(b) The determination of the extent to which a rate is for a period equal in length to an Interest Period shall disregard any inconsistency arising from the last day of that Interest Period being determined pursuant to the terms of this Agreement.
(c) Section, Clause and Schedule headings are for ease of reference only and are not to be used for the purposes of construction or interpretation of the Finance Documents.
(d) Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under, or in connection with, any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.
(e) A Potential Event of Default is continuing if it has not been remedied or waived and an Event of Default is continuing if it has not been waived.
1.3 Construction of insurance terms
In this Agreement:
approved means, approved in writing by the Facility Agent.
excess risks means, in respect of a Ship, the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of that Ship in consequence of its insured value being less than the value at which that Ship is assessed for the purpose of such claims.
obligatory insurances means all insurances effected, or which any Borrower is obliged to effect, under Clause 23 ( Insurance Undertakings ) or any other provision of this Agreement or of another Finance Document.
policy includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms.
protection and indemnity risks means the usual risks covered by a protection and indemnity association which is a member of the International Group of P&I clubs, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02) (1/11/03), clause 8 of the Institute Time Clauses (Hulls) (1/10/83) (1/11/95) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision.
war risks includes the risk of mines and all risks excluded by clause 29 of the International Hull Clauses (1/11/02 or 1/11/03), clause 24 of the Institute Time Clauses (Hulls) (1/11/95) or clause 23 of the Institute Time Clauses (Hulls) (1/10/83).
1.4 Agreed forms of Finance Documents
References in Clause 1.1 ( Definitions ) to any Finance Document being in agreed form are to that Finance Document:
(a) in a form attached to a certificate dated the same date as this Agreement (and signed by each Borrower and the Facility Agent); or
(b) in any other form agreed in writing between each Borrower and the Facility Agent acting with the authorisation of the Majority Lenders or, where Clause 43.2 ( All Lender matters ) applies, all the Lenders.
1.5 Third party rights
(a) Unless expressly provided to the contrary in a Finance Document, a person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the Third Parties Act ) to enforce or to enjoy the benefit of any term of this Agreement.
(b) Subject to Clause 43.3 ( Other exceptions ) but otherwise notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.
(c) Any Affiliate, Receiver, Delegate or any other person described in paragraph (d) of Clause 14.2 ( Other indemnities ), paragraph (b) of Clause 30.11 ( Exclusion of liability ), Clause 30.21 ( Role of Reference Banks ), Clause 30.22 ( Third Party Reference Banks ) or paragraph (b) of Clause 31.11 ( Exclusion of liability ) may, subject to this Clause 1.5 ( Third party rights ) and the Third Parties Act, rely on any Clause of this Agreement which expressly confers rights on it.
SECTION 2
THE FACILITY
2 THE FACILITY
2.1 The Facility
Subject to the terms of this Agreement, the Lenders make available to the Borrowers a dollar term loan facility in three Tranches in an aggregate amount not exceeding the Total Commitments.
2.2 Finance Parties rights and obligations
(a) The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
(b) The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor is a separate and independent debt in respect of which a Finance Party shall be entitled to enforce its rights in accordance with paragraph (c) below. The rights of each Finance Party include any debt owing to that Finance Party under the Finance Documents and, for the avoidance of doubt, any part of the Loan or any other amount owed by an Obligor which relates to a Finance Partys participation in the Facility or its role under a Finance Document (including any such amount payable to the Facility Agent on its behalf) is a debt owing to that Finance Party by that Obligor.
(c) A Finance Party may, except as specifically provided in the Finance Documents, separately enforce its rights under or in connection with the Finance Documents.
2.3 Borrowers Agent
(a) Each Borrower by its execution of this Agreement irrevocably appoints the Parent Guarantor to act on its behalf as its agent in relation to the Finance Documents and irrevocably authorises:
(i) the Parent Guarantor on its behalf to supply all information concerning itself contemplated by this Agreement to the Finance Parties and to give all notices and instructions (including Utilisation Requests), to make such agreements and to effect the relevant amendments, supplements and variations capable of being given, made or effected by any Borrower notwithstanding that they may affect the Borrower, without further reference to or the consent of that Borrower; and
(ii) each Finance Party to give any notice, demand or other communication to that Borrower pursuant to the Finance Documents to the Parent Guarantor,
and in each case the Borrower shall be bound as though the Borrower itself had given the notices and instructions (including, without limitation, any Utilisation Requests) or executed or made the agreements or effected the amendments, supplements or variations, or received the relevant notice, demand or other communication.
(b) Every act, omission, agreement, undertaking, settlement, waiver, amendment, supplement, variation, notice or other communication given or made by the Parent Guarantor or given to the Parent Guarantor under any Finance Document on behalf of a Borrower or in connection with any Finance Document (whether or not known to any Borrower) shall be binding for all
purposes on that Borrower as if that Borrower had expressly made, given or concurred with it. In the event of any conflict between any notices or other communications of the Parent Guarantor and any Borrower, those of the Parent Guarantor shall prevail.
3 PURPOSE
3.1 Purpose
Each Borrower shall apply all amounts borrowed by it under the Facility only for the purpose of:
(a) in respect of Tranche A, refinancing the Existing Indebtedness A in respect of Ship A by way of a loan in a principal amount not exceeding $9,335,000 and any balance for general corporate working capital purposes;
(b) in respect of Tranche B, refinancing the Existing Indebtedness B in respect of Ship B by way of a loan in a principal amount not exceeding $7,300,000 and any balance for general corporate working capital purposes; and
(c) in respect of Tranche C, refinancing the Existing Indebtedness B in respect of Ship C by way of a loan in a principal amount not exceeding $4,365,000 and any balance for general corporate working capital purposes,
and, in addition, the aggregate amount of the Advances shall not exceed 60 per cent. of the aggregate Market Value of the Ships.
3.2 Monitoring
No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
4 CONDITIONS OF UTILISATION
4.1 Initial conditions precedent
The Borrowers may not deliver a Utilisation Request unless the Facility Agent has received all of the documents and other evidence listed in Part A of Schedule 2 ( Conditions Precedent ) in form and substance satisfactory to the Facility Agent.
4.2 Further conditions precedent
The Lenders will only be obliged to comply with Clause 5.4 ( Lenders participation ) if:
(a) on the date of the Utilisation Request and on the proposed Utilisation Date and before the Advance is made available:
(i) no Default is continuing or would result from the proposed Advance;
(ii) the Repeating Representations to be made by each Obligor are true;
(iii) the Ship in respect of which such Advance is to be made has neither been sold nor become a Total Loss;
(b) the Facility Agent has received on or before the relevant Utilisation Date, or is satisfied it will receive when the Advance is made available, all of the documents and other evidence listed in Part B of Schedule 2 ( Conditions Precedent ) in form and substance satisfactory to the Facility Agent.
4.3 Notification of satisfaction of conditions precedent
(a) The Facility Agent shall notify the Borrowers and the Lenders promptly upon being satisfied as to the satisfaction of the conditions precedent referred to in Clause 4.1 ( Initial conditions precedent ) and Clause 4.2 ( Further conditions precedent ).
(b) Other than to the extent that the Majority Lenders notify the Facility Agent in writing to the contrary before the Facility Agent gives the notification described in paragraph (a) above, the Lenders authorise (but do not require) the Facility Agent to give that notification. The Facility Agent shall not be liable for any damages, costs or losses whatsoever as a result of giving any such notification.
4.4 Waiver of conditions precedent
If the Lenders, at their discretion, permit an Advance to be borrowed before any of the conditions precedent referred to in Clause 4.1 ( Initial conditions precedent ) or Clause 4.2 ( Further conditions precedent ) has been satisfied, the Borrowers shall ensure that that condition is satisfied within five Business Days after the relevant Utilisation Date or such later date as the Facility Agent, acting with the authorisation of the Majority Lenders, may agree in writing with the Borrowers.
SECTION 3
UTILISATION
5 UTILISATION
5.1 Delivery of a Utilisation Request
(a) The Borrowers may utilise the Facility by delivery to the Facility Agent of a duly completed Utilisation Request not later than the Specified Time.
(b) The Borrowers may not deliver more than one Utilisation Request for each Tranche and each Tranche shall be advanced on the same Utilisation Date.
5.2 Completion of a Utilisation Request
(a) Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:
(i) the proposed Utilisation Date is a Business Day within the relevant Availability Period;
(ii) the currency and amount of the Utilisation comply with Clause 5.3 ( Currency and amount ); and
(iii) the proposed Interest Period complies with Clause 9 ( Interest Periods ).
(b) Only one Advance may be requested in each Utilisation Request.
5.3 Currency and amount
(a) The currency specified in a Utilisation Request must be dollars.
(b) The amount of the proposed Advance must be an amount which is not more than:
(i) in respect of the Advance under Tranche A, $9,335,000;
(ii) in respect of the Advance under Tranche B, $7,300,000; and
(iii) in respect of the Advance under Tranche C, $4,365,000,
and, in addition, the aggregate amount of the Advances shall not exceed 60 per cent. of the aggregate Market Value of the Ships.
(c) The aggregate amount of the proposed Advance must be an amount which is not more than the Available Facility.
5.4 Lenders participation
(a) If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Advance available by the Utilisation Date through its Facility Office.
(b) The amount of each Lenders participation in each Advance will be equal to the proportion borne by its Available Commitment to the Available Facility immediately before making that Advance.
(c) The Facility Agent shall notify each Lender of the amount of each Advance and the amount of its participation in that Advance by the Specified Time.
5.5 Cancellation of Commitments
The Commitments in respect of any Tranche which are unutilised at the end of the Availability Period for such Tranche shall then be cancelled.
5.6 Retentions and payment to third parties
The Borrowers irrevocably authorise the Facility Agent:
(a) to deduct from the proceeds of any Advance any fees then payable to the Finance Parties in accordance with Clause 11 ( Fees ), any agreed solicitors fees and disbursements together with any applicable VAT and any other items listed as deductible items in the relevant Utilisation Request and to apply them in payment of the items to which they relate; and
(b) on each Utilisation Date, to pay to, or for the account of, the Borrower which is to utilise the relevant Advance the balance (after any deduction made in accordance with paragraph (a) above) of the amounts which the Facility Agent receives from the Lenders in respect of the relevant Advance. That payment shall be made in like funds as the Facility Agent received from the Lenders in respect of the relevant Advance:
(i) in the case of Tranche A, to the account of the Existing Facility Agent A under Existing Facility Agreement A which the Borrowers specify in the relevant Utilisation Request; and
(ii) in the case of Tranche B and Tranche C, to the account of the Existing Facility Lender under Existing Facility Agreement B which the Borrowers specify in the relevant Utilisation Request and any balance to the account of the Borrowers as specified in the relevant Utilisation Request.
5.7 Disbursement of Advance to third party
Payment by the Facility Agent under Clause 5.6 ( Retentions and payment to third parties ) to a person other than a Borrower shall constitute the making of the relevant Advance and the Borrowers shall at that time become indebted, as principal and direct obligors, to each Lender in an amount equal to that Lenders participation in that Advance.
SECTION 4
REPAYMENT, PREPAYMENT AND CANCELLATION
6 REPAYMENT
6.1 Repayment of Loan
The Borrowers shall repay the Loan by three equal consecutive instalments, each in an amount of $659,500 (each a Repayment Instalment ), on 30 June 2017, 30 September 2017 and 31 December 2017 together with a balloon instalment of $19,021,500 (the Balloon Instalment ) payable on the Termination Date.
6.2 Effect of cancellation and prepayment on scheduled repayments
(a) If the Borrower cancels the whole or any part of any Available Commitment in accordance with Clause 7.4 ( Right of repayment and cancellation in relation to a single Lender ) or if the Available Commitment of any Lender is cancelled under Clause 7.1 ( Illegality ) then the Repayment Instalments falling after that cancellation will reduce pro rata by the amount of the Available Commitments so cancelled.
(b) If the Borrower cancels the whole or part of any Commitment or the whole or any part of any Commitment is cancelled pursuant to Clause 5.5 ( Cancellation of Commitments ), the Repayment Instalments for each Repayment Date falling after that cancellation will reduce in inverse chronological order by the amount of the Commitments so cancelled.
(c) If any part of the Loan is repaid or prepaid in accordance with Clause 7.4 ( Right of repayment and cancellation in relation to a single Lender ) or Clause 7.1 ( Illegality ) then the Repayment Instalments for each Repayment Date falling after that repayment or prepayment will reduce pro rata by the amount of the Loan repaid or prepaid.
(d) If any part of the Loan is prepaid in accordance with Clause 7.2 ( Voluntary prepayment of Loan ), Clause 7.3 ( Mandatory prepayment on sale or Total Loss ) then the amount of the Repayment Instalments for each Repayment Date falling after that repayment or prepayment will reduce in inverse chronological order by the amount of the Loan repaid or prepaid.
6.3 Termination Date
On the Termination Date, the Borrowers shall additionally pay to the Facility Agent for the account of the Finance Parties all other sums then accrued and owing under the Finance Documents.
6.4 Reborrowing
No Borrower may reborrow any part of the Facility which is repaid.
7 PREPAYMENT AND CANCELLATION
7.1 Illegality
If it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in an Advance or the Loan or it becomes unlawful for any Affiliate of a Lender for that Lender to do so:
(a) that Lender shall promptly notify the Facility Agent upon becoming aware of that event;
(b) upon the Facility Agent notifying the Borrowers, the Available Commitment of that Lender will be immediately cancelled; and
(c) the Borrowers shall prepay that Lenders participation in the Loan on the last day of the Interest Period for the Loan occurring after the Facility Agent has notified the Borrowers or, if earlier, the date specified by the Lender in the notice delivered to the Facility Agent (being no earlier than the last day of any applicable grace period permitted by law) and that Lenders corresponding Commitment shall be cancelled in the amount of the participation prepaid.
7.2 Voluntary prepayment of Loan
The Borrowers may, if they give the Facility Agent not less than 15 Business Days (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of the Loan (but, if in part, being an amount that reduces the amount of the Loan by a minimum amount of $500,000 or a multiple of that amount).
7.3 Mandatory prepayment on sale or Total Loss
(a) If a Ship is sold or becomes a Total Loss, the Borrowers shall on the Relevant Date prepay the Tranche applicable to that Ship.
(b) On the Relevant Date, the Borrowers shall also prepay such part of the Loan so as to comply with the ratio set out in Clause 25 ( Security Cover ) and in addition, such amount as may be necessary so as to maintain the same security cover which existed immediately prior to such sale or Total Loss.
(c) Provided that no Event of Default has occurred and is continuing, any remaining proceeds of the sale or Total Loss of a Ship after the prepayments referred to in paragraph (a) and paragraph (b) above have been made together with all other amounts that are payable on any such prepayment pursuant to the Finance Documents shall be paid to the Borrower that owned the relevant Ship.
(d) In this Clause 7.3 ( Mandatory prepayment on sale or Total Loss ):
Relevant Date means:
(i) in the case of a sale of a Ship, on the date on which the sale is completed by delivery of that Ship to the buyer of that Ship; and
(ii) in the case of a Total Loss of a Ship, on the earlier of:
(A) the date falling 90 days after the Total Loss Date; and
(B) the date of receipt by the Security Agent of the proceeds of insurance relating to such Total Loss.
7.4 Right of repayment and cancellation in relation to a single Lender
(a) If:
(i) any sum payable to any Lender by an Obligor is required to be increased under paragraph (c) of Clause 12.2 ( Tax gross-up ) or under that clause as incorporated by reference or in full in any other Finance Document; or
(ii) any Lender claims indemnification from a Borrower under Clause 12.3 ( Tax indemnity ) or Clause 13.1 ( Increased costs ),
the Borrowers may whilst in the case of sub-paragraphs (i) and (ii) above the circumstance giving rise to the requirement for that increase or indemnification continues, give the Facility Agent notice of cancellation of the Commitment of that Lender and its intention to procure the repayment of that Lenders participation in the Loan.
(b) On receipt of a notice of cancellation referred to in paragraph (a) above, the Commitment of that Lender shall immediately be reduced to zero.
(c) On the last day of each Interest Period which ends after the Borrowers have given notice of cancellation under paragraph (a) above in relation to a Lender (or, if earlier, the date specified by the Borrowers in that notice), the Borrowers shall repay that Lenders participation in the Loan.
7.5 Restrictions
(a) Any notice of cancellation or prepayment given by any Party under this Clause 7 ( Prepayment and Cancellation ) shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made, the amount of that cancellation or prepayment and, if relevant, the part of the Loan to be prepaid or cancelled.
(b) No Borrower may reborrow any part of the Facility which is prepaid.
(c) No Borrower shall repay or prepay all or any part of the Loan or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.
(d) No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.
(e) If the Facility Agent receives a notice under this Clause 7 ( Prepayment and Cancellation ) it shall promptly forward a copy of that notice to either the Borrowers or the affected Lenders, as appropriate.
(f) If all or part of any Lenders participation in the Loan is repaid or prepaid, an amount of that Lenders Commitment (equal to the amount of the participation which is repaid or prepaid) will be deemed to be cancelled on the date of repayment or prepayment.
7.6 Application of prepayments
Any prepayment of any part of the Loan (other than a prepayment pursuant to Clause 7.1 ( Illegality ) or Clause 7.4 ( Right of repayment and cancellation in relation to a single Lender )) shall be applied pro rata to each Lenders participation in that part of the Loan.
SECTION 5
COSTS OF UTILISATION
8 INTEREST
8.1 Calculation of interest
The rate of interest on the Loan or any part of the Loan for each Interest Period is the percentage rate per annum which is the aggregate of:
(a) the Margin; and
(b) LIBOR.
8.2 Payment of interest
(a) The Borrowers shall pay accrued interest on the Loan or any part of the Loan on the last day of each Interest Period (each an Interest Payment Date ).
(b) If an Interest Period is longer than three Months, the Borrowers shall also pay interest then accrued on the Loan or the relevant part of the Loan on the dates falling at three Monthly intervals after the first day of the Interest Period.
8.3 Default interest
(a) If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the Unpaid Sum from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is two per cent. per annum higher than the rate which would have been payable if the Unpaid Sum had, during the period of non-payment, constituted part of the Loan in the currency of the Unpaid Sum for successive Interest Periods, each of a duration selected by the Facility Agent. Any interest accruing under this Clause 8.3 ( Default interest ) shall be immediately payable by the Obligor on demand by the Facility Agent.
(b) If an Unpaid Sum consists of all or part of the Loan which became due on a day which was not the last day of an Interest Period relating to the Loan or that part of the Loan:
(i) the first Interest Period for that Unpaid Sum shall have a duration equal to the unexpired portion of the current Interest Period relating to the Loan or that part of the Loan; and
(ii) the rate of interest applying to that Unpaid Sum during that first Interest Period shall be two per cent. per annum higher than the rate which would have applied if that Unpaid Sum had not become due.
(c) Default interest (if unpaid) arising on an Unpaid Sum will be compounded with the Unpaid Sum at the end of each Interest Period applicable to that Unpaid Sum but will remain immediately due and payable.
8.4 Notification of rates of interest
(a) The Facility Agent shall promptly notify the Lenders and the Borrowers of the determination of a rate of interest under this Agreement.
(b) The Facility Agent shall promptly notify the Borrower of each Funding Rate relating to the Loan, any part of the Loan or any Unpaid Sum.
9 INTEREST PERIODS
9.1 Selection of Interest Periods
(a) The Borrowers may select the Interest Period for the Loan in the Utilisation Request for the first Advance. Subject to paragraphs (f) and (h) below and Clause 9.2 ( Changes to Interest Periods ), the Borrowers may select each subsequent Interest Period in respect of the Loan in a Selection Notice.
(b) Each Selection Notice is irrevocable and must be delivered to the Facility Agent by the Borrowers not later than the Specified Time.
(c) If the Borrowers fail to select an Interest Period in the first Utilisation Request or fail to deliver a Selection Notice to the Facility Agent in accordance with paragraphs (a) and (b) above, the relevant Interest Period will, subject to paragraphs (f) and (h) below and Clause 9.2 ( Changes to Interest Periods ), be three Months.
(d) Subject to this Clause 9 ( Interest Periods ), the Borrowers may select an Interest Period of one, three, six or nine Months or any other period agreed between the Borrowers and the Facility Agent (acting on the instructions of all the Lenders).
(e) An Interest Period in respect of the Loan or any part of the Loan shall not extend beyond the Termination Date.
(f) In respect of a Repayment Instalment, the Borrowers may request in the relevant Selection Notice that an Interest Period for a part of the Loan equal to such Repayment Instalment shall end on the Repayment Date relating to it and, subject to paragraph (d) above, select a longer Interest Period for the remaining part of the Loan.
(g) The first Interest Period for the Loan shall start on the first Utilisation Date and, subject to paragraph (h) below, each subsequent Interest Period shall start on the last day of the preceding Interest Period.
(h) The first Interest Period for the second and any subsequent Advance shall start on the Utilisation Date of such Advance and end on the last day of the Interest Period applicable to the Loan on the date on which such Advance is made.
(i) Except for the purposes of paragraph (f) and paragraph (h) above and Clause 9.2 ( Changes to Interest Periods ), the Loan shall have one Interest Period only at any time.
9.2 Changes to Interest Periods
(a) In respect of a Repayment Instalment, prior to determining the interest rate for the Loan, the Facility Agent may establish an Interest Period for a part of the Loan equal to such Repayment Instalment to end on the Repayment Date relating to it and the remaining part of the Loan shall have the Interest Period selected in the relevant Selection Notice, subject to paragraph (d) of Clause 9.1 ( Selection of Interest Periods ).
(b) If the Facility Agent makes any change to an Interest Period referred to in this Clause 9.2 ( Changes to Interest Periods ), it shall promptly notify the Borrowers and the Lenders.
9.3 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).
10 CHANGES TO THE CALCULATION OF INTEREST
10.1 Unavailability of Screen Rate
(a) Interpolated Screen Rate : If no Screen Rate is available for LIBOR for the Interest Period of the Loan or any part of the Loan, the applicable LIBOR shall be the Interpolated Screen Rate for a period equal in length to the Interest Period of the Loan or that part of the Loan.
(b) Reference Bank Rate : If no Screen Rate is available for LIBOR for:
(i) dollars; or
(ii) the Interest Period of the Loan or any part of the Loan and it is not possible to calculate the Interpolated Screen Rate,
the applicable LIBOR shall be the Reference Bank Rate as of the Specified Time and for a period equal in length to the Interest Period of the Loan or that part of the Loan.
(c) Cost of funds : If paragraph (b) above applies but no Reference Bank Rate is available for dollars or the relevant Interest Period there shall be no LIBOR for the Loan or that part of the Loan (as applicable) and Clause 10.4 ( Cost of funds ) shall apply to the Loan or that part of the Loan for that Interest Period.
10.2 Calculation of Reference Bank Rate
(a) Subject to paragraph (b) below, if LIBOR is to be determined on the basis of a Reference Bank Rate but a Reference Bank does not supply a quotation by the Specified Time, the Reference Bank Rate shall be calculated on the basis of the quotations of the remaining Reference Banks.
(b) If at or about noon on the Quotation Day none or only one of the Reference Banks supplies a quotation, there shall be no Reference Bank Rate for the relevant Interest Period.
10.3 Market disruption
If before close of business in London on the Quotation Day for the relevant Interest Period the Facility Agent receives notification from a Lender or Lenders (whose participations in the Loan or the relevant part of the Loan exceed 30 per cent. of the Loan or the relevant part of the Loan as appropriate) (the Relevant Lender ) that the cost to it of funding its participation in the Loan or that part of the Loan from whatever source it may reasonably select.
10.4 Cost of funds
(a) If this Clause 10.4 ( Cost of funds ) applies, the rate of interest on the Loan or the relevant part of the Loan for the relevant Interest Period shall be the percentage rate per annum which is the sum of:
(i) the Margin; and
(ii) the weighted average of the rates notified to the Facility Agent by each Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period] to be that which expresses as a percentage rate per annum the cost to the relevant Lender of funding its participation in the Loan or that part of the Loan from whatever source it may reasonably select.
(b) If this Clause 10.4 ( Cost of funds ) applies and the Facility Agent or the Borrowers so require, the Facility Agent and the Borrowers shall enter into negotiations (for a period of not more
than 30 days) with a view to agreeing a substitute basis for determining the rate of interest or (as the case may be) an alternative basis for funding.
(c) Subject to Clause 43.4 ( Replacement of Screen Rate ), any substitute or alternative basis agreed pursuant to paragraph (b) above shall, with the prior consent of all the Lenders and the Borrowers, be binding on all Parties.
(d) If this Clause 10.4 ( Cost of funds ) applies but any Lender does not supply a quotation by the time specified in sub-paragraph (ii) of paragraph (a) above, the rate of interest shall be calculated on the basis of the quotations of the remaining Lenders.
10.5 Break Costs
(a) The Borrowers shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of the Loan or Unpaid Sum being paid by a Borrower on a day other than the last day of an Interest Period for the Loan, the relevant part of the Loan or that Unpaid Sum.
(b) Each Lender shall, as soon as reasonably practicable after a demand by the Facility Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.
11 FEES
11.1 Commitment fee
(a) The Borrowers shall pay to the Facility Agent (for the account of each Lender) a fee computed at the rate of 40 per cent. per annum of the Margin on that Lenders Available Commitment from time to time for the Availability Period.
(b) The accrued commitment fee is payable on the last day of each successive period of three Months which ends during the Availability Period, on the last day of the Availability Period and, if cancelled, on the cancelled amount of the relevant Lenders Commitment at the time the cancellation is effective.
11.2 Arrangement fee
The Borrowers shall pay to the Arranger an arrangement fee in the amount and at the times agreed in a Fee Letter.
11.3 Facility Agent fee
The Borrowers shall pay to the Facility Agent (for its own account) an agency fee in the amount and at the times agreed in a Fee Letter.
11.4 Upfront fee
The Borrowers shall pay to the Security Agent (for its own account) an upfront fee in the amount of 0.65 per cent. of the Loan.
SECTION 6
ADDITIONAL PAYMENT OBLIGATIONS
12 TAX GROSS UP AND INDEMNITIES
12.1 Definitions
(a) In this Agreement:
Protected Party means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.
Tax Credit means a credit against, relief or remission for, or repayment of any Tax.
Tax Deduction means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than a FATCA Deduction.
Tax Payment means either the increase in a payment made by an Obligor to a Finance Party under Clause 12.2 ( Tax gross-up ) or a payment under Clause 12.3 ( Tax indemnity ).
(b) Unless a contrary indication appears, in this Clause 12 ( Tax Gross Up and Indemnities ) reference to determines or determined means a determination made in the absolute discretion of the person making the determination.
12.2 Tax gross-up
(a) Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.
(b) The Borrowers shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Facility Agent accordingly. Similarly, a Lender shall notify the Facility Agent on becoming so aware in respect of a payment payable to that Lender. If the Facility Agent receives such notification from a Lender it shall notify the Borrowers and that Obligor.
(c) If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.
(d) If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.
(e) Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Facility Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.
12.3 Tax indemnity
(a) The Obligors shall (within three Business Days of demand by the Facility Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party
determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.
(b) Paragraph (a) above shall not apply:
(i) with respect to any Tax assessed on a Finance Party:
(A) under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or
(B) under the law of the jurisdiction in which that Finance Partys Facility Office is located in respect of amounts received or receivable in that jurisdiction,
if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or
(ii) to the extent a loss, liability or cost:
(A) is compensated for by an increased payment under Clause 12.2 ( Tax gross-up ) ; or
(B) relates to a FATCA Deduction required to be made by a Party.
(c) A Protected Party making, or intending to make, a claim under paragraph (a) above shall promptly notify the Facility Agent of the event which will give, or has given, rise to the claim, following which the Facility Agent shall notify the Obligors.
(d) A Protected Party shall, on receiving a payment from an Obligor under this Clause 12.3 ( Tax indemnity ), notify the Facility Agent.
12.4 Tax Credit
If an Obligor makes a Tax Payment and the relevant Finance Party determines that:
(a) a Tax Credit is attributable to an increased payment of which that Tax Payment forms part, to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was received; and
(b) that Finance Party has obtained and utilised that Tax Credit,
the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by the Obligor.
12.5 Stamp taxes
(a) The Obligors shall pay and, within three Business Days of demand, indemnify each Secured Party against any cost, loss or liability which that Secured Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.
(b) Unless an Event of Default has occurred and is continuing, paragraph (a) above shall not apply in respect of any stamp duty, registration or other similar Taxes which are payable in respect of an assignment, transfer or other alienation of any kind by a Finance Party of any of its rights and/or obligations under a Finance Document.
12.6 VAT
(a) All amounts expressed to be payable under a Finance Document by any Party to a Finance Party which (in whole or in part) constitute the consideration for any supply for VAT purposes are deemed to be exclusive of any VAT which is chargeable on that supply, and accordingly, subject to paragraph (b) below, if VAT is or becomes chargeable on any supply made by any Finance Party to any Party under a Finance Document and such Finance Party is required to account to the relevant tax authority for the VAT, that Party must pay to such Finance Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of the VAT (and such Finance Party must promptly provide an appropriate VAT invoice to that Party).
(b) If VAT is or becomes chargeable on any supply made by any Finance Party (the Supplier ) to any other Finance Party (the Recipient ) under a Finance Document, and any Party other than the Recipient (the Relevant Party ) is required by the terms of any Finance Document to pay an amount equal to the consideration for that supply to the Supplier (rather than being required to reimburse or indemnify the Recipient in respect of that consideration):
(i) (where the Supplier is the person required to account to the relevant tax authority for the VAT) the Relevant Party must also pay to the Supplier (at the same time as paying that amount) an additional amount equal to the amount of the VAT. The Recipient must (where this sub-paragraph (i) applies) promptly pay to the Relevant Party an amount equal to any credit or repayment the Recipient receives from the relevant tax authority which the Recipient reasonably determines relates to the VAT chargeable on that supply; and
(ii) (where the Recipient is the person required to account to the relevant tax authority for the VAT) the Relevant Party must promptly, following demand from the Recipient, pay to the Recipient an amount equal to the VAT chargeable on that supply but only to the extent that the Recipient reasonably determines that it is not entitled to credit or repayment from the relevant tax authority in respect of that VAT.
(c) Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part of it as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.
(d) Any reference in this Clause 12.6 ( VAT ) to any Party shall, at any time when that Party is treated as a member of a group or unity (or fiscal unity) for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the person who is treated at that time as making the supply, or (as appropriate) receiving the supply, under the grouping rules (provided for in Article 11 of Council Directive 2006/112/EC (or as implemented by the relevant member state of the European Union) so that a reference to a Party shall be construed as a reference to that Party or the relevant group or unity (or fiscal unity) of which that Party is a member for VAT purposes at the relevant time or the relevant representative member (or representative or head) of that group or unity at the relevant time (as the case may be).
(e) In relation to any supply made by a Finance Party to any Party under a Finance Document, if reasonably requested by such Finance Party, that Party must promptly provide such Finance Party with details of that Partys VAT registration and such other information as is reasonably requested in connection with such Finance Partys VAT reporting requirements in relation to such supply.
12.7 FATCA Information
(a) Subject to paragraph (c) below, each Party shall, within ten Business Days of a reasonable request by another Party:
(i) confirm to that other Party whether it is:
(A) a FATCA Exempt Party; or
(B) not a FATCA Exempt Party; and
(ii) supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Partys compliance with FATCA; and
(iii) supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Partys compliance with any other law, regulation or exchange of information regime.
(b) If a Party confirms to another Party pursuant to sub-paragraph (i) of paragraph (a) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
(c) Paragraph (a) above shall not oblige any Finance Party to do anything and sub-paragraph (iii) of paragraph (a) above shall not oblige any other Party to do anything which would or might in its reasonable opinion constitute a breach of:
(i) any law or regulation;
(ii) any fiduciary duty; or
(iii) any duty of confidentiality.
(d) If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with sub-paragraphs (i) or (ii) of paragraph (a) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.
12.8 FATCA Deduction
(a) Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.
(b) Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment and, in addition, shall notify each Obligor and the Facility Agent and the Facility Agent shall notify the other Finance Parties.
13 INCREASED COSTS
13.1 Increased costs
(a) Subject to Clause 13.3 ( Exceptions ), the Borrowers shall, within three Business Days of a demand by the Facility Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of:
(i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation; or
(ii) compliance with any law or regulation made,
in each case after the date of this Agreement; or
(iii) the implementation, application of or compliance with Basel III or CRD IV or any law or regulation that implements or applies Basel III or CRD IV.
(b) In this Agreement:
(i) Basel III means:
(A) the agreements on capital requirements, a leverage ratio and liquidity standards contained in Basel III: A global regulatory framework for more resilient banks and banking systems, Basel III: International framework for liquidity risk measurement, standards and monitoring and Guidance for national authorities operating the countercyclical capital buffer published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated;
(B) the rules for global systemically important banks contained in Global systemically important banks: assessment methodology and the additional loss absorbency requirement - Rules text published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and
(C) any further guidance or standards published by the Basel Committee on Banking Supervision relating to Basel III.
(ii) CRD IV means:
(A) Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending regulation (EU) No. 648/2012;
(B) Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC; and
(C) any other law or regulation which implements Basel III.
(iii) Increased Costs means:
(A) a reduction in the rate of return from the Facility or on a Finance Partys (or its Affiliates) overall capital;
(B) an additional or increased cost; or
(C) a reduction of any amount due and payable under any Finance Document,
which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document.
13.2 Increased cost claims
(a) A Finance Party intending to make a claim pursuant to Clause 13.1 ( Increased costs ) shall notify the Facility Agent of the event giving rise to the claim, following which the Facility Agent shall promptly notify the Borrowers.
(b) Each Finance Party shall, as soon as practicable after a demand by the Facility Agent, provide a certificate confirming the amount of its Increased Costs.
13.3 Exceptions
Clause 13.1 ( Increased costs ) does not apply to the extent any Increased Cost is:
(a) attributable to a Tax Deduction required by law to be made by an Obligor;
(b) attributable to a FATCA Deduction required to be made by a Party;
(c) compensated for by Clause 12.3 ( Tax indemnity ) (or would have been compensated for under Clause 12.3 ( Tax indemnity ) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 12.3 ( Tax indemnity ) applied);
(d) compensated for by any payment made pursuant to Clause 14.3 ( Mandatory Cost ); or
(e) attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.
14 OTHER INDEMNITIES
14.1 Currency indemnity
(a) If any sum due from an Obligor under the Finance Documents (a Sum ), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the First Currency ) in which that Sum is payable into another currency (the Second Currency ) for the purpose of:
(i) making or filing a claim or proof against that Obligor; or
(ii) obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,
that Obligor shall, as an independent obligation, on demand, indemnify each Secured Party to which that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.
(b) Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.
14.2 Other indemnities
(a) Each Obligor shall, on demand, indemnify each Secured Party against any cost, loss or liability incurred by it as a result of:
(i) the occurrence of any Event of Default;
(ii) a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 33 ( Sharing among the Finance Parties );
(iii) funding, or making arrangements to fund, its participation in an Advance requested by the Borrowers in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Secured Party alone); or
(iv) the Loan (or part of the Loan) not being prepaid in accordance with a notice of prepayment given by the Borrowers.
(b) Each Obligor shall, on demand, indemnify each Finance Party, each Affiliate of a Finance Party and each officer or employee of a Finance Party or its Affiliate (each such person for the purposes of this Clause 14.2 ( Other indemnities ) an Indemnified Person ), against any cost, loss or liability incurred by that Indemnified Person pursuant to or in connection with any litigation, arbitration or administrative proceedings or regulatory enquiry, in connection with or arising out of the entry into and the transactions contemplated by the Finance Documents, having the benefit of any Security constituted by the Finance Documents or which relates to the condition or operation of, or any incident occurring in relation to, any Ship unless such cost, loss or liability is caused by the gross negligence or wilful misconduct of that Indemnified Person.
(c) Without limiting, but subject to any limitations set out in paragraph (b) above, the indemnity in paragraph (b) above shall cover any cost, loss or liability incurred by each Indemnified Person in any jurisdiction:
(i) arising or asserted under or in connection with any law relating to safety at sea, the ISM Code, any Environmental Law or any Sanctions; or
(ii) in connection with any Environmental Claim.
(d) Any Affiliate or any officer or employee of a Finance Party or of any of its Affiliates may rely on this Clause 14.2 ( Other indemnities ) subject to Clause 1.5 ( Third party rights ) and the provisions of the Third Parties Act.
14.3 Mandatory Cost
Each Borrower shall, on demand by the Facility Agent, pay to the Facility Agent for the account of the relevant Lender, such amount which any Lender certifies in a notice to the Facility Agent to be its good faith determination of the amount necessary to compensate it for complying with:
(a) in the case of a Lender lending from a Facility Office in a Participating Member State, the minimum reserve requirements (or other requirements having the same or similar purpose) of the European Central Bank or any other authority or agency which replaces all or any of its functions) in respect of loans made from that Facility Office; and
(b) in the case of any Lender lending from a Facility Office in the United Kingdom, any reserve asset, special deposit or liquidity requirements (or other requirements having the same or similar purpose) of the Bank of England (or any other governmental authority or agency)
and/or paying any fees to the Financial Conduct Authority and/or the Prudential Regulation Authority (or any other governmental authority or agency which replaces all or any of their functions),
which, in each case, is referable to that Lenders participation in the Loan.
14.4 Indemnity to the Facility Agent
Each Obligor shall, on demand, indemnify the Facility Agent against:
(a) any cost, loss or liability incurred by the Facility Agent (acting reasonably) as a result of:
(i) investigating any event which it reasonably believes is a Default; or
(ii) acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; or
(iii) instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under the Finance Documents; and
(b) any cost, loss or liability incurred by the Facility Agent (otherwise than by reason of the Facility Agents gross negligence or wilful misconduct) or, in the case of any cost, loss or liability pursuant to Clause 34.11 ( Disruption to Payment Systems etc. ) notwithstanding the Facility Agents negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Facility Agent in acting as Facility Agent under the Finance Documents.
14.5 Indemnity to the Security Agent
(a) Each Obligor shall, on demand, indemnify the Security Agent and every Receiver and Delegate against any cost, loss or liability incurred by any of them:
(i) in relation to or as a result of:
(A) any failure by a Borrower to comply with its obligations under Clause 16 ( Costs and Expenses );
(B) acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised;
(C) the taking, holding, protection or enforcement of the Finance Documents and the Transaction Security;
(D) the exercise of any of the rights, powers, discretions, authorities and remedies vested in the Security Agent and each Receiver and Delegate by the Finance Documents or by law;
(E) any default by any Transaction Obligor in the performance of any of the obligations expressed to be assumed by it in the Finance Documents;
(F) any action by any Transaction Obligor which vitiates, reduces the value of, or is otherwise prejudicial to, the Transaction Security; and
(G) instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under the Finance Documents.
(ii) acting as Security Agent, Receiver or Delegate under the Finance Documents or which otherwise relates to any of the Security Property or the performance of the
terms of this Agreement or the other Finance Documents (otherwise, in each case, than by reason of the relevant Security Agents, Receivers or Delegates gross negligence or wilful misconduct).
(b) The Security Agent and every Receiver and Delegate may, in priority to any payment to the Secured Parties, indemnify itself out of the Security Assets in respect of, and pay and retain, all sums necessary to give effect to the indemnity in this Clause 14.5 ( Indemnity to the Security Agent ) and shall have a lien on the Transaction Security and the proceeds of the enforcement of the Transaction Security for all monies payable to it.
15 MITIGATION BY THE FINANCE PARTIES
15.1 Mitigation
(a) Each Finance Party shall, in consultation with the Borrowers, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 7.1 ( Illegality ), Clause 12 ( Tax Gross Up and Indemnities ), Clause 13 ( Increased Costs ) or paragraph (a) of Clause 14.3 ( Mandatory Cost ) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.
(b) Paragraph (a) above does not in any way limit the obligations of any Transaction Obligor under the Finance Documents.
15.2 Limitation of liability
(a) Each Obligor shall, on demand, indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 15.1 ( Mitigation ).
(b) A Finance Party is not obliged to take any steps under Clause 15.1 ( Mitigation ) if either:
(i) a Default has occurred and is continuing; or
(ii) in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.
16 COSTS AND EXPENSES
16.1 Transaction expenses
The Obligors shall, on demand, pay the Facility Agent, the Security Agent and the Arranger the amount of all costs and expenses (including legal fees) reasonably incurred by any Secured Party in connection with the negotiation, preparation, printing, execution, syndication and perfection of:
(a) this Agreement and any other documents referred to in this Agreement or in a Security Document; and
(b) any other Finance Documents executed after the date of this Agreement.
16.2 Amendment costs
If:
(a) a Transaction Obligor requests an amendment, waiver or consent; or
(b) an amendment is required pursuant to Clause 34.9 ( Change of currency ); or
(c) a Transaction Obligor requests, and the Security Agent agrees to, the release of all or any part of the Security Assets from the Transaction Security,
the Obligors shall, on demand, reimburse each of the Facility Agent and the Security Agent for the amount of all costs and expenses (including legal fees) reasonably incurred by each Secured Party in responding to, evaluating, negotiating or complying with that request or requirement.
16.3 Enforcement and preservation costs
The Obligors shall, on demand, pay to each Secured Party the amount of all costs and expenses (including legal fees) incurred by that Secured Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document or the Transaction Security and with any proceedings instituted by or against that Secured Party as a consequence of it entering into a Finance Document, taking or holding the Transaction Security, or enforcing those rights.
SECTION 7
GUARANTEES AND JOINT AND SEVERAL LIABILITY OF BORROWERS
17 GUARANTEE AND INDEMNITY PARENT GUARANTOR
17.1 Guarantee and indemnity
The Parent Guarantor irrevocably and unconditionally:
(a) guarantees to each Finance Party punctual performance by each Borrower of all that Borrowers obligations under the Finance Documents;
(b) undertakes with each Finance Party that whenever a Borrower does not pay any amount when due under or in connection with any Finance Document, the Parent Guarantor shall immediately on demand pay that amount as if it were the principal obligor; and
(c) agrees with each Finance Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify that Finance Party immediately on demand against any cost, loss or liability it incurs as a result of a Borrower not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document on the date when it would have been due. The amount payable by the Parent Guarantor under this indemnity will not exceed the amount it would have had to pay under this Clause 17 ( Guarantee and Indemnity Parent Guarantor ) if the amount claimed had been recoverable on the basis of a guarantee.
17.2 Continuing guarantee
This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by each Borrower under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.
17.3 Reinstatement
If any discharge, release or arrangement (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is made by a Secured Party in whole or in part on the basis of any payment, security or other disposition which is avoided or must be restored in insolvency, liquidation, administration or otherwise, without limitation, then the liability of the Parent Guarantor under this Clause 17 ( Guarantee and Indemnity Parent Guarantor ) will continue or be reinstated as if the discharge, release or arrangement had not occurred.
17.4 Waiver of defences
The obligations of the Parent Guarantor under this Clause 17 ( Guarantee and Indemnity Parent Guarantor ) and in respect of any Transaction Security will not be affected or discharged by an act, omission, matter or thing which, but for this Clause 17.4 ( Waiver of defences ), would reduce, release or prejudice any of its obligations under this Clause 17 ( Guarantee and Indemnity Parent Guarantor ) or in respect of any Transaction Security (without limitation and whether or not known to it or any Secured Party) including:
(a) any time, waiver or consent granted to, or composition with, any Obligor or other person;
(b) the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;
(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect or delay in perfecting, or refusal or neglect to take up or enforce, or delay in taking or enforcing any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
(d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;
(e) any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document or any other document or security including, without limitation, any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security;
(f) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or
(g) any insolvency or similar proceedings.
17.5 Immediate recourse
The Parent Guarantor waives any right it may have of first requiring any Secured Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person (including without limitation to commence any proceedings under any Finance Document or to enforce any Transaction Security) before claiming or commencing proceedings under this Clause 17 ( Guarantee and Indemnity Parent Guarantor ). This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.
17.6 Appropriations
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Secured Party (or any trustee or agent on its behalf) may:
(a) refrain from applying or enforcing any other moneys, security or rights held or received by that Secured Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and the Parent Guarantor shall not be entitled to the benefit of the same; and
(b) hold in an interest-bearing suspense account any moneys received from the Parent Guarantor or on account of the Parent Guarantors liability under this Clause 17 ( Guarantee and Indemnity Parent Guarantor ).
17.7 Deferral of Parent Guarantors rights
All rights which the Parent Guarantor at any time has (whether in respect of this guarantee, a mortgage or any other transaction) against any Borrower, any other Obligor or their respective assets shall be fully subordinated to the rights of the Secured Parties under the Finance Documents and until the end of the Security Period and unless the Facility Agent otherwise directs, the Parent Guarantor will not exercise any rights which it may have (whether in respect of any Finance Document to which it is a Party or any other transaction) by reason of performance by it of its obligations under the Finance Documents or by reason of any amount being payable, or liability arising, under this Clause 17 ( Guarantee and Indemnity Parent Guarantor ):
(a) to be indemnified by an Obligor;
(b) to claim any contribution from any third party providing security for, or any other guarantor of, any Obligors obligations under the Finance Documents;
(c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Secured Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Secured Party;
(d) to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which the Parent Guarantor has given a guarantee, undertaking or indemnity under Clause 17.1 ( Guarantee and indemnity );
(e) to exercise any right of set-off against any Obligor; and/or
(f) to claim or prove as a creditor of any Obligor in competition with any Secured Party.
If the Parent Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Secured Parties by the Obligors under or in connection with the Finance Documents to be repaid in full on trust for the Secured Parties and shall promptly pay or transfer the same to the Facility Agent or as the Facility Agent may direct for application in accordance with Clause 34 ( Payment Mechanics ).
17.8 Additional security
This guarantee and any other Security given by the Parent Guarantor is in addition to and is not in any way prejudiced by, and shall not prejudice, any other guarantee or Security or any other right of recourse now or subsequently held by any Secured Party or any right of set-off or netting or right to combine accounts in connection with the Finance Documents.
17.9 Applicability of provisions of Guarantee to other Security
Clauses 17.2 ( Continuing guarantee ), 17.3 ( Reinstatement ), 17.4 ( Waiver of defences ), 17.5 ( Immediate recourse ), 17.6 ( Appropriations ), 17.7 ( Deferral of Parent Guarantors rights ) and 17.8 ( Additional security ) shall apply, with any necessary modifications, to any Security which the Parent Guarantor creates (whether at the time at which it signs this Agreement or at any later time) to secure the Secured Liabilities or any part of them.
18 JOINT AND SEVERAL LIABILITY OF THE BORROWERS
18.1 Joint and several liability
All liabilities and obligations of the Borrowers under this Agreement shall, whether expressed to be so or not, be joint and several.
18.2 Waiver of defences
The liabilities and obligations of a Borrower shall not be impaired by:
(a) this Agreement being or later becoming void, unenforceable or illegal as regards any other Borrower;
(b) any Lender or the Security Agent entering into any rescheduling, refinancing or other arrangement of any kind with any other Borrower;
(c) any Lender or the Security Agent releasing any other Borrower or any Security created by a Finance Document; or
(d) any time, waiver or consent granted to, or composition with any other Borrower or other person;
(e) the release of any other Borrower or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;
(f) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any other Borrower or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
(g) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of any other Borrower or any other person;
(h) any amendment, novation, supplement, extension, restatement (however fundamental, and whether or not more onerous) or replacement of a Finance Document or any other document or security including, without limitation, any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security;
(i) any unenforceability, illegality or invalidity of any obligation or any person under any Finance Document or any other document or security; or
(j) any insolvency or similar proceedings.
18.3 Principal Debtor
Each Borrower declares that it is and will, throughout the Security Period, remain a principal debtor for all amounts owing under this Agreement and the Finance Documents and no Borrower shall, in any circumstances, be construed to be a surety for the obligations of any other Borrower under this Agreement.
18.4 Borrower restrictions
(a) Subject to paragraph (b) below, during the Security Period no Borrower shall:
(i) claim any amount which may be due to it from any other Borrower whether in respect of a payment made under, or matter arising out of, this Agreement or any Finance Document, or any matter unconnected with this Agreement or any Finance Document; or
(ii) take or enforce any form of security from any other Borrower for such an amount, or in any way seek to have recourse in respect of such an amount against any asset of any other Borrower; or
(iii) set off such an amount against any sum due from it to any other Borrower; or
(iv) prove or claim for such an amount in any liquidation, administration, arrangement or similar procedure involving any other Borrower; or
(v) exercise or assert any combination of the foregoing.
(b) If during the Security Period, the Facility Agent, by notice to a Borrower, requires it to take any action referred to in paragraph (a) above in relation to any other Borrower, that
Borrower shall take that action as soon as practicable after receiving the Facility Agents notice.
18.5 Deferral of Borrowers rights
Until all amounts which may be or become payable by the Borrowers under or in connection with the Finance Documents have been irrevocably paid in full and unless the Facility Agent otherwise directs, no Borrower will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents:
(a) to be indemnified by any other Borrower; or
(b) to claim any contribution from any other Borrower in relation to any payment made by it under the Finance Documents.
SECTION 8
REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT
19 REPRESENTATIONS
19.1 General
Each Obligor makes the representations and warranties set out in this Clause 19 ( Representations ) to each Finance Party on the date of this Agreement.
19.2 Status
(a) In the case of each Borrower and the Parent Guarantor, it is a limited liability company, duly formed and validly existing in good standing under the law of its jurisdiction of incorporation.
(b) It has the power to own its assets and carry on its business as it is being conducted.
19.3 Share capital and ownership
(a) Borrower A has an authorised share capital of $50,001 divided into 50,001 registered ordinary shares, all of which shares have been issued fully paid.
(b) Borrower B has an authorised share capital of $26,950,000 divided into 26,950,000 registered ordinary shares of Singapore $1 each, all of which shares have been issued fully paid.
(c) Borrower C has an authorised share capital of $50,000 divided into 50,000 registered ordinary shares, all of which shares have been issued fully paid.
(d) The legal title to and beneficial interest in the shares in each Borrower is held free of any Security or any other claim the Parent Guarantor.
(e) None of the shares in any Borrower is subject to any option to purchase, pre-emption rights or similar rights.
19.4 Binding obligations
Subject to the Legal Reservations and save for the stamping of each Shares Security with the Inland Revenue Authority of Singapore, and the registration of the charges contemplated by each Shares Security, Mortgages, Deeds of Covenant, General Assignments and Accounts Security with the Accounting and Corporate Regulatory Authority of Singapore, the obligations expressed to be assumed by it in each Transaction Document to which it is a party are legal, valid, binding and enforceable obligations.
19.5 Validity, effectiveness and ranking of Security
(a) Each Finance Document to which it is a party does now or, as the case may be, will upon execution and delivery create, subject to the Legal Reservations and the Perfection Requirements, the Security it purports to create over any assets to which such Security, by its terms, relates, and such Security will, when created or intended to be created, be valid and effective.
(b) No third party has or will have any Security (except for Permitted Security) over any assets that are the subject of any Transaction Security granted by it.
(c) Subject to the Legal Reservations and the Perfection Requirements, the Transaction Security granted by it to the Security Agent or any other Secured Party has or will when created or intended to be created have first ranking priority or such other priority it is expressed to have in the Finance Documents and is not subject to any prior ranking or pari passu ranking security.
(d) No concurrence, consent or authorisation of any person is required for the creation of or otherwise in connection with any Transaction Security.
19.6 Non-conflict with other obligations
The entry into and performance by it of, and the transactions contemplated by, each Transaction Document to which it is a party do not and will not conflict with:
(a) any law or regulation applicable to it;
(b) its constitutional documents; or
(c) any agreement or instrument binding upon it or any member of the Group or any member of the Groups assets or constitute a default or termination event (however described) under any such agreement or instrument.
19.7 Power and authority
(a) It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, each Transaction Document to which it is or will be a party and the transactions contemplated by those Transaction Documents.
(b) No limit on its powers will be exceeded as a result of the borrowing, granting of security or giving of guarantees or indemnities contemplated by the Transaction Documents to which it is a party.
19.8 Validity and admissibility in evidence
All Authorisations required or desirable:
(a) to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Transaction Documents to which it is a party; and
(b) to make the Transaction Documents to which it is a party admissible in evidence in its Relevant Jurisdictions,
have been obtained or effected and are in full force and effect.
19.9 Governing law and enforcement
(a) Subject to the Legal Reservations, the choice of governing law of each Transaction Document to which it is a party will be recognised and enforced in its Relevant Jurisdictions.
(b) Subject to the Legal Reservations, any judgment obtained in relation to a Transaction Document to which it is a party in the jurisdiction of the governing law of that Transaction Document will be recognised and enforced in its Relevant Jurisdictions.
19.10 Insolvency
No:
(a) corporate action, legal proceeding or other procedure or step described in paragraph (a) of Clause 27.8 ( Insolvency proceedings ); or
(b) creditors process described in Clause 27.9 ( Creditors process ),
has been taken or, to its knowledge, threatened in relation to a member of the Group; and none of the circumstances described in Clause 27.7 ( Insolvency ) applies to a member of the Group.
19.11 No filing or stamp taxes
Under the laws of its Relevant Jurisdictions it is not necessary that the Finance Documents to which it is a party be registered, filed, recorded, notarised or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents to which it is a party or the transactions contemplated by those Finance Documents except for:
(a) the payment of stamp taxes in relation to the stamping of each Shares Security at the Inland Revenue Authority of Singapore;
(b) the payment of registration fees in relation to registration of the charges contemplated by each Shares Security, Mortgages, Deeds of Covenant, General Assignments and Accounts Security with the Accounting and Corporate Regulatory Authority of Singapore; and
(c) any other filing, recording or enrolling or any tax or fee payable which is referred to in any legal opinion delivered pursuant to Clause 4 ( Conditions of Utilisation ) or any further legal opinion (in a form agreed by the Lenders) delivered pursuant to the Finance Documents and which will be made or paid promptly after the date of the relevant Finance Document.
19.12 Deduction of Tax
It is not required to make any Tax Deduction from any payment it may make under any Finance Document to which it is a party.
19.13 No default
(a) No Event of Default and, on the date of this Agreement and on each Utilisation Date, no Default is continuing or might reasonably be expected to result from the making of any Utilisation or the entry into, the performance of, or any transaction contemplated by, any Transaction Document.
(b) No other event or circumstance is outstanding which constitutes a default or a termination event (however described) under any other agreement or instrument which is binding on it or to which its assets are subject which is reasonably likely to have a Material Adverse Effect.
19.14 No misleading information
(a) Any factual information provided by any member of the Group for the purposes of this Agreement was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated.
(b) The financial projections contained in any such information have been prepared on the basis of recent historical information and on the basis of reasonable assumptions.
(c) Nothing has occurred or been omitted from any such information and no information has been given or withheld that results in any such information being untrue or misleading in any material respect.
19.15 Financial Statements
(a) Its Original Financial Statements were prepared in accordance with IFRS consistently applied.
(b) Its Original Financial Statements give a true and fair view of (if audited) or fairly represent (if unaudited) its financial condition as at the end of the relevant financial year and results of operations during the relevant financial year (consolidated in the case of the Parent Guarantor).
(c) There has been no material adverse change in its assets, business or financial condition (or the assets, business or consolidated financial condition of the Group, in the case of the Parent Guarantor) since 31 December 2015.
(d) Its most recent financial statements delivered pursuant to Clause 20.2 ( Financial statements ):
(i) have been prepared in accordance with paragraph (a) of Clause 20.3 ( Compliance Certificate ); and
(ii) give a true and fair view of (if audited) or fairly represent (if unaudited) its financial condition as at the end of the relevant financial year and operations during the relevant financial year (consolidated in the case of the Parent Guarantor).
(e) Since the date of the most recent financial statements delivered pursuant to Clause 20.2 ( Financial statements ) there has been no material adverse change in its business, assets or financial condition (or the business or consolidated financial condition of the Group, in the case of the Guarantor).
19.16 Pari passu ranking
Its payment obligations 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.
19.17 No proceedings pending or threatened
(a) No litigation, arbitration or administrative proceedings or investigations (including proceedings or investigations relating to any alleged or actual breach of the ISM Code or of the ISPS Code) of or before any court, arbitral body or agency have (to the best of its knowledge and belief (having made due and careful enquiry)) been started or threatened against it which might reasonably be expected to have a Material Adverse Effect.
(b) No judgment or order of a court, arbitral tribunal or other tribunal or any order or sanction of any governmental or other regulatory body which might reasonably be expected to have a Material Adverse Effect has (to the best of its knowledge and belief (having made due and careful enquiry)) been made against it.
19.18 Validity and completeness of the Deed of Release and Pool Agreement
(a) Each of the Deeds of Release and the Pool Agreements constitute legal, valid, binding and enforceable obligations of the parties to it.
(b) The copies of each of the Deeds of Release and the Pool Agreements, delivered to the Facility Agent before the date of this Agreement are true and complete copies.
(c) No amendments or additions to the Deeds of Release or the Pool Agreements have been agreed nor have any rights under the Deeds of Release or the Pool Agreements been waived.
19.19 No rebates etc.
There is no agreement or understanding to allow or pay any rebate, premium, inducement, commission, discount or other benefit or payment (however described) to any Borrower or any other member of the Group, or a third party in connection with the purchase by a Borrower of a Ship, other than as disclosed to the Facility Agent in writing on or before the date of this Agreement.
19.20 Valuations
(a) All information supplied by it or on its behalf to an Approved Valuer for the purposes of a valuation delivered to the Facility Agent in accordance with this Agreement was true and accurate as at the date it was supplied or (if appropriate) as at the date (if any) at which it is stated to be given.
(b) It has not omitted to supply any information to an Approved Valuer which, if disclosed, would adversely affect any valuation prepared by such Approved Valuer.
(c) There has been no change to the factual information provided pursuant to paragraph (a) above in relation to any valuation between the date such information was provided and the date of that valuation which, in either case, renders that information untrue or misleading in any material respect.
19.21 No breach of laws
It has not breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.
19.22 No Charter
No Ship is subject to any Charter other than a Permitted Charter.
19.23 No pooling agreements
No Ship is subject to any pooling arrangements other than the Pool Agreements.
19.24 Compliance with Environmental Laws
All Environmental Laws relating to the ownership, operation and management of each Ship and the business of each member of the Group (as now conducted and as reasonably anticipated to be conducted in the future) and the terms of all Environmental Approvals have been complied with.
19.25 No Environmental Claim
No Environmental Claim has been made or threatened against any member of the Group or any Ship.
19.26 No Environmental Incident
No Environmental Incident has occurred and no person has claimed that an Environmental Incident has occurred.
19.27 ISM and ISPS Code compliance
All requirements of the ISM Code and the ISPS Code as they relate to each Borrower, each] Approved Manager and each Ship have been complied with.
19.28 Taxes paid
(a) It is not and no other member of the Group is materially overdue in the filing of any Tax returns and it is not (and no other member of the Group is) overdue in the payment of any amount in respect of Tax.
(b) No claims or investigations are being, or are reasonably likely to be, made or conducted against it (or any other member of the Group) with respect to Taxes.
19.29 Financial Indebtedness
No Borrower has any Financial Indebtedness outstanding other than Permitted Financial Indebtedness.
19.30 Overseas companies
No Obligor has delivered particulars, whether in its name stated in the Finance Documents or any other name, of any UK Establishment to the Registrar of Companies as required under the Overseas Regulations or, if it has so registered, it has provided to the Facility Agent sufficient details to enable an accurate search against it to be undertaken by the Lenders at the Companies Registry.
19.31 Good title to assets
It has good, valid and marketable title to, or valid leases or licences of, and all appropriate Authorisations to use, the assets necessary to carry on its business as presently conducted.
19.32 Ownership
(a) Borrower A is the sole legal and beneficial owner of Ship A, its Earnings and its Insurances.
(b) Borrower B is the sole legal and beneficial owner of Ship B, its Earnings and its Insurances.
(c) Borrower C is the sole legal and beneficial owner of Ship C, its Earnings and its Insurances.
(d) With effect on and from the date of its creation or intended creation, each Obligor will be the sole legal and beneficial owner of any asset that is the subject of any Transaction Security created or intended to be created by such Obligor.
(e) The constitutional documents of each Obligor do not and could not restrict or inhibit any transfer of the shares of the Borrowers on creation or enforcement of the security conferred by the Security Documents.
19.33 Centre of main interests and establishments
For the purposes of The Council of the European Union Regulation No. 1346/2000 on Insolvency Proceedings (the Regulation), its centre of main interest (as that term is used in Article 3(1) of the Regulation) is situated in Singapore and it has no establishment (as that term is used in Article 2(h) of the Regulation) in any other jurisdiction.
19.34 Place of business
No Obligor has a place of business in any country other than its country of incorporation.
19.35 No employee or pension arrangements
No Borrower has any employees or any liabilities under any pension scheme.
19.36 Sanctions
(a) No Transaction Obligor:
(i) is a Prohibited Person;
(ii) is owned or controlled by or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person;
(iii) owns or controls a Prohibited Person;
(iv) has a Prohibited Person serving as a director, officer or, to the best of its knowledge, employee.
(b) No proceeds of any Advance or the Loan shall be made available, directly or indirectly, to or for the benefit of a Prohibited Person nor shall they be otherwise directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions.
19.37 Repetition
The Repeating Representations are deemed to be made by each Obligor by reference to the facts and circumstances then existing on the date of each Utilisation Request and the first day of each Interest Period.
20 INFORMATION UNDERTAKINGS
20.1 General
The undertakings in this Clause 20 ( Information Undertakings ) remain in force throughout the Security Period unless the Facility Agent, acting with the authorisation of the Majority Lenders (or, where specified, all the Lenders), may otherwise permit.
20.2 Financial statements
The Borrowers shall supply to the Facility Agent in sufficient copies for all the Lenders:
(a) as soon as they become available, but in any event within 180 days after the end of each of its financial years, the audited consolidated financial statements of the Group for that financial year;
(b) as soon as they become available, but in any event within 180 days after the end of each their respective financial years, the audited individual financial statements of that Borrower;
(c) as soon as they become available, but in any event within 90 days after the end of each half of each of its financial years, the unaudited consolidated financial statements of the Group for that financial half year;
(d) as soon as they become available, but in any event within 90 days after the end of each half of each of their respective financial years, the unaudited individual financial statements of that Borrower for that financial half year; and
(e) upon the request of the Facility Agent, a forecast (in a form satisfactory to the Facility Agent (acting on behalf of the Lenders)) for the forthcoming financial year including, but not limited to, Parent Guarantors and the Borrowers (consolidated in the case of the Parent Guarantor) cash flow statements, profit and loss accounts and balance sheets.
20.3 Compliance Certificate
(a) The Borrowers shall supply to the Facility Agent, with each set of financial statements delivered pursuant to paragraphs (a) and (c) of Clause 20.2 ( Financial statements ), a Compliance Certificate setting out computations as to compliance with Clause 21 ( Financial Covenants ) as at the date as at which those financial statements were drawn up.
(b) Each Compliance Certificate shall be signed by an officer of the Borrowers or appointed administration manager of the Borrowers acceptable to the Lenders.
20.4 Requirements as to financial statements
(a) Each set of financial statements delivered by a Borrower pursuant to Clause 20.2 ( Financial statements ) shall be certified by a director of the relevant company as giving a true and fair view (if audited) or fairly representing (if unaudited) its financial condition and operations as at the date as at which those financial statements were drawn up.
(b) The Borrowers shall procure that each set of financial statements delivered pursuant to Clause 20.2 ( Financial statements ) is prepared using IFRS.
(c) The Borrowers shall procure that each set of financial statements of an Obligor delivered pursuant to Clause 20.2 ( Financial statements ) is prepared using IFRS, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements for that Obligor unless, in relation to any set of financial statements, it notifies the Facility Agent that there has been a change in IFRS, the accounting practices or reference periods and its auditors (or, if appropriate, the auditors of the Obligor) deliver to the Facility Agent:
(i) a description of any change necessary for those financial statements to reflect the IFRS, accounting practices and reference periods upon which that Obligors Original Financial Statements were prepared; and
(ii) sufficient information, in form and substance as may be reasonably required by the Facility Agent, to enable the Lenders to determine whether Clause 21 ( Financial Covenants ) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and that Obligors Original Financial Statements.
Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.
20.5 Information: miscellaneous
Each Obligor shall supply to the Facility Agent (in sufficient copies for all the Lenders, if the Facility Agent so requests):
(a) all material documents dispatched by it to its shareholders (or any class of them) or its creditors generally at the same time as they are dispatched and which can be delivered without a breach of a confidentiality obligation by that Obligor owed to a third party;
(b) promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings or investigations (including proceedings or investigations relating to any alleged or actual breach of the ISM Code or of the ISPS Code) which are current, threatened or pending against any member of the Group, and which might, if adversely determined, have a Material Adverse Effect;
(c) promptly upon becoming aware of them, the details of any judgment or order of a court, arbitral tribunal or other tribunal or any order or sanction of any governmental or other regulatory body which is made against any member of the Group and which might have a Material Adverse Effect;
(d) promptly, its constitutional documents where these have been amended or varied;
(e) promptly, such further information and/or documents regarding:
(i) each Ship, goods transported on each Ship, its Earnings and its Insurances;
(ii) the Security Assets;
(iii) compliance of the Transaction Obligors with the terms of the Finance Documents;
(iv) the financial condition, business and operations of any member of the Group,
as any Finance Party (through the Facility Agent) may reasonably request; and
(f) promptly, such further information and/or documents as any Finance Party (through the Facility Agent) may reasonably request so as to enable such Finance Party to comply with any laws applicable to it or as may be required by any regulatory authority and which can be delivered without a breach of a confidentiality by that Obligor owed to a third party.
20.6 Notification of Default
(a) Each Obligor shall notify the Facility Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).
(b) Promptly upon a request by the Facility Agent, each Borrower shall supply to the Facility Agent 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).
20.7 Use of websites
(a) Each Obligor may satisfy its obligation under the Finance Documents to which it is a party to deliver any information in relation to those Lenders (the Website Lenders ) which accept this method of communication by posting this information onto an electronic website designated by the Borrowers and the Facility Agent (the Designated Website ) if:
(i) the Facility Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;
(ii) both the relevant Obligor and the Facility Agent are aware of the address of and any relevant password specifications for the Designated Website; and
(iii) the information is in a format previously agreed between the relevant Obligor and the Facility Agent.
If any Lender (a Paper Form Lender ) does not agree to the delivery of information electronically then the Facility Agent shall notify the Obligors accordingly and each Obligor shall supply the information to the Facility Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event each Obligor shall supply the Facility Agent with at least one copy in paper form of any information required to be provided by it.
(b) The Facility Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Obligors or any of them and the Facility Agent.
(c) An Obligor shall promptly upon becoming aware of its occurrence notify the Facility Agent if:
(i) the Designated Website cannot be accessed due to technical failure;
(ii) the password specifications for the Designated Website change;
(iii) any new information which is required to be provided under this Agreement is posted onto the Designated Website;
(iv) any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or
(v) if that Obligor becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.
If an Obligor notifies the Facility Agent under sub-paragraph (i) or (v) of paragraph (c) above, all information to be provided by the Obligors under this Agreement after the date of that notice shall be supplied in paper form unless and until the Facility Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.
(d) Any Website Lender may request, through the Facility Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website. The Obligors shall comply with any such request within 10 Business Days.
20.8 Know your customer checks
(a) If:
(i) 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;
(ii) any change in the status of an Obligor (or of a Holding Company of a Borrower) (including, without limitation, a change of ownership of an Obligor or of a Holding Company of an Obligor) after the date of this Agreement; or
(iii) a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges a Finance Party (or, in the case of sub-paragraph (iii) 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, each Obligor shall promptly upon the request of any Finance Party supply, or procure the supply of, such documentation and other evidence as is reasonably requested by a Servicing Party (for itself or on behalf of any other Finance Party) or any Lender (for itself or, in the case of the event described in sub-paragraph (iii) above, on behalf of any prospective new Lender) in order for such Finance Party or, in the case of the event described in sub-paragraph (iii) 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.
(b) Each Lender shall promptly upon the request of a Servicing Party supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Servicing Party (for itself) in order for that Servicing Party 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.
21 FINANCIAL COVENANTS
21.1 Financial covenants
The Parent Guarantor shall ensure that the consolidated financial position of the Group shall at all times from the Utilisation Date and thereafter during the Security Period be such that:
(a) Book Value Net Worth is not less than $275,000,000 in December 2016 and June 2016 and not less than $250,000,000 in December 2017;
(b) Cash and Cash Equivalents of not less than $35,000,000; and
(c) the ratio of Debt to Market Adjusted Tangible Fixed Assets shall be not more than 75 per cent.
The financial covenants contained in this Clause 21.1 ( Financial covenants ) shall be tested semi-annually on the basis of the annual and semi-annual financial statements provided under Clause 20.2 ( Financial statements ) and shall be confirmed in the relevant compliance certificate referred to in Clause 20.3 ( Compliance Certificate ).
21.2 Financial covenant definitions
The expressions used in this Clause 21 ( Financial Covenants ) shall be construed in accordance with IFRS:
Book Value Net Worth means the aggregate amount (without double counting) of the book value of the following:
(a) the amounts paid up, or credited as paid up, on the issued share capital of the Group;
(b) any credit balance on the consolidated profit and loss account of the Group; and
(c) any amount standing to the credit of any other consolidated capital and revenue reserves of the Group including any share premium account and capital redemption reserve,
less the aggregate amount (without double counting) of the following:
(d) any debt balance on the consolidated profit and loss account of the Group; and
(e) any reserves attributable to interests of minority shareholders in any subsidiary (whether direct or indirect) of the Group,
all as determined in accordance with IFRS applied in the preparation of the Latest Accounts but adjusted by:
(i) deducting any dividend or other distribution declared, recommended or made by the Group;
(ii) deducting any amount attributable to goodwill or any other intangible asset;
(iii) reflecting any variation required to be made to the asset value attributable to any ship owned by the Group in order to reflect the book value of any such ship;
(iv) excluding any amount attributable to deferred taxation;
(v) excluding any amount attributable to minority interests; and
(vi) eliminating inconsistencies (if any) between the accounting principles;
Cash and Cash Equivalents means the cash and cash equivalents set out in the Latest Accounts;
Debt means the aggregate (without double counting) of secured or unsecured bank loans, finance lease obligations, bonds and any other financial obligations included as a liability on the balance sheet in terms of IFRS, but excluding the mark to market of swaps and other derivative instruments and excluding contingent liabilities as shown in the Latest Accounts;
Latest Accounts means, at any date, the audited consolidated accounts of the Group most recently delivered to the Agent under Clause 20.2 ( Financial statements ); and
Market Adjusted Tangible Fixed Assets means the aggregate of the book value of:
(a) ships (including ships under construction) either wholly or partially owned by the Group; and
(b) land and buildings either wholly or partially owned by the Group,
as stated in the Latest Accounts adjusted by such amount to reflect the current open market value of such assets evidenced to the Facility Agents satisfaction and acceptable to the Lenders.
In the event that the Parent Guarantor agrees more favourable financial covenants to a particular lender or lenders in relation to any other facility, the financial covenants in this Clause 21 ( Financial Covenants ) shall be amended to reflect those more favourable financial covenants.
22 GENERAL UNDERTAKINGS
22.1 General
The undertakings in this Clause 22 ( General Undertakings ) remain in force throughout the Security Period except as the Facility Agent, acting with the authorisation of the Majority Lenders (or, where specified, all the Lenders) may otherwise permit.
22.2 Authorisations
Each Obligor shall, and shall procure that each other Transaction Obligor will, 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 Facility Agent of,
any Authorisation required under any law or regulation of a Relevant Jurisdiction or the state of the Approved Flag at any time of each Ship to enable it to:
(i) perform its obligations under the Transaction Documents to which it is a party;
(ii) ensure the legality, validity, enforceability or admissibility in evidence in any Relevant Jurisdiction or in the state of the Approved Flag at any time of each Ship, of any Transaction Document to which it is a party; and
(iii) own and operate each Ship (in the case of the Borrowers).
22.3 Compliance with laws
Each Obligor shall, and shall procure that each other member of the Group and each Affiliate of any of them will, comply in all respects with all laws and regulations to which it may be subject, including Sanctions.
22.4 Environmental compliance
Each Obligor shall, and shall procure that each other Transaction Obligor will, and the Parent Guarantor shall ensure that each other member of the Group will:
(a) comply with all Environmental Laws;
(b) obtain, maintain and ensure compliance with all requisite Environmental Approvals;
(c) implement procedures to monitor compliance with and to prevent liability under any Environmental Law,
where failure to do so has or is reasonably likely to have a Material Adverse Effect.
22.5 Environmental Claims
Each Obligor shall, and shall procure that each other Transaction Obligor will, (through the Parent Guarantor) promptly upon becoming aware of the same, inform the Facility Agent in writing of:
(a) any Environmental Claim against any member of the Group which is current, pending or threatened; and
(b) any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any member of the Group,
where the claim, if determined against that member of the Group, has or is reasonably likely to have a Material Adverse Effect.
22.6 Taxation
(a) Each Obligor shall, and shall procure that each other Transaction Obligor will, and the Parent Guarantor shall ensure that each other member of the Group will pay and discharge all Taxes imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:
(i) such payment is being contested in good faith;
(ii) adequate reserves are maintained for those Taxes and the costs required to contest them and both have been disclosed in its latest financial statements delivered to the Facility Agent under Clause 20.2 ( Financial statements ); and
(iii) such payment can be lawfully withheld and failure to pay those Taxes does not have or is not reasonably likely to have a Material Adverse Effect.
(b) No Obligor shall change its residence for Tax purposes.
22.7 Overseas companies
Each Obligor shall promptly inform the Facility Agent if it delivers to the Registrar particulars required under the Overseas Regulations of any UK Establishment and it shall comply with any directions given to it by the Facility Agent regarding the recording of any Transaction Security on the register which it is required to maintain under The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009.
22.8 No change to centre of main interests
No Obligor shall change the location of its centre of main interest (as that term is used in Article 3(1) of the Regulation) from that stated in relation to it in Clause 19.33 ( Centre of main interests and establishments ) and it will create no establishment (as that term is used in Article 2(h) of the Regulation) in any other jurisdiction.
22.9 Pari passu ranking
Each Obligor shall ensure that at all times any unsecured and unsubordinated claims of a Finance Party against it under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.
22.10 Title
(a) Each Borrower shall hold the legal title to, and own the entire beneficial interest in the Ship it owns, its Earnings and its Insurances;
(b) With effect on and from its creation or intended creation, each Obligor shall hold the legal title to, and own the entire beneficial interest in any other assets the subject of any Transaction Security created or intended to be created by such Obligor.
22.11 Negative pledge
(a) No Obligor shall create or permit to subsist any Security over any of its assets which are the subject of the Security created or intended to be created by the Finance Documents.
(b) No Obligor shall:
(i) sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor or any other member of the Group;
(ii) sell, transfer or otherwise dispose of any of its receivables on recourse terms;
(iii) enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or
(iv) enter into any other preferential arrangement having a similar effect,
in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.
(c) Paragraphs (a) and (b) above do not apply to any Permitted Security.
22.12 Disposals
(a) No Borrower shall enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset (including without limitation any Ship, its Earnings or its Insurances).
(b) Paragraph (a) above does not apply to any Charter as all Charters are subject to Clause 24.15 ( Restrictions on chartering, appointment of managers etc. ).
(c) Paragraph (a) does not apply to the sale of a Ship provided that the Borrowers comply with Clause 7.3 ( Mandatory prepayment on sale or Total Loss ) or to the sale of the shares in a Borrower provided that on the date of such sale of the shares the Borrowers prepay to the Facility Agent a sum equal to the amount which would have been payable pursuant to the provisions of Clause 7.3 ( Mandatory prepayment on sale or Total Loss ) if the Ship owned by the relevant Borrower was subject to a sale .
22.13 Merger
No Borrower shall enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction.
22.14 Change of Control
The Borrowers and the Parent Guarantor undertake that there will be no change in the direct legal or beneficial ownership or control of any Borrower from that advised to the Facility Agent as at the date of this Agreement.
22.15 Change of business
(a) The Parent Guarantor shall procure that no substantial change is made to the general nature of the business of the Parent Guarantor or the Group from that carried on at the date of this Agreement.
(b) No Borrower shall engage in any business other than the ownership and operation of its Ship.
22.16 Financial Indebtedness
No Borrower shall incur or permit to be outstanding any Financial Indebtedness except Permitted Financial Indebtedness.
22.17 Expenditure
No Borrower shall incur any expenditure, except for expenditure reasonably incurred in the ordinary course of owning, operating, maintaining and repairing its Ship or the administration of that Borrower.
22.18 Share capital
No Borrower shall:
(a) purchase, cancel or redeem any of its share capital;
(b) increase or reduce its authorised share capital;
(c) issue any further shares except to the Parent Guarantor and provided such new shares are made subject to the terms of the Shares Security applicable to that Borrower immediately upon the issue of such new shares in a manner satisfactory to the Facility Agent and the terms of that Shares Security are complied with;
(d) appoint any further director or secretary of that Borrower (unless the provisions of the Shares Security applicable to that Borrower are complied with).
22.19 Dividends
(a) No Borrower shall make or pay any dividend or other distribution (in cash or in kind) in respect of its share capital following the occurrence of a Potential Event of Default which is continuing or where the making or payment of such dividend or distribution would result in the occurrence of an Event of Default.
(b) The Parent Guarantor shall not make or pay any dividend or other distribution (in cash or in kind) in respect of its share capital following the occurrence of a Potential Event of Default which is continuing or where the making or payment of such dividend or distribution would result in the occurrence of an Event of Default.
22.20 People of significant control regime
Each Obligor shall (and the Parent Guarantor shall ensure that each other member of the Group will):
(a) within the relevant timeframe, comply with any notice it receives pursuant to Part 21A of the Companies Act 2006 from any company incorporated in the United Kingdom whose shares are the subject of the Transaction Security; and
(b) promptly provide the Security Agent with a copy of that notice.
22.21 Other transactions
No Borrower shall:
(a) be the creditor in respect of any loan or any form of credit to any person other than another Obligor and where such loan or form of credit is Permitted Financial Indebtedness;
(b) give or allow to be outstanding any guarantee or indemnity to or for the benefit of any person in respect of any obligation of any other person or enter into any document under which that Borrower assumes any liability of any other person other than any guarantee or indemnity given under the Finance Documents.
(c) enter into any material agreement other than:
(i) the Transaction Documents;
(ii) any other agreement expressly allowed under any other term of this Agreement; and
(d) enter into any transaction on terms which are, in any respect, less favourable to that Borrower than those which it could obtain in a bargain made at arms length; or
(e) acquire any shares or other securities other than US or UK Treasury bills and certificates of deposit issued by major North American or European banks.
22.22 Unlawfulness, invalidity and ranking; Security imperilled
No Obligor shall, and the Obligors shall procure that no other Transaction Obligor will, do (or fail to do) or cause or permit another person to do (or omit to do) anything which is likely to:
(a) make it unlawful for an Obligor to perform any of its obligations under the Transaction Documents;
(b) subject to the Legal Reservations, cause any obligation of an Obligor under the Transaction Documents to cease to be legal, valid, binding or enforceable if that cessation individually or
together with any other cessations materially or adversely affects the interests of the Secured Parties under the Finance Documents;
(c) subject to the Legal Reservations, cause any Transaction Document to cease to be in full force and effect;
(d) cause any Transaction Security to rank after, or lose its priority to, any other Security; and
(e) imperil or jeopardise the Transaction Security.
22.23 No variation, release etc. of Pool Agreement
(a) Unless notified and agreed to by the Lenders, no Borrower shall, whether by a document, by conduct, by acquiescence or in any other way:
(i) vary the terms of the Pool Agreement to which it is a party in any material respect;
(ii) release, waive, suspend or subordinate or permit to be lost or impaired any interest or right of any kind which such Borrower has at any time to, in or in connection with the Pool Agreement to which it is a party or in relation to any matter arising out of or in connection with the Pool Agreement to which it is a party;
(iii) waive any persons breach of the Pool Agreement to which it is a party; or
(iv) rescind or terminate the Pool Agreement to which it is a party or treat itself as discharged or relieved from further performance of any of its obligations or liabilities under the Pool Agreement to which it is a party.
22.24 Further assurance
(a) Each Obligor shall promptly, and in any event within the time period specified by the Security Agent do all such acts (including procuring or arranging any registration, notarisation or authentication or the giving of any notice) or execute or procure execution of all such documents (including assignments, transfers, mortgages, charges, notices, instructions, acknowledgments, proxies and powers of attorney), as the Security Agent may specify (and in such form as the Security Agent may require in favour of the Security Agent or its nominee(s)):
(i) to create, perfect, vest in favour of the Security Agent or protect the priority of the Security or any right of any kind created or intended to be created under or evidenced by the Finance Documents (which may include the execution of a mortgage, charge, assignment or other Security over all or any of the assets which are, or are intended to be, the subject of the Transaction Security) or for the exercise of any rights, powers and remedies of any of the Secured Parties provided by or pursuant to the Finance Documents or by law;
(ii) to confer on the Security Agent or confer on the Secured Parties Security over any property and assets of that Obligor located in any jurisdiction equivalent or similar to the Security intended to be conferred by or pursuant to the Finance Documents;
(iii) to facilitate or expedite the realisation and/or sale of, the transfer of title to or the grant of, any interest in or right relating to the assets which are, or are intended to be, the subject of the Transaction Security or to exercise any power specified in any Finance Document in respect of which the Security has become enforceable; and/or
(iv) to enable or assist the Security Agent to enter into any transaction to commence, defend or conduct any proceedings and/or to take any other action relating to any item of the Security Property.
(b) Each Obligor shall, and shall procure that each other Transaction Obligor will, (and the Parent Guarantor shall procure that each member of the Group will) take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Security conferred or intended to be conferred on the Security Agent or the Secured Parties by or pursuant to the Finance Documents.
(c) At the same time as an Obligor delivers to the Security Agent any document executed by itself pursuant to this Clause 22.24 ( Further assurance ), that Obligor shall deliver to the Security Agent a certificate signed by two of that Obligors directors or officers which shall:
(i) set out the text of a resolution of that Obligors directors specifically authorising the execution of the document specified by the Security Agent; and
(ii) state that either the resolution was duly passed at a meeting of the directors validly convened and held, throughout which a quorum of directors entitled to vote on the resolution was present, or that the resolution has been signed by all the directors or officers and is valid under that Obligors articles of association or other constitutional documents.
23 INSURANCE UNDERTAKINGS
23.1 General
The undertakings in this Clause 23 ( Insurance Undertakings ) remain in force from the date of this Agreement throughout the rest of the Security Period except as the Facility Agent, acting with the authorisation of the Majority Lenders (or, where specified, all the Lenders) may otherwise permit.
23.2 Maintenance of obligatory insurances
Each Borrower shall keep the Ship owned by it insured at its expense against:
(a) fire and usual marine risks (including hull and machinery and excess risks);
(b) war risks;
(c) protection and indemnity risks; and
(d) any other risks against which the Facility Agent acting on the instructions of the Majority Lenders considers, having regard to practices and other circumstances prevailing at the relevant time, it would be reasonable for that Borrower to insure and which are specified by the Facility Agent by notice to that Borrower.
23.3 Terms of obligatory insurances
Each Borrower shall effect such insurances:
(a) In dollars;
(b) in the case of fire and usual marine risks and war risks, in an amount on an agreed value basis at least the greater of:
(i) 120 per cent. of the Tranche relating to the Ship owned by it; and
(ii) the Market Value of that Ship;
(c) in the case of oil pollution liability risks, for an aggregate amount equal to the highest level of cover from time to time available under basic protection and indemnity club entry and in the international marine insurance market;
(d) in the case of protection and indemnity risks, in respect of the full tonnage of its Ship;
(e) on approved terms; and
(f) through Approved Brokers and with approved insurance companies and/or underwriters or, in the case of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations.
23.4 Further protections for the Finance Parties
In addition to the terms set out in Clause 23.3 ( Terms of obligatory insurances ), each Borrower shall procure that the obligatory insurances effected by it shall:
(a) subject always to paragraph (b), name that Borrower as the sole named insured unless the interest of every other named insured is limited:
(i) in respect of any obligatory insurances for hull and machinery and war risks;
(A) to any provable out-of-pocket expenses that it has incurred and which form part of any recoverable claim on underwriters; and
(B) to any third party liability claims where cover for such claims is provided by the policy (and then only in respect of discharge of any claims made against it); and
(ii) in respect of any obligatory insurances for protection and indemnity risks, to any recoveries it is entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against it;
and every other named insured has undertaken in writing to the Security Agent (in such form as it requires) that any deductible shall be apportioned between that Borrower and every other named insured in proportion to the gross claims made or paid by each of them and that it shall do all things necessary and provide all documents, evidence and information to enable the Security Agent to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;
(b) whenever the Facility Agent requires, name (or be amended to name) the Security Agent as additional named insured for its rights and interests, warranted no operational interest and with full waiver of rights of subrogation against the Security Agent, but without the Security Agent being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance Provided that this paragraph (b) shall not apply to the protection and indemnity risks;
(c) name the Security Agent as loss payee with such directions for payment as the Facility Agent may specify;
(d) provide that all payments by or on behalf of the insurers under the obligatory insurances to the Security Agent shall be made without set off, counterclaim or deductions or condition whatsoever;
(e) provide that the obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Security Agent or any other Finance Party; and
(f) provide that the Security Agent may make proof of loss if that Borrower fails to do so.
23.5 Renewal of obligatory insurances
Each Borrower shall:
(a) at least 21 days before the expiry of any obligatory insurance effected by it:
(i) notify the Facility Agent of the Approved Brokers (or other insurers) and any protection and indemnity or war risks association through or with which it proposes to renew that obligatory insurance and of the proposed terms of renewal; and
(ii) obtain the Facility Agents approval to the matters referred to in sub-paragraph (i) above;
(b) at least 14 days before the expiry of any obligatory insurance, renew that obligatory insurance in accordance with the Facility Agents approval pursuant to paragraph (a) above; and
(c) procure that the Approved Brokers and/or the approved war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal notify the Facility Agent in writing of the terms and conditions of the renewal.
23.6 Copies of policies; letters of undertaking
Each Borrower shall ensure that the Approved Brokers provide the Security Agent with:
(a) pro forma copies of all policies relating to the obligatory insurances which they are to effect or renew; and
(b) a letter or letters or undertaking in a form required by the Facility Agent and including undertakings by the Approved Brokers that:
(i) they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of Clause 23.4 ( Further protections for the Finance Parties );
(ii) they will hold such policies, and the benefit of such insurances, to the order of the Security Agent in accordance with such loss payable clause;
(iii) they will advise the Security Agent immediately of any material change to the terms of the obligatory insurances;
(iv) they will, if they have not received notice of renewal instructions from the relevant Borrower or its agents, notify the Security Agent not less than 14 days before the expiry of the obligatory insurances;
(v) if they receive instructions to renew the obligatory insurances, they will promptly notify the Facility Agent of the terms of the instructions;
(vi) they will not set off against any sum recoverable in respect of a claim relating to the Ship owned by that Borrower under such obligatory insurances any premiums or other amounts due to them or any other person whether in respect of that Ship or otherwise, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums or other amounts and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts; and
(vii) they will arrange for a separate policy to be issued in respect of the Ship owned by that Borrower forthwith upon being so requested by the Facility Agent.
23.7 Copies of certificates of entry
Each Borrower shall ensure that any protection and indemnity and/or war risks associations in which the Ship owned by it is entered provide the Security Agent with:
(a) a certified copy of the certificate of entry for that Ship;
(b) a letter or letters of undertaking in such form as may be required by the Facility Agent acting on the instructions of Majority Lenders; and
(c) a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to that Ship.
23.8 Deposit of original policies
Each Borrower shall ensure that all policies relating to obligatory insurances effected by it are deposited with the Approved Brokers through which the insurances are effected or renewed.
23.9 Payment of premiums
Each Borrower shall punctually pay all premiums or other sums payable in respect of the obligatory insurances effected by it and produce all relevant receipts when so required by the Facility Agent or the Security Agent.
23.10 Guarantees
Each Borrower shall ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect.
23.11 Compliance with terms of insurances
(a) No Borrower shall do or omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part.
(b) Without limiting paragraph (a) above, each Borrower shall:
(i) take all necessary action and comply with all requirements which may from time to time be applicable to the obligatory insurances, and (without limiting the obligation contained in sub-paragraph (iii) of paragraph (b) of Clause 23.6 ( Copies of policies; letters of undertaking )) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Facility Agent has not given its prior approval;
(ii) not make any changes relating to the classification or classification society or manager or operator of the Ship owned by it approved by the underwriters of the obligatory insurances;
(iii) make (and promptly supply copies to the Facility Agent of) all quarterly or other voyage declarations which may be required by the protection and indemnity risks association in which the Ship owned by it is entered to maintain cover for trading to the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990 or any other applicable legislation); and
(iv) not employ the Ship owned by it, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.
23.12 Alteration to terms of insurances
No Borrower shall make or agree to any material alteration to the terms of any obligatory insurance or waive any right relating to any obligatory insurance.
23.13 Settlement of claims
Each Borrower shall:
(a) not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty; and
(b) do all things necessary and provide all documents, evidence and information to enable the Security Agent to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.
23.14 Provision of copies of communications
Each Borrower shall provide the Security Agent, at the time of each such material communication, with copies of all written communications between that Borrower and:
(a) the Approved Brokers;
(b) the approved protection and indemnity and/or war risks associations; and
(c) the approved insurance companies and/or underwriters,
which relate directly or indirectly to:
(i) that Borrowers obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and
(ii) any credit arrangements made between that Borrower and any of the persons referred to in paragraphs (a) or (b) above relating wholly or partly to the effecting or maintenance of the obligatory insurances.
23.15 Provision of information
Each Borrower shall promptly provide the Facility Agent (or any persons which it may designate) with any information which the Facility Agent (or any such designated person) requests for the purpose of:
(a) obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurances effected or proposed to be effected; and/or
(b) effecting, maintaining or renewing any such insurances as are referred to in Clause 23.16 ( Mortgagees interest and additional perils insurances ) or dealing with or considering any matters relating to any such insurances,
and the Borrowers shall, forthwith upon demand, indemnify the Security Agent in respect of all fees and other expenses incurred by or for the account of the Security Agent in connection with any such report as is referred to in paragraph (a) above.
23.16 Mortgagees interest and additional perils insurances
(a) The Security Agent shall be entitled from time to time to effect, maintain and renew a mortgagees interest marine insurance and a mortgagees interest additional perils insurance in such amounts, on such terms, through such insurers and generally in such manner as the Security Agent may from time to time consider appropriate.
(b) The Borrowers shall upon demand fully indemnify the Security Agent in respect of all premiums and other expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any insurance referred to in paragraph (a) above or dealing with, or considering, any matter arising out of any such insurance.
24 GENERAL SHIP UNDERTAKINGS
24.1 General
The undertakings in this Clause 24 ( General Ship Undertakings ) remain in force on and from the date of this Agreement and throughout the rest of the Security Period except as the Facility Agent, acting with the authorisation of the Majority Lenders (or, where specified, all the Lenders) may otherwise permit.
24.2 Ships names and registration
Each Borrower shall, in respect of the Ship owned by it:
(a) keep that Ship registered in its name under the Approved Flag from time to time at its port of registration;
(b) not do or allow to be done anything as a result of which such registration might be suspended, cancelled or imperilled; and
(c) not change the name of that Ship,
provided that any change of flag of a Ship shall be subject to:
(i) that Ship remaining subject to Security securing the Secured Liabilities created by a first priority or preferred ship mortgage on that Ship and, if appropriate, a first priority deed of covenant collateral to that mortgage (or equivalent first priority Security) on substantially the same terms as the Mortgage on that Ship and related Deed of Covenant and on such other terms and in such other form as the Facility Agent, acting with the authorisation of the Lenders, shall approve or require; and
(ii) the execution of such other documentation amending and supplementing the Finance Documents as the Facility Agent, acting with the authorisation of the Majority Lenders, shall approve or require.
24.3 Repair and classification
Each Borrower shall keep the Ship owned by it in a good and safe condition and state of repair:
(a) consistent with first class ship ownership and management practice; and
(b) so as to maintain the Approved Classification free of overdue recommendations and conditions affecting that Ships class.
24.4 Modifications
No Borrower shall make any modification or repairs to, or replacement of, any Ship or equipment installed on it which would or might materially alter the structure, type or performance characteristics of that Ship or materially reduce its value.
24.5 Removal and installation of parts
(a) Subject to paragraph (b) below, no Borrower shall remove any material part of any Ship, or any item of equipment installed on any Ship unless:
(i) the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed;
(ii) the replacement part or item is free from any Security in favour of any person other than the Security Agent; and
(iii) the replacement part or item becomes, on installation on that Ship, the property of that Borrower and subject to the security constituted by the Mortgage on that Ship and the related Deed of Covenant.
(b) A Borrower may install equipment owned by a third party if the equipment can be removed without any risk of damage to the Ship owned by that Borrower.
24.6 Surveys
(a) Each Borrower shall submit the Ship owned by it regularly to all periodic or other surveys which may be required for classification purposes and, if so required by the Facility Agent acting on the instructions of the Majority Lenders, provide the Facility Agent, with copies of all survey reports.
(b) The Facility Agent shall have the right to have a technical survey carried out at any time on each Ship but not more than once per year (unless an Event of Default or Major Casualty has occurred, in which case as often as the Facility Agent may require) provided that the Facility Agent provides reasonable notice of the intended date of such inspection and such inspection does not delay or interfere with that Ships operation, loading or unloading. The Borrowers shall pay the reasonable cost of such survey or surveys of each Ship at the Facility Agents request.
24.7 Inspection
Each Borrower shall permit the Security Agent (acting through surveyors or other persons appointed by it for that purpose) to board the Ship owned by it at all reasonable times and at least once per calendar year to inspect its condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections. The Borrowers shall pay the cost of one inspection per Ship per annum.
24.8 Prevention of and release from arrest
(a) Each Borrower shall, in respect of the Ship owned by it, promptly discharge amounts due in respect of:
(i) all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against that Ship, its Earnings or its Insurances;
(ii) all Taxes, dues and other amounts charged in respect of that Ship, its Earnings or its Insurances; and
(iii) all other outgoings whatsoever in respect of that Ship, its Earnings or its Insurances.
(b) Each Borrower shall immediately upon receiving notice of the arrest of the Ship owned by it or of its detention in exercise or purported exercise of any lien or claim, take all steps necessary to procure its release by providing bail or otherwise as the circumstances may require.
24.9 Compliance with laws etc.
Each Borrower shall:
(a) comply, or procure compliance with all laws or regulations:
(i) relating to its business generally; and
(ii) relating to the Ship owned by it, its ownership, employment, operation, management and registration,
including, but not limited to, the ISM Code, the ISPS Code, all Environmental Laws, all Sanctions and the laws of the Approved Flag;
(b) obtain, comply with and do all that is necessary to maintain in full force and effect any Environmental Approvals; and
(c) without limiting paragraph (a) above, not employ the Ship owned by it nor allow its employment, operation or management in any manner contrary to any law or regulation including but not limited to the ISM Code, the ISPS Code, all Environmental Laws and all Sanctions.
24.10 ISPS Code
Without limiting paragraph (a) of Clause 24.9 ( Compliance with laws etc. ), each Borrower shall:
(a) procure that the Ship owned by it and the company responsible for that Ships compliance with the ISPS Code comply with the ISPS Code; and
(b) maintain an ISSC for that Ship; and
(c) notify the Facility Agent immediately in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC.
24.11 Sanctions and Ship trading
Without limiting Clause 24.9 ( Compliance with laws etc. ), each Borrower shall procure:
(a) that the Ship owned by it shall not be used by or for the benefit of a Prohibited Person;
(b) that such Ship shall not be used in trading in any manner contrary to Sanctions (or which could be contrary to Sanctions if Sanctions were binding on each Transaction Obligor);
(c) that such Ship shall not be traded in any manner which would trigger the operation of any sanctions limitation or exclusion clause (or similar) in the Insurances; and
(d) that each charterparty in respect of that Ship shall contain, for the benefit of that Borrower, language which gives effect to the provisions of paragraph (c) of Clause 24.9 ( Compliance with laws etc. ) as regards Sanctions and of this Clause 24.11 ( Sanctions and Ship trading ) and which permits refusal of employment or voyage orders if compliance would result in a
breach of Sanctions (or which would result in a breach of Sanctions if Sanctions were binding on each Transaction Obligor).
24.12 Trading in war zones
In the event of hostilities in any part of the world (whether war is declared or not), no Borrower shall cause or permit any Ship to enter or trade to any zone which is declared a war zone by any government or by that Ships war risks insurers unless:
(a) the prior written consent of the Security Agent acting on the instructions of the Lenders has been given such approval deemed to be given in relation to the Indian Ocean Piracy Zone, West African Piracy Zone and Venezuela provided that any conditions imposed under the relevant war risk policy are complied with; and
(b) that Borrower has (at its expense) effected any special, additional or modified insurance cover which (i) the Security Agent acting on the instructions of the Lenders may require or (ii) in the case of the Indian Ocean Piracy Zone, the West African Piracy Zone and Venezuela, is customary in relation to such war zones.
24.13 Provision of information
Without prejudice to Clause 20.5 ( Information: miscellaneous ) each Borrower shall, in respect of the Ship owned by it, promptly provide the Facility Agent with any information which it requests regarding:
(a) that Ship, its employment, position and engagements;
(b) the Earnings and payments and amounts due to its master and crew;
(c) any expenditure incurred, or likely to be incurred, in connection with the operation, maintenance or repair of that Ship and any payments made by it in respect of that Ship;
(d) any towages and salvages; and
(e) its compliance, the Approved Managers compliance and the compliance of that Ship with the ISM Code and the ISPS Code,
and, upon the Facility Agents request, promptly provide copies of any current Charter relating to that Ship, of any current guarantee of any such Charter, the Ships Safety Management Certificate and any relevant Document of Compliance.
24.14 Notification of certain events
Each Borrower shall, in respect of the Ship owned by it, immediately notify the Facility Agent by fax, confirmed forthwith by letter, of:
(a) any casualty to that Ship which is or is likely to be or to become a Major Casualty;
(b) any occurrence as a result of which that Ship has become or is, by the passing of time or otherwise, likely to become a Total Loss;
(c) any requisition of that Ship for hire;
(d) any requirement or recommendation made in relation to that Ship by any insurer or classification society or by any competent authority which is not immediately complied with;
(e) any arrest or detention of that Ship or any exercise or purported exercise of any lien on that Ship or the Earnings;
(f) any intended dry docking of that Ship;
(g) any Environmental Claim made against that Borrower or in connection with that Ship, or any Environmental Incident;
(h) any claim for breach of the ISM Code or the ISPS Code being made against that Borrower, an Approved Manager or otherwise in connection with that Ship; or
(i) any other matter, event or incident, actual or threatened, the effect of which will or could lead to the ISM Code or the ISPS Code not being complied with,
and each Borrower shall keep the Facility Agent advised in writing on a regular basis and in such detail as the Facility Agent shall require as to that Borrowers, any such Approved Managers or any other persons response to any of those events or matters.
24.15 Restrictions on chartering, appointment of managers etc.
No Borrower shall, in relation to the Ship owned by it:
(a) let that Ship on demise charter for any period;
(b) enter into any time, voyage or consecutive voyage charter in respect of that Ship other than a Permitted Charter;
(c) amend, supplement or terminate a Management Agreement;
(d) appoint a manager of that Ship other than the Approved Commercial Manager and the Approved Technical Manager or agree to any alteration to the terms of an Approved Managers appointment;
(e) de activate or lay up that Ship; or
(f) put that Ship into the possession of any person for the purpose of work being done upon it in an amount exceeding or likely to exceed $2,000,000 (or the equivalent in any other currency) unless that person has first given to the Security Agent and in terms satisfactory to it a written undertaking not to exercise any lien on that Ship or its Earnings for the cost of such work or for any other reason.
24.16 Notice of Mortgage
Each Borrower shall keep the relevant Mortgage registered against the Ship owned by it as a valid first priority mortgage, carry on board that Ship a certified copy of the relevant Mortgage and place and maintain in a conspicuous place in the navigation room and the masters cabin of that Ship a framed printed notice stating that that Ship is mortgaged by that Borrower to the Security Agent.
24.17 Sharing of Earnings
No Borrower shall enter into any agreement or arrangement for the sharing of any Earnings other than for the purposes of this Agreement or except in relation to a pool or pooling arrangements for a Ship which has been approved in writing by the Facility Agent with the authorisation of the Lenders.
24.18 Notification of compliance
Each Borrower shall promptly provide the Facility Agent from time to time with evidence (in such form as the Facility Agent requires) that it is complying with this Clause 24 ( General Ship Undertakings ).
25 SECURITY COVER
25.1 Minimum required security cover
Clause 25.2 ( Provision of additional security; prepayment ) applies if, the Facility Agent notifies the Borrowers that:
(i) the aggregate Market Value of each Ship then subject to a Mortgage; plus
(ii) the net realisable value of additional Security previously provided under this Clause 25 ( Security Cover ),
is below 130 per cent. of the Loan.
25.2 Provision of additional security; prepayment
(a) If the Facility Agent serves a notice on the Borrowers under Clause 25.1 ( Minimum required security cover ), the Borrowers shall, on or before the date falling one Month after the date (the Prepayment Date ) on which the Facility Agents notice is served, prepay such part of the Loan as shall eliminate the shortfall.
(b) A Borrower may, instead of making a prepayment as described in paragraph (a) above, provide, or ensure that a third party has provided, additional security which, in the opinion of the Facility Agent acting on the instructions of the Majority Lenders:
(i) has a net realisable value at least equal to the shortfall; and
(ii) is documented in such terms as the Facility Agent may approve or require,
before the Prepayment Date; and conditional upon such security being provided in such manner, it shall satisfy such prepayment obligation.
25.3 Value of additional vessel security
The net realisable value of any additional security which is provided under Clause 25.2 ( Provision of additional security; prepayment ) and which consists of Security over a vessel shall be the Market Value of the vessel concerned.
25.4 Valuations binding
Any valuation under this Clause 25 ( Security Cover ) shall be binding and conclusive as regards each Borrower.
25.5 Provision of information
(a) Each Borrower shall promptly provide the Facility Agent and any shipbroker acting under this Clause 25 ( Security Cover ) with any information which the Facility Agent or the shipbroker may request for the purposes of the valuation.
(b) If a Borrower fails to provide the information referred to in paragraph (a) above by the date specified in the request, the valuation may be made on any basis and assumptions which the shipbroker or the Facility Agent considers prudent.
25.6 Prepayment mechanism
Any prepayment pursuant to Clause 25.2 ( Provision of additional security; prepayment ) shall be made in accordance with the relevant provisions of Clause 7 ( Prepayment and Cancellation ) and shall be treated as a voluntary prepayment pursuant to Clause 7.2
( Voluntary prepayment of Loan ) but ignoring any restriction as to prepayments being made on the last day of the Interest Period and shall be applied pro rata against the Repayment Instalments and the Balloon Instalment.
25.7 Provision of valuations
(a) The Facility Agent shall be entitled to obtain valuations of the Ships and any other vessel over which additional Security has been created in accordance with Clause 25.3 ( Value of additional vessel security ), from an Approved Valuer, to enable the Facility Agent to determine the Market Value of that Ship.
(b) The valuations referred to in this Clause 25.7 ( Provision of valuations ) are to be obtained:
(i) on or before the Utilisation Date (not to be obtained earlier than 14 days prior to the Utilisation Date);
(ii) following the Utilisation Date, on the last day of each financial quarter in each year during the Security Period; and
(iii) at any other time required by the Facility Agent in its absolute discretion.
(c) The valuations referred to in paragraph (b)(i) and (b)(ii) of Clause 25.7 ( Provision of valuations ) shall be at the Borrowers cost.
(d) The valuations referred to in paragraph (b)(iii) of Clause 25.7 ( Provision of valuations ) shall be at the Facility Agents cost unless (i) the valuations provided under paragraph (b)(iii) of Clause 25.7 ( Provision of valuations ) show a breach of Clause 25.1 ( Minimum required security cover ) or (ii) an Event of Default has occurred which is continuing, in which cases any additional valuations will be at the Borrowers cost.
26 ACCOUNTS AND APPLICATION OF EARNINGS
26.1 Accounts
No Borrower may, without the prior consent of the Facility Agent, maintain any bank account other than its Earnings Account and the Retention Account.
26.2 Payment of Earnings
Each Borrower shall ensure that, subject only to the provisions of the General Assignment to which it is a party, all the Earnings in respect of the Ship owned by it are paid in to its Earnings Account.
26.3 Monthly retentions
The Borrowers shall ensure that, in each calendar month following the first Utilisation Date, on such dates as the Facility Agent may from time to time specify, there is transferred to the Retention Account out of the aggregate Earnings received by the Borrowers in their respective Earnings Accounts during the preceding calendar month one-third of the amount of any Repayment Instalment falling due under Clause 6.1 ( Repayment of Loan ) on the next Repayment Date.
26.4 Shortfall in Earnings
(a) If the aggregate of the credit balance on each Earnings Account is insufficient in any calendar month for the required amount to be transferred to the Retention Account under Clause 26.3 ( Monthly retentions ), the Borrowers shall make up the amount of the insufficiency on demand from the Facility Agent.
(b) Without prejudicing the Facility Agents right to make such demand at any time, the Facility Agent may, if so authorised by the Majority Lenders, permit the Borrowers to make up all or part of the insufficiency by increasing the amount of any transfer under Clause 26.3 ( Monthly retentions ) from the Earnings received in the next or subsequent calendar months.
26.5 Application of retentions
(a) The Security Agent has sole signing rights in relation to the Retention Account.
(b) Until an Event of Default occurs, the Facility Agent shall instruct the Security Agent to release to it, on each Repayment Date and on each Interest Payment Date, for distribution to the Finance Parties in accordance with Clause 34.2 ( Distributions by the Facility Agent ) so much of the then balance on the Retention Account as equals:
(i) any Repayment Instalment due on that Repayment Date;
(ii) the amount of interest payable on that Interest Payment Date;
in discharge of the Borrowers liability for that Repayment Instalment, or that interest as the case may be.
26.6 Interest accrued on Retention Account
Any credit balance on the Retention Account shall bear interest at the rate from time to time offered by the Account Bank to its customers for dollar deposits of similar amounts and for periods similar to those for which such balances appear to the Account Bank likely to remain on the Retention Account.
26.7 Release of accrued interest
Interest accruing under Clause 26.6 ( Interest accrued on Retention Account ) shall be credited to the Retention Account and, to the extent not applied previously pursuant to Clause 26.5 ( Application of retentions ), shall be released to the Borrowers at the end of the Security Period.
26.8 Location of Accounts
Each Borrower shall promptly:
(a) comply with any requirement of the Facility Agent as to the location or relocation of its Earnings Account and the Retention Account (or either of them); and
(b) execute any documents which the Facility Agent specifies to create or maintain in favour of the Security Agent Security over (and/or rights of set-off, consolidation or other rights in relation to) the Earnings Accounts and the Retention Account.
27 EVENTS OF DEFAULT
27.1 General
Each of the events or circumstances set out in this Clause 27 ( Events of Default ) is an Event of Default except for Clause 27.19 ( Acceleration ) and Clause 27.20 ( Enforcement of security ).
27.2 Non-payment
An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless:
(a) its failure to pay is caused by:
(i) administrative or technical error; or
(ii) a Disruption Event; and
(b) payment is made within three Business Days of its due date.
27.3 Specific obligations
A breach occurs of Clause 4.4 ( Waiver of conditions precedent ), Clause 21 ( Financial Covenants ), Clause 22.10 ( Title ), Clause 22.11 ( Negative pledge ), Clause 22.22 ( Unlawfulness, invalidity and ranking; Security imperilled ), Clause 24.11 ( Sanctions and Ship trading ), Clause 23.2 ( Maintenance of obligatory insurances ), Clause 23.3 ( Terms of obligatory insurances ), Clause 23.5 ( Renewal of obligatory insurances ) or Clause 25 ( Security Cover ).
27.4 Other obligations
(a) A Transaction Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 27.2 ( Non-payment ) and Clause 27.3 ( Specific obligations )).
(b) No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within ten Business Days of the Facility Agent giving notice to the Borrowers or (if earlier) any Transaction Obligor becoming aware of the failure to comply.
27.5 Misrepresentation
(a) Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made.
(b) No Event of Default under paragraph (a) of this Clause 27.5 ( Misrepresentation ) will occur if the underlying circumstances leading to the incorrect representation or statement are capable of remedy (in the opinion of the Majority Lenders (acting reasonably)) and are remedied within 10 Business Days of the Facility Agent giving notice to the Borrowers or (if earlier) any Transaction Obligor becoming aware of the failure to comply provided that the failure to comply does not have or is not reasonably likely to have a Material Adverse Effect.
27.6 Cross default
(a) Any Financial Indebtedness of any Obligor is not paid when due nor within any originally applicable grace period.
(b) Any Financial Indebtedness of any Obligor is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).
(c) Any commitment for any Financial Indebtedness of any Obligor is cancelled or suspended by a creditor of any Obligor as a result of an event of default (however described).
(d) Any creditor of any Obligor becomes entitled to declare any Financial Indebtedness of any member of the Group (which is not a dormant company or which does not have gross assets of less than $50,000) due and payable prior to its specified maturity as a result of an event of default (however described).
(e) No Event of Default will occur under this paragraph (e) of this Clause 27.6 ( Cross default ) if the aggregate amount of Financial Indebtedness or Commitment for Financial Indebtedness falling with paragraphs (a) to (d) of this Clause 27.6 ( Cross default ) is less than $2,250,000 (or
its equivalent in any other currency or currencies) in relation to the Parent Guarantor or $100,000 (or its equivalent in any other currency or currencies) in relation to any Borrower.
27.7 Insolvency
(a) An Obligor or any member of the Group:
(i) is unable or admits inability to pay its debts as they fall due;
(ii) is deemed to, or is declared to, be unable to pay its debts under applicable law;
(iii) suspends or threatens to suspend making payments on any of its debts; or
(iv) by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors (excluding any Finance Party in its capacity as such) with a view to rescheduling any of its indebtedness.
(b) The value of the assets of any Obligor or any member of the Group is less than its liabilities (excluding, in the case of any Obligor, any shareholder loans falling within paragraph (b) of the definition of Permitted Financial Indebtedness and, in the case of the Parent Guarantor, any loans owed to any of its shareholders).
(c) A moratorium is declared in respect of any indebtedness of Obligor or member of the Group. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.
27.8 Insolvency proceedings
(a) Any corporate action, legal proceedings or other procedure or step is taken in relation to:
(i) the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of any member of the Group other than a solvent liquidation or reorganisation of any member of the Group which is not an Obligor;
(ii) a composition, compromise, assignment or arrangement with any creditor of any member of the Group;
(iii) the appointment of a liquidator (other than in respect of a solvent liquidation of a member of the Group which is not an Obligor), receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of any member of the Group or any of its assets; or
(iv) enforcement of any Security over any assets of any member of the Group,
or any analogous procedure or step is taken in any jurisdiction.
(b) Paragraph (a) above shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement.
27.9 Creditors process
(a) Any expropriation, attachment, sequestration, distress or execution (or any analogous process in any jurisdiction) affects any asset or assets of an Obligor or a member of the Group.
(b) No Event of Default under paragraph (a) of this Clause 27.9 ( Creditors process ) will occur if the failure to comply is capable of remedy (in the opinion of the Majority Lenders (acting reasonably)) and is remedied within 10 Business Days of the Facility Agent giving notice to the Obligors or (if earlier) an Obligor, a member of the Group or (in the case of such event occurring in relation to the Parent Guarantor) the Parent Guarantor becoming aware of the failure to comply.
27.10 Ownership of the Obligors
(a) An Obligor (other than the Parent Guarantor) is not or ceases to be a 100% directly owned Subsidiary of the Parent Guarantor.
(b) Any person or group of persons acting in concert gains control of the Parent Guarantor.
(c) For the purpose of paragraph (b) above control means:
(i) the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:
(A) cast, or control the casting of, more than 51 per cent. of the maximum number of votes that might be cast at a general meeting of the Parent Guarantor; or
(B) appoint or remove all, or the majority, of the directors or other equivalent officers of the Parent Guarantor; or
(C) give directions with respect to the operating and financial policies of the Parent Guarantor with which the directors or other equivalent officers of the Parent Guarantor are obliged to comply; and/or
(ii) the holding beneficially of more than 51 per cent. of the issued share capital of the Parent Guarantor (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital).
(d) For the purpose of paragraph (b) above acting in concert means a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition directly or indirectly of shares in the Parent Guarantor by any of them, either directly or indirectly, to obtain or consolidate control of the Parent Guarantor.
27.11 Unlawfulness, invalidity and ranking
(a) Subject to the Legal Reservations, it is or becomes unlawful for a Transaction Obligor to perform any of its obligations under the Finance Documents.
(b) Subject to the Legal Reservations, any obligation of a Transaction Obligor under the Finance Documents is not or ceases to be legal, valid, binding or enforceable if that cessation individually or together with any other cessations materially or adversely affects the interests of the Secured Parties under the Finance Documents.
(c) Subject to the Legal Reservations, any Finance Document ceases to be in full force and effect or to be continuing or is or purports to be determined or any Transaction Security is alleged by a party to it (other than a Finance Party) to be ineffective.
(d) Subject to the Legal Reservations, any Transaction Security proves to have ranked after, or loses its priority to, any other Security.
27.12 Security imperilled
Subject to the Legal Reservations, any Security created or intended to be created by a Finance Document is in any way imperilled or in jeopardy.
27.13 Cessation of business
Any Obligor suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business.
27.14 Arrest
Any arrest of a Ship or its detention in the exercise or the purported exercise of any lien or claim unless it is redelivered to the full control of the relevant Borrower within 30 days of such arrest or detention.
27.15 Expropriation
The authority or ability of any member of the Group to conduct its business is limited or wholly or substantially curtailed by any seizure, expropriation, nationalisation, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority or other person in relation to any member of the Group or any of its assets other than:
(a) an arrest or detention of a Ship referred to in Clause 27.14 ( Arrest ); or
(b) any Requisition.
27.16 Repudiation and rescission of agreements
An Obligor (or any other relevant party) rescinds or purports to rescind or repudiates or purports to repudiate a Transaction Document or any of the Transaction Security or evidences an intention to rescind or repudiate a Transaction Document or any Transaction Security.
27.17 Litigation
Any litigation, arbitration, administrative, governmental, regulatory or other investigations, proceedings or disputes are commenced or threatened, or any judgment or order of a court, arbitral tribunal or other tribunal or any order or sanction of any governmental or other regulatory body is made, in relation to any of the Transaction Documents or the transactions contemplated in any of the Transaction Documents or against any member of the Group or its assets which has or is reasonably likely to have a Material Adverse Effect.
27.18 Material adverse change
Any event or circumstance occurs which has or is reasonably likely to have a Material Adverse Effect.
27.19 Acceleration
On and at any time after the occurrence of an Event of Default which is continuing the Facility Agent may, and shall if so directed by the Majority Lenders, by notice to the Borrowers:
(a) cancel the Total Commitments, whereupon they shall immediately be cancelled;
(b) declare that all or part of the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon it shall become immediately due and payable;
(c) declare that all or part of the Loan be payable on demand, whereupon it shall immediately become payable on demand by the Facility Agent acting on the instructions of the Majority Lenders; and/or
(d) exercise or direct the Security Agent to exercise any or all of its rights, remedies, powers or discretions under the Finance Documents,
and the Facility Agent may serve notices under paragraphs (a), (b) and (c) above simultaneously or on different dates and the Security Agent may take any action referred to in Clause 27.20 ( Enforcement of security ) if no such notice is served or simultaneously with or at any time after the service of any of such notice.
27.20 Enforcement of security
On and at any time after the occurrence of an Event of Default which is continuing the Security Agent may, and shall if so directed by the Majority Lenders, take any action which, as a result of the Event of Default or any notice served under Clause 27.19 ( Acceleration ), the Security Agent is entitled to take under any Finance Document or any applicable law or regulation.
SECTION 9
CHANGES TO PARTIES
28 CHANGES TO THE LENDERS
28.1 Assignments and transfers by the Lenders
Subject to this Clause 28 ( Changes to the Lenders ), a Lender (the Existing Lender ) may:
(a) assign any of its rights; or
(b) transfer by novation any of its rights and obligations,
under the Finance Documents to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the New Lender ).
28.2 Conditions of assignment or transfer
(a) The consent of the Borrowers is required for an assignment or transfer by an Existing Lender, unless the assignment or transfer is:
(i) to another Lender or an Affiliate of a Lender;
(i) to another first class international bank or financial institution, insurer, social security fund, pension fund, capital investment company, financial intermediary or special purpose vehicle associated to any of them;
(ii) a trust corporation, fund or other person which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets and which is advised by or the assets of which are managed or serviced by a Lender; or
(iii) made at a time when a Default is continuing.
(b) The consent of the Borrowers to an assignment or transfer must not be unreasonably withheld or delayed. Each Borrower will be deemed to have given its consent five Business Days after the Existing Lender has requested it unless consent is expressly refused by that Borrower within that time.
(c) The consent of a Borrower to an assignment or transfer must not be withheld solely because the assignment or transfer may result in an increase to any amount payable under Clause 14.3 ( Mandatory Cost ).
(d) An assignment will only be effective on:
(i) receipt by the Facility Agent (whether in the Assignment Agreement or otherwise) of written confirmation from the New Lender (in form and substance satisfactory to the Facility Agent) that the New Lender will assume the same obligations to the other Secured Parties as it would have been under if it were an Original Lender; and
(ii) performance by the Facility Agent of all necessary know your customer or other similar checks under all applicable laws and regulations in relation to such assignment to a New Lender, the completion of which the Facility Agent shall promptly notify to the Existing Lender and the New Lender.
(e) Each Obligor on behalf of itself and each Transaction Obligor agrees that all rights and interests (present, future or contingent) which the Existing Lender has under or by virtue of the Finance Documents are assigned to the New Lender absolutely, free of any defects in the Existing Lenders title and of any rights or equities which the Borrower or any other Transaction Obligor had against the Existing Lender.
(f) A transfer will only be effective if the procedure set out in Clause 28.5 ( Procedure for transfer ) is complied with.
(g) If:
(i) a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and
(ii) as a result of circumstances existing at the date the assignment, transfer or change occurs, a Transaction Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 12 ( Tax Gross Up and Indemnities ) or under that clause as incorporated by reference or in full in any other Finance Document or Clause 13 ( Increased Costs ),
then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred. This paragraph (g) shall not apply in respect of an assignment or transfer made in the ordinary course of the primary syndication of the Facility.
(h) Each New Lender, by executing the relevant Transfer Certificate or Assignment Agreement, confirms, for the avoidance of doubt, that the Facility Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the transfer or assignment becomes effective in accordance with this Agreement and that it is bound by that decision to the same extent as the Existing Lender would have been had it remained a Lender.
28.3 Assignment or transfer fee
The New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Facility Agent (for its own account) a fee of $5,000.
28.4 Limitation of responsibility of Existing Lenders
(a) Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:
(i) the legality, validity, effectiveness, adequacy or enforceability of the Transaction Documents, the Transaction Security or any other documents;
(ii) the financial condition of any Transaction Obligor;
(iii) the performance and observance by any Transaction Obligor of its obligations under the Transaction Documents or any other documents; or
(iv) the accuracy of any statements (whether written or oral) made in or in connection with any Transaction Document or any other document,
and any representations or warranties implied by law are excluded.
(b) Each New Lender confirms to the Existing Lender and the other Finance Parties and the Secured Parties that it:
(i) has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Transaction Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender or any other Finance Party in connection with any Transaction Document or the Transaction Security; and
(ii) will continue to make its own independent appraisal of the creditworthiness of each Transaction Obligor and its related entities throughout the Security Period.
(c) Nothing in any Finance Document obliges an Existing Lender to:
(i) accept a re-transfer or re-assignment from a New Lender of any of the rights and obligations assigned or transferred under this Clause 28 ( Changes to the Lenders ); or
(ii) support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Transaction Obligor of its obligations under the Transaction Documents or otherwise.
28.5 Procedure for transfer
(a) Subject to the conditions set out in Clause 28.2 ( Conditions of assignment or transfer ), a transfer is effected in accordance with paragraph (c) below when the Facility Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Facility Agent shall, subject to paragraph (b) below as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with this Agreement and delivered in accordance with this Agreement, execute that Transfer Certificate.
(b) The Facility Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary know your customer or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.
(c) Subject to Clause 28.9 ( Pro rata interest settlement ), on the Transfer Date:
(i) to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents and in respect of the Transaction Security, each of the Obligors and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and in respect of the Transaction Security and their respective rights against one another under the Finance Documents and in respect of the Transaction Security shall be cancelled (being the Discharged Rights and Obligations );
(ii) each of the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Transaction Obligor and the New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender;
(iii) the Facility Agent, the Security Agent, the Arranger, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves and in respect of the Transaction Security as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent
the Facility Agent, the Security Agent, the Arranger and the Existing Lenders shall each be released from further obligations to each other under the Finance Documents; and
(iv) the New Lender shall become a Party as a Lender.
28.6 Procedure for assignment
(a) Subject to the conditions set out in Clause 28.2 ( Conditions of assignment or transfer ) an assignment may be effected in accordance with paragraph (c) below when the Facility Agent executes an otherwise duly completed Assignment Agreement delivered to it by the Existing Lender and the New Lender. The Facility Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Assignment Agreement appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Assignment Agreement.
(b) The Facility Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary know your customer or other similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.
(c) Subject to Clause 28.9 ( Pro rata interest settlement ), on the Transfer Date:
(i) the Existing Lender will assign absolutely to the New Lender its rights under the Finance Documents and in respect of the Transaction Security expressed to be the subject of the assignment in the Assignment Agreement;
(ii) the Existing Lender will be released from the obligations (the Relevant Obligations ) expressed to be the subject of the release in the Assignment Agreement (and any corresponding obligations by which it is bound in respect of the Transaction Security); and
(iii) the New Lender shall become a Party as a Lender and will be bound by obligations equivalent to the Relevant Obligations.
(d) Lenders may utilise procedures other than those set out in this Clause 28.6 ( Procedure for assignment ) to assign their rights under the Finance Documents (but not, without the consent of the relevant Obligor or unless in accordance with Clause 28.5 ( Procedure for transfer ), to obtain a release by that Obligor from the obligations owed to that Obligor by the Lenders nor the assumption of equivalent obligations by a New Lender) provided that they comply with the conditions set out in Clause 28.2 ( Conditions of assignment or transfer ).
28.7 Copy of Transfer Certificate or Assignment Agreement to Borrowers
The Facility Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate or an Assignment Agreement, send to the Borrowers a copy of that Transfer Certificate or Assignment Agreement.
28.8 Security over Lenders rights
In addition to the other rights provided to Lenders under this Clause 28 ( Changes to the Lenders ), each Lender may without consulting with or obtaining consent from any Obligor, at any time charge, assign or otherwise create Security in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:
(a) any charge, assignment or other Security to secure obligations to a federal reserve or central bank; and
(b) any charge, assignment or other Security granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities,
except that no such charge, assignment or Security shall:
(i) release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security for the Lender as a party to any of the Finance Documents; or
(ii) require any payments to be made by an Obligor other than or in excess of, or grant to any person any more extensive rights than, those required to be made or granted to the relevant Lender under the Finance Documents.
28.9 Pro rata interest settlement
If the Facility Agent has notified the Lenders that it is able to distribute interest payments on a pro rata basis to Existing Lenders and New Lenders then (in respect of any transfer pursuant to Clause 28.5 ( Procedure for transfer ) or any assignment pursuant to Clause 28.6 ( Procedure for assignment ) the Transfer Date of which, in each case, is after the date of such notification and is not on the last day of an Interest Period):
(a) any interest or fees in respect of the relevant participation which are expressed to accrue by reference to the lapse of time shall continue to accrue in favour of the Existing Lender up to but excluding the Transfer Date ( Accrued Amounts ) and shall become due and payable to the Existing Lender (without further interest accruing on them) on the last day of the current Interest Period (or, if the Interest Period is longer than six Months, on the next of the dates which falls at six Monthly intervals after the first day of that Interest Period); and
(b) the rights assigned or transferred by the Existing Lender will not include the right to the Accrued Amounts, so that, for the avoidance of doubt:
(i) when the Accrued Amounts become payable, those Accrued Amounts will be payable to the Existing Lender; and
(ii) the amount payable to the New Lender on that date will be the amount which would, but for the application of this Clause 28.9 ( Pro rata interest settlement ), have been payable to it on that date, but after deduction of the Accrued Amounts.
(c) In this Clause 28.9 ( Pro rata interest settlement ) references to Interest Period shall be construed to include a reference to any other period for accrual of fees.
29 CHANGES TO THE OBLIGORS
29.1 Assignment or transfer by Obligors
No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.
29.2 Release of security
(a) If a disposal of any asset subject to security created by a Security Document is made in the following circumstances:
(i) the disposal is permitted by the terms of any Finance Document; or
(ii) all the Lenders agree to the disposal; or
(iii) the disposal is being made at the request of the Security Agent in circumstances where any security created by the Security Documents has become enforceable; or
(iv) the disposal is being effected by enforcement of a Security Document,
the Security Agent may release the asset(s) being disposed of from any security over those assets created by a Security Document. However, the proceeds of any disposal (or an amount corresponding to them) must be applied in accordance with the requirements of the Finance Documents (if any).
(b) If the Security Agent is satisfied that a release is allowed under this Clause 29.2 ( Release of security ) (at the request and expense of the Borrowers) each Finance Party must enter into any document and do all such other things which are reasonably required to achieve that release. Each other Finance Party irrevocably authorises the Security Agent to enter into any such document. Any release will not affect the obligations of any other Obligor under the Finance Documents.
29.3 Subordinated Creditors
(a) The Borrowers may request that any person becomes a Subordinated Creditor, with the prior approval of the Facility Agent, by delivering to the Facility Agent:
(i) a duly executed Subordination Deed;
(ii) a duly executed Subordinated Debt Security; and
(iii) such constitutional documents, corporate authorisations and other documents and matters as the Facility Agent may reasonably require, in form and substance satisfactory to the Facility Agent, to verify that the persons obligations are legally binding, valid and enforceable and to satisfy any applicable legal and regulatory requirements.
(b) A person referred to in paragraph (a) above will become a Subordinated Creditor on the date the Security Agent enters into the Subordination Deed and the Subordinated Debt Security delivered under paragraph (a) above.
SECTION 10
THE FINANCE PARTIES
30 THE FACILITY AGENT, THE ARRANGER AND THE REFERENCE BANKS
30.1 Appointment of the Facility Agent
(a) Each of the Arranger, the Lenders appoints the Facility Agent to act as its agent under and in connection with the Finance Documents.
(b) Each of the Arranger, the Lenders authorises the Facility Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Facility Agent under, or in connection with, the Finance Documents together with any other incidental rights, powers, authorities and discretions.
30.2 Instructions
(a) The Facility Agent shall:
(i) unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Facility Agent in accordance with any instructions given to it by:
(A) all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and
(B) in all other cases, the Majority Lenders; and
(ii) not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with sub-paragraph (i) above (or, if this Agreement stipulates the matter is a decision for any other Finance Party or group of Finance Parties, in accordance with instructions given to it by that Finance Party or group of Finance Parties).
(b) The Facility Agent shall be entitled to request instructions, or clarification of any instruction, from the Majority Lenders (or, if the relevant Finance Document stipulates the matter is a decision for any other Finance Party or group of Finance Parties, from that Finance Party or group of Finance Parties) as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or discretion and the Facility Agent may refrain from acting unless and until it receives any such instructions or clarification that it has requested.
(c) Save in the case of decisions stipulated to be a matter for any other Finance Party or group of Finance Parties under the relevant Finance Document and unless a contrary indication appears in a Finance Document, any instructions given to the Facility Agent by the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties.
(d) Paragraph (a) above shall not apply:
(i) where a contrary indication appears in a Finance Document;
(ii) where a Finance Document requires the Facility Agent to act in a specified manner or to take a specified action;
(iii) in respect of any provision which protects the Facility Agents own position in its personal capacity as opposed to its role of Facility Agent for the relevant Finance Parties.
(e) If giving effect to instructions given by the Majority Lenders would in the Facility Agents opinion have an effect equivalent to an amendment or waiver referred to in Clause 43 ( Amendments and Waivers ), the Facility Agent shall not act in accordance with those instructions unless consent to it so acting is obtained from each Party (other than the Facility Agent) whose consent would have been required in respect of that amendment or waiver.
(f) In exercising any discretion to exercise a right, power or authority under the Finance Documents where it has not received any instructions as to the exercise of that discretion the Facility Agent shall do so having regard to the interests of all the Finance Parties.
(g) The Facility Agent may refrain from acting in accordance with any instructions of any Finance Party or group of Finance Parties until it has received any indemnification and/or security that it may in its discretion require (which may be greater in extent than that contained in the Finance Documents and which may include payment in advance) for any cost, loss or liability (together with any applicable VAT) which it may incur in complying with those instructions.
(h) Without prejudice to the remainder of this Clause 30.2 ( Instructions ), in the absence of instructions, the Facility Agent shall not be obliged to take any action (or refrain from taking action) even if it considers acting or not acting to be in the best interests of the Finance Parties. The Facility Agent may act (or refrain from acting) as it considers to be in the best interest of the Finance Parties.
(i) The Facility Agent is not authorised to act on behalf of a Finance Party (without first obtaining that Finance Partys consent) in any legal or arbitration proceedings relating to any Finance Document. This paragraph (i) shall not apply to any legal or arbitration proceeding relating to the perfection, preservation or protection of rights under the Security Documents or enforcement of the Transaction Security or Security Documents.
30.3 Duties of the Facility Agent
(a) The Facility Agents duties under the Finance Documents are solely mechanical and administrative in nature.
(b) Subject to paragraph (c) below, the Facility Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Facility Agent for that Party by any other Party.
(c) Without prejudice to Clause 28.7 ( Copy of Transfer Certificate or Assignment Agreement to Borrower ), paragraph (b) above shall not apply to any Transfer Certificate or any Assignment Agreement.
(d) Except where a Finance Document specifically provides otherwise, the Facility Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
(e) If the Facility Agent receives notice from a Party referring to any Finance Document, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.
(f) If the Facility Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Facility Agent, the Arranger or the Security Agent) under this Agreement, it shall promptly notify the other Finance Parties.
(g) The Facility Agent shall have only those duties, obligations and responsibilities expressly specified in the Finance Documents to which it is expressed to be a party (and no others shall be implied).
30.4 Role of the Arranger
Except as specifically provided in the Finance Documents, the Arranger has no obligations of any kind to any other Party under or in connection with any Finance Document.
30.5 No fiduciary duties
(a) Nothing in any Finance Document constitutes the Facility Agent or the Arranger as a trustee or fiduciary of any other person.
(b) Neither the Facility Agent nor the Arranger shall be bound to account to other Finance Party for any sum or the profit element of any sum received by it for its own account.
30.6 Application of receipts
Except as expressly stated to the contrary in any Finance Document, any moneys which the Facility Agent receives or recovers in its capacity as Facility Agent shall be applied by the Facility Agent in accordance with Clause 34.5 ( Application of receipts; partial payments ).
30.7 Business with the Group
The Facility Agent and the Arranger may accept deposits from, lend money to, and generally engage in any kind of banking or other business with, any member of the Group.
30.8 Rights and discretions
(a) The Facility Agent may:
(i) rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised;
(ii) assume that:
(A) any instructions received by it from the Majority Lenders, any Finance Parties or any group of Finance Parties are duly given in accordance with the terms of the Finance Documents; and
(B) unless it has received notice of revocation, that those instructions have not been revoked; and
(iii) rely on a certificate from any person:
(A) as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of that person; or
(B) to the effect that such person approves of any particular dealing, transaction, step, action or thing,
as sufficient evidence that that is the case and, in the case of paragraph (A) above, may assume the truth and accuracy of that certificate.
(b) The Facility Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Finance Parties) that:
(i) no Default has occurred (unless it has actual knowledge of a Default arising under Clause 27.2 ( Non-payment ));
(ii) any right, power, authority or discretion vested in any Party or any group of Finance Parties has not been exercised; and
(iii) any notice or request made by any Borrower (other than a Utilisation Request or a Selection Notice) is made on behalf of and with the consent and knowledge of all the Transaction Obligors.
(c) The Facility Agent may engage and pay for the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts.
(d) Without prejudice to the generality of paragraph (c) above or paragraph (e) below, the Facility Agent may at any time engage and pay for the services of any lawyers to act as independent counsel to the Facility Agent (and so separate from any lawyers instructed by the Lenders) if the Facility Agent in its reasonable opinion deems this to be desirable.
(e) The Facility Agent may rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Facility Agent or by any other Party) and shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying.
(f) The Facility Agent may act in relation to the Finance Documents and the Security Property through its officers, employees and agents and shall not:
(i) be liable for any error of judgment made by any such person; or
(ii) be bound to supervise, or be in any way responsible for any loss incurred by reason of misconduct, omission or default on the part of any such person,
unless such error or such loss was directly caused by the Facility Agents gross negligence or wilful misconduct.
(g) Unless a Finance Document expressly provides otherwise the Facility Agent may disclose to any other Party any information it reasonably believes it has received as agent under the Finance Documents.
(h) Notwithstanding any other provision of any Finance Document to the contrary, neither the Facility Agent nor the Arranger is obliged to do or omit to do anything if it would or might, in its reasonable opinion, constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.
(i) Notwithstanding any provision of any Finance Document to the contrary, the Facility Agent is not obliged to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties, obligations or responsibilities or the exercise of any right, power, authority or discretion if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not reasonably assured to it.
30.9 Responsibility for documentation
Neither the Facility Agent nor the Arranger is responsible or liable for:
(a) the adequacy, accuracy or completeness of any information (whether oral or written) supplied by the Facility Agent, the Security Agent, the Arranger, an Obligor or any other person in, or in connection with, any Transaction Document or the transactions
contemplated in the Transaction Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document; or
(b) the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document or the Security Property or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Transaction Document or the Security Property.
30.10 No duty to monitor
The Facility Agent shall not be bound to enquire:
(a) whether or not any Default has occurred;
(b) as to the performance, default or any breach by any Obligor of its obligations under any Transaction Document; or
(c) whether any other event specified in any Transaction Document has occurred.
30.11 Exclusion of liability
(a) Without limiting paragraph (b) below (and without prejudice to paragraph (e) of Clause 34.11 ( Disruption to Payment Systems etc. ) or any other provision of any Finance Document excluding or limiting the liability of the Facility Agent), the Facility Agent will not be liable for:
(i) any damages, costs or losses to any person, any diminution in value, or any liability whatsoever arising as a result of taking or not taking any action under or in connection with any Transaction Document or the Security Property, unless directly caused by its gross negligence or wilful misconduct;
(ii) exercising, or not exercising, any right, power, authority or discretion given to it by, or in connection with, any Transaction Document, the Security Property or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Transaction Document or the Security Property; or
(iii) any shortfall which arises on the enforcement or realisation of the Security Property; or
(iv) without prejudice to the generality of paragraphs (i) to (iii) above, any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of:
(A) any act, event or circumstance not reasonably within its control; or
(B) the general risks of investment in, or the holding of assets in, any jurisdiction,
including (in each case and without limitation) such damages, costs, losses, diminution in value or liability arising as a result of nationalisation, expropriation or other governmental actions; any regulation, currency restriction, devaluation or fluctuation; market conditions affecting the execution or settlement of transactions or the value of assets (including any Disruption Event); breakdown, failure or malfunction of any third party transport, telecommunications, computer services or systems; natural disasters or acts of God; war, terrorism, insurrection or revolution; or strikes or industrial action.
(b) No Party other than the Facility Agent may take any proceedings against any officer, employee or agent of the Facility Agent in respect of any claim it might have against the Facility Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Transaction Document or any Security Property and any officer, employee or agent of the Facility Agent may rely on this Clause subject to Clause 1.5 ( Third party rights ) and the provisions of the Third Parties Act.
(c) The Facility Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Facility Agent if the Facility Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Facility Agent for that purpose.
(d) Nothing in this Agreement shall oblige the Facility Agent or the Arranger to carry out:
(i) any know your customer or other checks in relation to any person; or
(ii) any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Finance Party,
on behalf of any Finance Party and each Finance Party confirms to the Facility Agent and the Arranger that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Facility Agent or the Arranger.
(e) Without prejudice to any provision of any Finance Document excluding or limiting the Facility Agents liability, any liability of the Facility Agent arising under or in connection with any Transaction Document or the Security Property shall be limited to the amount of actual loss which has been finally judicially determined to have been suffered (as determined by reference to the date of default of the Facility Agent or, if later, the date on which the loss arises as a result of such default) but without reference to any special conditions or circumstances known to the Facility Agent at any time which increase the amount of that loss. In no event shall the Facility Agent be liable for any loss of profits, goodwill, reputation, business opportunity or anticipated saving, or for special, punitive, indirect or consequential damages, whether or not the Facility Agent has been advised of the possibility of such loss or damages.
30.12 Lenders indemnity to the Facility Agent
(a) Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Facility Agent, within three Business Days of demand, against any cost, loss or liability incurred by the Facility Agent (otherwise than by reason of the Facility Agents gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 34.11 ( Disruption to Payment Systems etc. ) notwithstanding the Facility Agents negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Facility Agent) in acting as Facility Agent under the Finance Documents (unless the Facility Agent has been reimbursed by a Transaction Obligor pursuant to a Finance Document).
(b) Subject to paragraph (c) below, the Borrowers shall immediately on demand reimburse any Lender for any payment that Lender makes to the Facility Agent pursuant to paragraph (a) above.
(c) Paragraph (b) above shall not apply to the extent that the indemnity payment in respect of which the Lender claims reimbursement relates to a liability of the Facility Agent to an Obligor.
30.13 Resignation of the Facility Agent
(a) The Facility Agent may resign and appoint one of its Affiliates as successor by giving notice to the other Finance Parties and the Borrowers.
(b) Alternatively, the Facility Agent may resign by giving 30 days notice to the other Finance Parties and the Borrowers, in which case the Majority Lenders may appoint a successor Facility Agent.
(c) If the Majority Lenders have not appointed a successor Facility Agent in accordance with paragraph (b) above within 20 days after notice of resignation was given, the retiring Facility Agent may appoint a successor Facility Agent.
(d) If the Facility Agent wishes to resign because (acting reasonably) it has concluded that it is no longer appropriate for it to remain as agent and the Facility Agent is entitled to appoint a successor Facility Agent under paragraph (c) above, the Facility Agent may (if it concludes (acting reasonably) that it is necessary to do so in order to persuade the proposed successor Facility Agent to become a party to this Agreement as Facility Agent) agree with the proposed successor Facility Agent amendments to this Clause 30 ( The Facility Agent, the Arranger and the Reference Banks ) and any other term of this Agreement dealing with the rights or obligations of the Facility Agent consistent with then current market practice for the appointment and protection of corporate trustees together with any reasonable amendments to the agency fee payable under this Agreement which are consistent with the successor Facility Agents normal fee rates and those amendments will bind the Parties.
(e) The retiring Facility Agent shall, at its own cost, make available to the successor Facility Agent such documents and records and provide such assistance as the successor Facility Agent may reasonably request for the purposes of performing its functions as Facility Agent under the Finance Documents.
(f) The Facility Agents resignation notice shall only take effect upon the appointment of a successor.
(g) Upon the appointment of a successor, the retiring Facility Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under paragraph (e) above) but shall remain entitled to the benefit of Clause 14.4 ( Indemnity to the Facility Agent ) and this Clause 30 ( The Facility Agent, the Arranger and the Reference Banks ) and any other provisions of a Finance Document which are expressed to limit or exclude its liability (or to indemnify it) in acting as Facility Agent. Any fees for the account of the retiring Facility Agent shall cease to accrue from (and shall be payable on) that date). Any successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
(h) The Majority Lenders may, by notice to the Facility Agent, require it to resign in accordance with paragraph (b) above. In this event, the Facility Agent shall resign in accordance with paragraph (b) above.
(i) The consent of any Borrower (or any other Transaction Obligor) is not required for an assignment or transfer of rights and/or obligations by the Facility Agent.
(j) The Facility Agent shall resign in accordance with paragraph (b) above (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Facility Agent pursuant to paragraph (c) above) if on or after the date which is three months before the earliest FATCA Application Date relating to any payment to the Facility Agent under the Finance Documents, either:
(i) the Facility Agent fails to respond to a request under Clause 12.7 ( FATCA Information ) and a Lender reasonably believes that the Facility Agent will not be (or
will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
(ii) the information supplied by the Facility Agent pursuant to Clause 12.7 ( FATCA Information ) indicates that the Facility Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or
(iii) the Facility Agent notifies the Borrowers and the Lenders that the Facility Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
and (in each case) the Borrowers or a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Facility Agent were a FATCA Exempt Party, and the Borrowers or that Lender, by notice to the Facility Agent, requires it to resign.
30.14 Confidentiality
(a) In acting as Facility Agent for the Finance Parties, the Facility Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.
(b) If information is received by a division or department of the Facility Agent other than the division or department responsible for complying with the obligations assumed by it under the Finance Documents, that information may be treated as confidential to that division or department, and the Facility Agent shall not be deemed to have notice of it nor shall it be obliged to disclose such information to any Party.
(c) Notwithstanding any other provision of any Finance Document to the contrary, neither the Facility Agent nor the Arranger is obliged to disclose to any other person (i) any confidential information or (ii) any other information if the disclosure would, or might in its reasonable opinion, constitute a breach of any law or regulation or a breach of a fiduciary duty.
30.15 Relationship with the other Finance Parties
(a) Subject to Clause 28.9 ( Pro rata interest settlement ), the, Facility Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Facility Agents principal office as notified to the Finance Parties from time to time) as the Lender acting through its Facility Office:
(i) entitled to or liable for any payment due under any Finance Document on that day; and
(ii) entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day,
unless it has received not less than five Business Days prior notice from that Lender to the contrary in accordance with the terms of this Agreement.
(b) Each Finance Party shall supply the Facility Agent with any information that the Security Agent may reasonably specify (through the Facility Agent) as being necessary or desirable to enable the Security Agent to perform its functions as Security Agent. Each Finance Party shall deal with the Security Agent exclusively through the Facility Agent and shall not deal directly with the Security Agent and any reference to any instructions being given by or sought from any Finance Party or group of Finance Parties by or to the Security Agent in this Agreement must be given or sought through the Facility Agent.
(c) Any Lender may by notice to the Facility Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or despatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted under Clause 37.5 ( Electronic communication ) electronic mail address and/or any other information required to enable the transmission of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address (or such other information), department and officer by that Lender for the purposes of Clause 37.2 ( Addresses ) and sub-paragraph (ii) of paragraph (a) of Clause 37.5 ( Electronic communication ) and the Facility Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Lender.
30.16 Credit appraisal by the Finance Parties
Without affecting the responsibility of any Transaction Obligor for information supplied by it or on its behalf in connection with any Transaction Document, each Finance Party confirms to the Facility Agent and the Arranger that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under, or in connection with, any Transaction Document including but not limited to:
(a) the financial condition, status and nature of each member of the Group;
(b) the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document, the Security Property and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document or the Security Property;
(c) whether that Finance Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under, or in connection with, any Transaction Document, the Security Property, the transactions contemplated by the Transaction Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document or the Security Property;
(d) the adequacy, accuracy or completeness of any other information provided by the Facility Agent, any Party or by any other person under, or in connection with, any Transaction Document, the transactions contemplated by any Transaction Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document; and
(e) the right or title of any person in or to or the value or sufficiency of any part of the Security Assets, the priority of any of the Transaction Security or the existence of any Security affecting the Security Assets.
30.17 Facility Agents management time
Any amount payable to the Facility Agent under Clause 14.4 ( Indemnity to the Facility Agent ), Clause 16 ( Costs and Expenses ) and Clause 30.12 ( Lenders indemnity to the Facility Agent ) shall include the cost of utilising the Facility Agents management time, such management time to be in respect of extraordinary matters pre-agreed with the Obligors and will be calculated on the basis of such reasonable daily or hourly rates as the Facility Agent may notify to the Borrowers and the other Finance Parties, and is in addition to any fee paid or payable to the Facility Agent under Clause 11 ( Fees ).
30.18 Deduction from amounts payable by the Facility Agent
If any Party owes an amount to the Facility Agent under the Finance Documents, the Facility Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Facility Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.
30.19 Reliance and engagement letters
Each Secured Party confirms that each of the Arranger and the Facility Agent has authority to accept on its behalf (and ratifies the acceptance on its behalf of any letters or reports already accepted by the Arranger or the Facility Agent) the terms of any reliance letter or engagement letters or any reports or letters provided by accountants, auditors or providers of due diligence reports in connection with the Finance Documents or the transactions contemplated in the Finance Documents and to bind it in respect of those, reports or letters and to sign such letters on its behalf and further confirms that it accepts the terms and qualifications set out in such letters.
30.20 Full freedom to enter into transactions
Without prejudice to Clause 30.7 ( Business with the Group ) or any other provision of a Finance Document and notwithstanding any rule of law or equity to the contrary, the Facility Agent shall be absolutely entitled:
(a) to enter into and arrange banking, derivative, investment and/or other transactions of every kind with or affecting any Transaction Obligor or any person who is party to, or referred to in, a Finance Document (including, but not limited to, any interest or currency swap or other transaction, whether related to this Agreement or not, and acting as syndicate agent and/or security agent for, and/or participating in, other facilities to such Transaction Obligor or any person who is party to, or referred to in, a Finance Document);
(b) to deal in and enter into and arrange transactions relating to:
(i) any securities issued or to be issued by any Transaction Obligor or any other person; or
(ii) any options or other derivatives in connection with such securities; and
(c) to provide advice or other services to any Borrower or any person who is a party to, or referred to in, a Finance Document,
and, in particular, the Facility Agent shall be absolutely entitled, in proposing, evaluating, negotiating, entering into and arranging all such transactions and in connection with all other matters covered by paragraphs (a), (b) and (c) above, to use (subject only to insider dealing legislation) any information or opportunity, howsoever acquired by it, to pursue its own interests exclusively, to refrain from disclosing such dealings, transactions or other matters or any information acquired in connection with them and to retain for its sole benefit all profits and benefits derived from the dealings transactions or other matters.
30.21 Role of Reference Banks
(a) No Reference Bank is under any obligation to provide a quotation or any other information to the Facility Agent.
(b) No Reference Bank will be liable for any action taken by it under or in connection with any Finance Document, or for any Reference Bank Quotation, unless directly caused by its gross negligence or wilful misconduct.
(c) No Party (other than the relevant Reference Bank) may take any proceedings against any officer, employee or agent of any Reference Bank in respect of any claim it might have against that Reference Bank or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document, or to any Reference Bank Quotation, and any officer, employee or agent of each Reference Bank may rely on this Clause 30.21 ( Role of Reference Banks ) subject to Clause 1.5 ( Third party rights ) and the provisions of the Third Parties Act.
30.22 Third Party Reference Banks
A Reference Bank which is not a Party may rely on Clause 30.21 ( Role of Reference Banks ), Clause 43.3 ( Other exceptions ) and Clause 45 ( Confidentiality of Funding Rates and Reference Bank Quotations ) subject to Clause 1.5 ( Third party rights ) and the provisions of the Third Parties Act.
31 THE SECURITY AGENT
31.1 Trust
(a) The Security Agent declares that it holds the Security Property on trust for the Secured Parties on the terms contained in this Agreement and shall deal with the Security Property in accordance with this Clause 31 ( The Security Agent ) and the other provisions of the Finance Documents.
(b) Each other Finance Party authorises the Security Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Security Agent under, or in connection with, the Finance Documents together with any other incidental rights, powers, authorities and discretions.
31.2 Parallel Debt (Covenant to pay the Security Agent)
(a) Each Obligor irrevocably and unconditionally undertakes to pay to the Security Agent its Parallel Debt which shall be amounts equal to, and in the currency or currencies of, its Corresponding Debt.
(b) The Parallel Debt of an Obligor:
(i) shall become due and payable at the same time as its Corresponding Debt;
(ii) is independent and separate from, and without prejudice to, its Corresponding Debt.
(c) For purposes of this Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) ), the Security Agent:
(i) is the independent and separate creditor of each Parallel Debt;
(ii) acts in its own name and not as agent, representative or trustee of the Finance Parties and its claims in respect of each Parallel Debt shall not be held on trust; and
(iii) shall have the independent and separate right to demand payment of each Parallel Debt in its own name (including, without limitation, through any suit, execution, enforcement of security, recovery of guarantees and applications for and voting in any kind of insolvency proceeding).
(d) The Parallel Debt of an Obligor shall be:
(i) decreased to the extent that its Corresponding Debt has been irrevocably and unconditionally paid or discharged; and
(ii) increased to the extent that its Corresponding Debt has increased,
and the Corresponding Debt of an Obligor shall be decreased to the extent that its Parallel Debt has been irrevocably and unconditionally paid or discharged,
in each case provided that the Parallel Debt of an Obligor shall never exceed its Corresponding Debt.
(e) All amounts received or recovered by the Security Agent in connection with this Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) ) to the extent permitted by applicable law, shall be applied in accordance with Clause 34.5 ( Application of receipts; partial payments ).
(f) This Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) ) shall apply, with any necessary modifications, to each Finance Document.
31.3 Enforcement through Security Agent only
The Secured Parties shall not have any independent power to enforce, or have recourse to, any of the Transaction Security or to exercise any right, power, authority or discretion arising under the Security Documents except through the Security Agent.
31.4 Instructions
(a) The Security Agent shall:
(i) unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Security Agent in accordance with any instructions given to it by:
(A) all Lenders (or the Facility Agent on their behalf) if the relevant Finance Document stipulates the matter is an all Lender decision; and
(B) in all other cases, the Majority Lenders (or the Facility Agent on their behalf); and
(ii) not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with sub-paragraph (i) above (or if this Agreement stipulates the matter is a decision for any other Finance Party or group of Finance Parties, in accordance with instructions given to it by that Finance Party or group of Finance Parties).
(b) The Security Agent shall be entitled to request instructions, or clarification of any instruction, from the Majority Lenders (or the Facility Agent on their behalf) (or, if the relevant Finance Document stipulates the matter is a decision for any other Finance Party or group of Finance Parties, from that Finance Party or group of Finance Parties) as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or discretion and the Security Agent may refrain from acting unless and until it receives any such instructions or clarification that it has requested.
(c) Save in the case of decisions stipulated to be a matter for any other Finance Party or group of Finance Parties under the relevant Finance Document and unless a contrary indication appears in a Finance Document, any instructions given to the Security Agent by the Majority
Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties.
(d) Paragraph (a) above shall not apply:
(i) where a contrary indication appears in a Finance Document;
(ii) where a Finance Document requires the Security Agent to act in a specified manner or to take a specified action;
(iii) in respect of any provision which protects the Security Agents own position in its personal capacity as opposed to its role of Security Agent for the relevant Secured Parties.
(iv) in respect of the exercise of the Security Agents discretion to exercise a right, power or authority under any of:
(A) Clause 31.28 ( Application of receipts );
(B) Clause 31.29 ( Permitted Deductions ); and
(C) Clause 31.30 ( Prospective liabilities ).
(e) If giving effect to instructions given by the Majority Lenders would in the Security Agents opinion have an effect equivalent to an amendment or waiver referred to in Clause 43 ( Amendments and Waivers ), the Security Agent shall not act in accordance with those instructions unless consent to it so acting is obtained from each Party (other than the Security Agent) whose consent would have been required in respect of that amendment or waiver.
(f) In exercising any discretion to exercise a right, power or authority under the Finance Documents where either:
(i) it has not received any instructions as to the exercise of that discretion; or
(ii) the exercise of that discretion is subject to sub-paragraph (iv) of paragraph (d) above,
the Security Agent shall do so having regard to the interests of all the Secured Parties.
(g) The Security Agent may refrain from acting in accordance with any instructions of any Finance Party or group of Finance Parties until it has received any indemnification and/or security that it may in its discretion require (which may be greater in extent than that contained in the Finance Documents and which may include payment in advance) for any cost, loss or liability (together with any applicable VAT) which it may incur in complying with those instructions.
(h) Without prejudice to the remainder of this Clause 31.4 ( Instructions ), in the absence of instructions, the Security Agent may (but shall not be obliged to) take such action in the exercise of its powers and duties under the Finance Documents as it considers in its discretion to be appropriate.
(i) The Security Agent is not authorised to act on behalf of a Finance Party (without first obtaining that Finance Partys consent) in any legal or arbitration proceedings relating to any Finance Document. This paragraph (i) shall not apply to any legal or arbitration proceeding relating to the perfection, preservation or protection of rights under the Security Documents or enforcement of the Transaction Security or Security Documents.
31.5 Duties of the Security Agent
(a) The Security Agents duties under the Finance Documents are solely mechanical and administrative in nature.
(b) The Security Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Security Agent for that Party by any other Party.
(c) Except where a Finance Document specifically provides otherwise, the Security Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
(d) If the Security Agent receives notice from a Party referring to any Finance Document, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.
(e) The Security Agent shall have only those duties, obligations and responsibilities expressly specified in the Finance Documents to which it is expressed to be a party (and no others shall be implied).
31.6 No fiduciary duties
(a) Nothing in any Finance Document constitutes the Security Agent as an agent, trustee or fiduciary of any Transaction Obligor.
(b) The Security Agent shall not be bound to account to any other Secured Party for any sum or the profit element of any sum received by it for its own account.
31.7 Business with the Group
The Security Agent may accept deposits from, lend money to, and generally engage in any kind of banking or other business with, any member of the Group.
31.8 Rights and discretions
(a) The Security Agent may:
(i) rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised;
(ii) assume that:
(A) any instructions received by it from the Majority Lenders, any Finance Parties or any group of Finance Parties are duly given in accordance with the terms of the Finance Documents;
(B) unless it has received notice of revocation, that those instructions have not been revoked;
(C) if it receives any instructions to act in relation to the Transaction Security, that all applicable conditions under the Finance Documents for so acting have been satisfied; and
(iii) rely on a certificate from any person:
(A) as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of that person; or
(B) to the effect that such person approves of any particular dealing, transaction, step, action or thing,
as sufficient evidence that that is the case and, in the case of paragraph (A) above, may assume the truth and accuracy of that certificate.
(b) The Security Agent shall be entitled to carry out all dealings with the other Finance Parties through the Facility Agent and may give to the Facility Agent any notice or other communication required to be given by the Security Agent to any Finance Party.
(c) The Security Agent may assume (unless it has received notice to the contrary in its capacity as security agent for the Secured Parties) that:
(i) no Default has occurred;
(ii) any right, power, authority or discretion vested in any Party or any group of Finance Parties has not been exercised; and
(iii) any notice or request made by any Borrower (other than a Utilisation Request or a Selection Notice) is made on behalf of and with the consent and knowledge of all the Transaction Obligors.
(d) The Security Agent may engage and pay for the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts.
(e) Without prejudice to the generality of paragraph (c) above or paragraph (f) below, the Security Agent may at any time engage and pay for the services of any lawyers to act as independent counsel to the Security Agent (and so separate from any lawyers instructed by the Facility Agent or the Lenders) if the Security Agent in its reasonable opinion deems this to be desirable.
(f) The Security Agent may rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Security Agent or by any other Party) and shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying.
(g) The Security Agent may act in relation to the Finance Documents and the Security Property through its officers, employees and agents and shall not:
(i) be liable for any error of judgment made by any such person; or
(ii) be bound to supervise, or be in any way responsible for any loss incurred by reason of misconduct, omission or default on the part of any such person,
unless such error or such loss was directly caused by the Security Agents gross negligence or wilful misconduct.
(h) Unless a Finance Document expressly provides otherwise the Security Agent may disclose to any other Party any information it reasonably believes it has received as security agent under the Finance Documents.
(i) Notwithstanding any other provision of any Finance Document to the contrary, the Security Agent is not obliged to do or omit to do anything if it would or might, in its reasonable opinion, constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.
(j) Notwithstanding any provision of any Finance Document to the contrary, the Security Agent is not obliged to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties, obligations or responsibilities or the exercise of any right, power, authority or discretion if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not reasonably assured to it.
31.9 Responsibility for documentation
None of the Security Agent, any Receiver or Delegate is responsible or liable for:
(a) the adequacy, accuracy or completeness of any information (whether oral or written) supplied by the Facility Agent, the Security Agent, the Arranger, a Transaction Obligor or any other person in, or in connection with, any Transaction Document or the transactions contemplated in the Transaction Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document;
(b) the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document or the Security Property or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Transaction Document or the Security Property; or
(c) any determination as to whether any information provided or to be provided to any Secured Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise.
31.10 No duty to monitor
The Security Agent shall not be bound to enquire:
(a) whether or not any Default has occurred;
(b) as to the performance, default or any breach by any Transaction Obligor of its obligations under any Transaction Document; or
(c) whether any other event specified in any Transaction Document has occurred.
31.11 Exclusion of liability
(a) Without limiting paragraph (b) below (and without prejudice to any other provision of any Finance Document excluding or limiting the liability of the Security Agent or any Receiver or Delegate), none of the Security Agent nor any Receiver or Delegate will be liable for:
(i) any damages, costs or losses to any person, any diminution in value, or any liability whatsoever arising as a result of taking or not taking any action under or in connection with any Transaction Document or the Security Property, unless directly caused by its gross negligence or wilful misconduct;
(ii) exercising, or not exercising, any right, power, authority or discretion given to it by, or in connection with, any Transaction Document, the Security Property or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Transaction Document or the Security Property; or
(iii) any shortfall which arises on the enforcement or realisation of the Security Property; or
(iv) without prejudice to the generality of paragraphs (i) to (iii) above, any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of:
(A) any act, event or circumstance not reasonably within its control; or
(B) the general risks of investment in, or the holding of assets in, any jurisdiction,
including (in each case and without limitation) such damages, costs, losses, diminution in value or liability arising as a result of nationalisation, expropriation or other governmental actions; any regulation, currency restriction, devaluation or fluctuation; market conditions affecting the execution or settlement of transactions or the value of assets (including any Disruption Event); breakdown, failure or malfunction of any third party transport, telecommunications, computer services or systems; natural disasters or acts of God; war, terrorism, insurrection or revolution; or strikes or industrial action.
(b) No Party other than the Security Agent, that Receiver or that Delegate (as applicable) may take any proceedings against any officer, employee or agent of the Security Agent, a Receiver or a Delegate in respect of any claim it might have against the Security Agent, a Receiver or a Delegate or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Transaction Document or any Security Property and any officer, employee or agent of the Security Agent, a Receiver or a Delegate may rely on this Clause subject to Clause 1.5 ( Third party rights ) and the provisions of the Third Parties Act.
(c) The Security Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Security Agent if the Security Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Security Agent for that purpose.
(d) Nothing in this Agreement shall oblige the Security Agent to carry out:
(i) any know your customer or other checks in relation to any person; or
(ii) any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Finance Party,
on behalf of any Finance Party and each Finance Party confirms to the Security Agent that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Security Agent.
(e) Without prejudice to any provision of any Finance Document excluding or limiting the liability of the Security Agent or any Receiver or Delegate, any liability of the Security Agent or any Receiver or Delegate arising under or in connection with any Transaction Document or the Security Property shall be limited to the amount of actual loss which has been finally judicially determined to have been suffered (as determined by reference to the date of default of the Security Agent, Receiver or Delegate or, if later, the date on which the loss arises as a result of such default) but without reference to any special conditions or circumstances known to the Security Agent, any Receiver or Delegate at any time which increase the amount of that loss. In no event shall the Security Agent, any Receiver or Delegate be liable for any loss of profits, goodwill, reputation, business opportunity or anticipated saving, or for special, punitive, indirect or consequential damages, whether or not the Security Agent, the Receiver or Delegate has been advised of the possibility of such loss or damages.
31.12 Lenders indemnity to the Security Agent
(a) Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Security Agent and every Receiver, within three Business Days of demand, against any cost, loss or liability incurred by any of them (otherwise than by reason of the Security Agents or Receivers gross negligence or wilful misconduct) in acting as Security Agent or Receiver under the Finance Documents (unless the Security Agent or Receiver has been reimbursed by a Transaction Obligor pursuant to a Finance Document).
(b) Subject to paragraph (c) below, the Borrowers shall immediately on demand reimburse any Lender for any payment that Lender makes to the Security Agent pursuant to paragraph (a) above.
(c) Paragraph (b) above shall not apply to the extent that the indemnity payment in respect of which the Lender claims reimbursement relates to a liability of the Security Agent to an Obligor.
31.13 Resignation of the Security Agent
(a) The Security Agent may resign and appoint one of its Affiliates as successor by giving notice to the other Finance Parties and the Borrowers.
(b) Alternatively, the Security Agent may resign by giving 30 days notice to the other Finance Parties and the Borrowers, in which case the Majority Lenders may appoint a successor Security Agent.
(c) If the Majority Lenders have not appointed a successor Security Agent in accordance with paragraph (b) above within 20 days after notice of resignation was given, the retiring Security Agent may appoint a successor Security Agent.
(d) The retiring Security Agent shall, at its own cost, make available to the successor Security Agent such documents and records and provide such assistance as the successor Security Agent may reasonably request for the purposes of performing its functions as Security Agent under the Finance Documents. The Security Agents resignation notice shall only take effect upon:
(i) the appointment of a successor; and
(ii) the transfer, by way of a document expressed as a deed, of all the Security Property to that successor.
(e) Upon the appointment of a successor, the retiring Security Agent shall be discharged, by way of a document executed as a deed, from any further obligation in respect of the Finance Documents (other than its obligations under paragraph (b) of Clause 31.25 ( Winding up of trust ) and paragraph (d) above) but shall remain entitled to the benefit of Clause 14.5 ( Indemnity to the Security Agent ) and this Clause 31 ( The Security Agent ) and any other provisions of a Finance Document which are expressed to limit or exclude its liability (or to indemnify it) in acting as Security Agent. Any fees for the account of the retiring Security Agent shall cease to accrue from (and shall be payable on) that date). Any successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
(f) The Majority Lenders may, by notice to the Security Agent, require it to resign in accordance with paragraph (b) above. In this event, the Security Agent shall resign in accordance with paragraph (b) above.
(g) The consent of any Borrower (or any other Transaction Obligor) is not required for an assignment or transfer of rights and/or obligations by the Security Agent.
31.14 Confidentiality
(a) In acting as Security Agent for the Finance Parties, the Security Agent shall be regarded as acting through its trustee division which shall be treated as a separate entity from any other of its divisions or departments.
(b) If information is received by a division or department of the Security Agent other than the division or department responsible for complying with the obligations assumed by it under the Finance Documents, that information may be treated as confidential to that division or department, and the Security Agent shall not be deemed to have notice of it nor shall it be obliged to disclose such information to any Party.
(c) Notwithstanding any other provision of any Finance Document to the contrary, the Security Agent is not obliged to disclose to any other person (i) any confidential information or (ii) any other information if the disclosure would, or might in its reasonable opinion, constitute a breach of any law or regulation or a breach of a fiduciary duty.
31.15 Credit appraisal by the Finance Parties
Without affecting the responsibility of any Transaction Obligor for information supplied by it or on its behalf in connection with any Transaction Document, each Finance Party confirms to the Security Agent that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under, or in connection with, any Transaction Document including but not limited to:
(a) the financial condition, status and nature of each member of the Group;
(b) the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document, the Security Property and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document or the Security Property;
(c) whether that Finance Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under, or in connection with, any Transaction Document, the Security Property, the transactions contemplated by the Transaction Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document or the Security Property;
(d) the adequacy, accuracy or completeness of any other information provided by the Security Agent, any Party or by any other person under, or in connection with, any Transaction Document, the transactions contemplated by any Transaction Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document; and
(e) the right or title of any person in or to or the value or sufficiency of any part of the Security Assets, the priority of any of the Transaction Security or the existence of any Security affecting the Security Assets.
31.16 Security Agents management time
(a) Any amount payable to the Security Agent under Clause 14.5 ( Indemnity to the Security Agent ), Clause 16 ( Costs and Expenses ) and Clause 31.12 ( Lenders indemnity to the Security Agent ) shall include the cost of utilising the Security Agents management time, such management time to be in respect of extraordinary matters pre-agreed with the Obligors
and will be calculated on the basis of such reasonable daily or hourly rates as the Security Agent may notify to the Borrowers and the other Finance Parties, and is in addition to any fee paid or payable to the Security Agent under Clause 11 ( Fees ).
(b) Without prejudice to paragraph (a) above, in the event of:
(i) a Default;
(ii) the Security Agent being requested by a Transaction Obligor or the Majority Lenders to undertake duties which the Security Agent and the Borrowers agree to be of an exceptional nature or outside the scope of the normal duties of the Security Agent under the Finance Documents; or
(iii) the Security Agent and the Borrowers agreeing that it is otherwise appropriate in the circumstances,
the Borrowers shall pay to the Security Agent any additional remuneration (together with any applicable VAT) that may be agreed between them or determined pursuant to paragraph (c) below.
(c) If the Security Agent and the Borrowers fail to agree upon the nature of the duties, or upon the additional remuneration referred to in paragraph (b) above or whether additional remuneration is appropriate in the circumstances, any dispute shall be determined by an investment bank (acting as an expert and not as an arbitrator) selected by the Security Agent and approved by the Borrowers or, failing approval, nominated (on the application of the Security Agent) by the President for the time being of the Law Society of England and Wales (the costs of the nomination and of the investment bank being payable by the Borrowers) and the determination of any investment bank shall be final and binding upon the Parties.
31.17 Reliance and engagement letters
Each Secured Party confirms that the Security Agent has authority to accept on its behalf (and ratifies the acceptance on its behalf of any letters or reports already accepted by the Security Agent) the terms of any reliance letter or engagement letters or any reports or letters provided by accountants, auditors or providers of due diligence reports in connection with the Finance Documents or the transactions contemplated in the Finance Documents and to bind it in respect of those, reports or letters and to sign such letters on its behalf and further confirms that it accepts the terms and qualifications set out in such letters.
31.18 No responsibility to perfect Transaction Security
The Security Agent shall not be liable for any failure to:
(a) require the deposit with it of any deed or document certifying, representing or constituting the title of any Transaction Obligor to any of the Security Assets;
(b) obtain any licence, consent or other authority for the execution, delivery, legality, validity, enforceability or admissibility in evidence of any Finance Document or the Transaction Security;
(c) register, file or record or otherwise protect any of the Transaction Security (or the priority of any of the Transaction Security) under any law or regulation or to give notice to any person of the execution of any Finance Document or of the Transaction Security;
(d) take, or to require any Transaction Obligor to take, any step to perfect its title to any of the Security Assets or to render the Transaction Security effective or to secure the creation of any ancillary Security under any law or regulation; or
(e) require any further assurance in relation to any Security Document.
31.19 Insurance by Security Agent
(a) The Security Agent shall not be obliged:
(i) to insure any of the Security Assets;
(ii) to require any other person to maintain any insurance; or
(iii) to verify any obligation to arrange or maintain insurance contained in any Finance Document,
and the Security Agent shall not be liable for any damages, costs or losses to any person as a result of the lack of, or inadequacy of, any such insurance.
(b) Where the Security Agent is named on any insurance policy as an insured party, it shall not be liable for any damages, costs or losses to any person as a result of its failure to notify the insurers of any material fact relating to the risk assumed by such insurers or any other information of any kind, unless the Majority Lenders request it to do so in writing and the Security Agent fails to do so within 14 days after receipt of that request.
31.20 Custodians and nominees
The Security Agent may appoint and pay any person to act as a custodian or nominee on any terms in relation to any asset of the trust as the Security Agent may determine, including for the purpose of depositing with a custodian this Agreement or any document relating to the trust created under this Agreement and the Security Agent shall not be responsible for any loss, liability, expense, demand, cost, claim or proceedings incurred by reason of the misconduct, omission or default on the part of any person appointed by it under this Agreement or be bound to supervise the proceedings or acts of any person.
31.21 Delegation by the Security Agent
(a) Each of the Security Agent, any Receiver and any Delegate may, at any time, delegate by power of attorney or otherwise to any person for any period, all or any right, power, authority or discretion vested in it in its capacity as such.
(b) That delegation may be made upon any terms and conditions (including the power to sub delegate) and subject to any restrictions that the Security Agent, that Receiver or that Delegate (as the case may be) may, in its discretion, think fit in the interests of the Secured Parties.
(c) No Security Agent, Receiver or Delegate shall be bound to supervise, or be in any way responsible for any damages, costs or losses incurred by reason of any misconduct, omission or default on the part of any such delegate or sub delegate.
31.22 Additional Security Agents
(a) The Security Agent may at any time appoint (and subsequently remove) any person to act as a separate trustee or as a co-trustee jointly with it:
(i) if it considers that appointment to be in the interests of the Secured Parties; or
(ii) for the purposes of conforming to any legal requirement, restriction or condition which the Security Agent deems to be relevant; or
(iii) for obtaining or enforcing any judgment in any jurisdiction,
and the Security Agent shall give prior notice to the Borrowers and the Finance Parties of that appointment.
(b) Any person so appointed shall have the rights, powers, authorities and discretions (not exceeding those given to the Security Agent under or in connection with the Finance Documents) and the duties, obligations and responsibilities that are given or imposed by the instrument of appointment.
(c) The remuneration that the Security Agent may pay to that person, and any costs and expenses (together with any applicable VAT) incurred by that person in performing its functions pursuant to that appointment shall, for the purposes of this Agreement, be treated as costs and expenses incurred by the Security Agent.
31.23 Acceptance of title
The Security Agent shall be entitled to accept without enquiry, and shall not be obliged to investigate, any right and title that any Transaction Obligor may have to any of the Security Assets and shall not be liable for or bound to require any Transaction Obligor to remedy any defect in its right or title.
31.24 Releases
Upon a disposal of any of the Security Assets pursuant to the enforcement of the Transaction Security by a Receiver, a Delegate or the Security Agent, the Security Agent is irrevocably authorised (at the cost of the Obligors and without any consent, sanction, authority or further confirmation from any other Secured Party) to release, without recourse or warranty, that property from the Transaction Security and to execute any release of the Transaction Security or other claim over that asset and to issue any certificates of non-crystallisation of floating charges that may be required or desirable.
31.25 Winding up of trust
If the Security Agent, with the approval of the Facility Agent determines that:
(a) all of the Secured Liabilities and all other obligations secured by the Security Documents have been fully and finally discharged; and
(b) no Secured Party is under any commitment, obligation or liability (actual or contingent) to make advances or provide other financial accommodation to any Transaction Obligor pursuant to the Finance Documents,
then
(i) the trusts set out in this Agreement shall be wound up and the Security Agent shall release, without recourse or warranty, all of the Transaction Security and the rights of the Security Agent under each of the Security Documents; and
(ii) any Security Agent which has resigned pursuant to Clause 31.13 ( Resignation of the Security Agent ) shall release, without recourse or warranty, all of its rights under each Security Document.
31.26 Powers supplemental to Trustee Acts
The rights, powers, authorities and discretions given to the Security Agent under or in connection with the Finance Documents shall be supplemental to the Trustee Act 1925 and the Trustee Act 2000 and in addition to any which may be vested in the Security Agent by law or regulation or otherwise.
31.27 Disapplication of Trustee Acts
Section 1 of the Trustee Act 2000 shall not apply to the duties of the Security Agent in relation to the trusts constituted by this Agreement and the other Finance Documents. Where there are any inconsistencies between (i) the Trustee Acts 1925 and 2000 and (ii) the provisions of this Agreement and any other Finance Document, the provisions of this Agreement and any other Finance Document shall, to the extent permitted by law and regulation, prevail and, in the case of any inconsistency with the Trustee Act 2000, the provisions of this Agreement and any other Finance Document shall constitute a restriction or exclusion for the purposes of the Trustee Act 2000.
31.28 Application of receipts
All amounts from time to time received or recovered by the Security Agent pursuant to the terms of any Finance Document, under Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) ) or in connection with the realisation or enforcement of all or any part of the Security Property (for the purposes of this Clause 31 ( The Security Agent ), the Recoveries ) shall be held by the Security Agent on trust to apply them at any time as the Security Agent (in its discretion) sees fit, to the extent permitted by applicable law (and subject to the remaining provisions of this Clause 31 ( The Security Agent ), in the following order of priority:
(a) in discharging any sums owing to the Security Agent (in its capacity as such) (other than pursuant to Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) ) or any Receiver or Delegate;
(b) in payment or distribution to the Facility Agent, on its behalf and on behalf of the other Secured Parties, for application towards the discharge of all sums due and payable by any Transaction Obligor under any of the Finance Documents in accordance with Clause 34.5 ( Application of receipts; partial payments );
(c) if none of the Transaction Obligors is under any further actual or contingent liability under any Finance Document, in payment or distribution to any person to whom the Security Agent is obliged to pay or distribute in priority to any Transaction Obligor; and
(d) the balance, if any, in payment or distribution to the relevant Transaction Obligor.
31.29 Permitted Deductions
The Security Agent may, in its discretion:
(a) set aside by way of reserve amounts required to meet, and to make and pay, any deductions and withholdings (on account of Taxes or otherwise) which it is or may be required by any applicable law to make from any distribution or payment made by it under this Agreement; and
(b) pay all Taxes which may be assessed against it in respect of any of the Security Property, or as a consequence of performing its duties, or by virtue of its capacity as Security Agent under any of the Finance Documents or otherwise (other than in connection with its remuneration for performing its duties under this Agreement).
31.30 Prospective liabilities
Following enforcement of any of the Transaction Security, the Security Agent may, in its discretion, or at the request of the Facility Agent, hold any Recoveries in an interest bearing suspense or impersonal account(s) in the name of the Security Agent with such financial institution (including itself) and for so long as the Security Agent shall think fit (the interest
being credited to the relevant account) for later payment to the Facility Agent for application in accordance with Clause 31.28 ( Application of receipts ) in respect of:
(a) any sum to the Security Agent, any Receiver or any Delegate; and
(b) any part of the Secured Liabilities,
that the Security Agent or, in the case of paragraph (b) only, the Facility Agent, reasonably considers, in each case, might become due or owing at any time in the future.
31.31 Investment of proceeds
Prior to the payment of the proceeds of the Recoveries to the Facility Agent for application in accordance with Clause 31.28 ( Application of receipts ) the Security Agent may, in its discretion, hold all or part of those proceeds in an interest bearing suspense or impersonal account(s) in the name of the Security Agent with such financial institution (including itself) and for so long as the Security Agent shall think fit (the interest being credited to the relevant account) pending the payment from time to time of those moneys in the Security Agents discretion in accordance with the provisions of Clause 31.28 ( Application of receipts ).
31.32 Currency conversion
(a) For the purpose of, or pending the discharge of, any of the Secured Liabilities the Security Agent may convert any moneys received or recovered by the Security Agent from one currency to another, at a market rate of exchange.
(b) The obligations of any Obligor to pay in the due currency shall only be satisfied to the extent of the amount of the due currency purchased after deducting the costs of conversion.
31.33 Good discharge
(a) Any payment to be made in respect of the Secured Liabilities by the Security Agent may be made to the Facility Agent on behalf of the Secured Parties and any payment made in that way shall be a good discharge, to the extent of that payment, by the Security Agent.
(b) The Security Agent is under no obligation to make the payments to the Facility Agent under paragraph (a) above in the same currency as that in which the obligations and liabilities owing to the relevant Finance Party are denominated.
31.34 Amounts received by Obligors
If any of the Obligors receives or recovers any amount which, under the terms of any of the Finance Documents, should have been paid to the Security Agent, that Obligor will hold the amount received or recovered on trust for the Security Agent and promptly pay that amount to the Security Agent for application in accordance with the terms of this Agreement.
31.35 Application and consideration
In consideration for the covenants given to the Security Agent by each Obligor in relation to Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) ), the Security Agent agrees with each Obligor to apply all moneys from time to time paid by such Obligor to the Security Agent in accordance with the foregoing provisions of this Clause 31 ( The Security Agent ).
31.36 Full freedom to enter into transactions
Without prejudice to Clause 31.7 ( Business with the Group ) or any other provision of a Finance Document and notwithstanding any rule of law or equity to the contrary, the Security Agent shall be absolutely entitled:
(a) to enter into and arrange banking, derivative, investment and/or other transactions of every kind with or affecting any Transaction Obligor or any person who is party to, or referred to in, a Finance Document (including, but not limited to, any interest or currency swap or other transaction, whether related to this Agreement or not, and acting as syndicate agent and/or security agent for, and/or participating in, other facilities to such Transaction Obligor or any person who is party to, or referred to in, a Finance Document);
(b) to deal in and enter into and arrange transactions relating to:
(i) any securities issued or to be issued by any Transaction Obligor or any other person; or
(ii) any options or other derivatives in connection with such securities; and
(c) to provide advice or other services to the Borrowers or any person who is a party to, or referred to in, a Finance Document,
and, in particular, the Security Agent shall be absolutely entitled, in proposing, evaluating, negotiating, entering into and arranging all such transactions and in connection with all other matters covered by paragraphs (a), (b) and (c) above, to use (subject only to insider dealing legislation) any information or opportunity, howsoever acquired by it, to pursue its own interests exclusively, to refrain from disclosing such dealings, transactions or other matters or any information acquired in connection with them and to retain for its sole benefit all profits and benefits derived from the dealings transactions or other matters.
32 CONDUCT OF BUSINESS BY THE FINANCE PARTIES
No provision of this Agreement will:
(a) interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;
(b) oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or
(c) oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.
33 SHARING AMONG THE FINANCE PARTIES
33.1 Payments to Finance Parties
If a Finance Party (a Recovering Finance Party ) receives or recovers any amount from a Transaction Obligor other than in accordance with Clause 34 ( Payment Mechanics ) (a Recovered Amount ) and applies that amount to a payment due to it under the Finance Documents then:
(a) the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery, to the Facility Agent;
(b) the Facility Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Facility Agent and distributed in accordance with Clause 34 ( Payment Mechanics ), without taking account of any Tax which would be imposed on the Facility Agent in relation to the receipt, recovery or distribution; and
(c) the Recovering Finance Party shall, within three Business Days of demand by the Facility Agent, pay to the Facility Agent an amount (the Sharing Payment ) equal to such receipt or
recovery less any amount which the Facility Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 34.5 ( Application of receipts; partial payments ).
33.2 Redistribution of payments
The Facility Agent shall treat the Sharing Payment as if it had been paid by the relevant Transaction Obligor and distribute it among the Finance Parties (other than the Recovering Finance Party) (the Sharing Finance Parties ) in accordance with Clause 34.5 ( Application of receipts; partial payments ) towards the obligations of that Transaction Obligor to the Sharing Finance Parties.
33.3 Recovering Finance Partys rights
On a distribution by the Facility Agent under Clause 33.2 ( Redistribution of payments ) of a payment received by a Recovering Finance Party from a Transaction Obligor, as between the relevant Transaction Obligor and the Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated as not having been paid by that Transaction Obligor.
33.4 Reversal of redistribution
If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
(a) each Sharing Finance Party shall, upon request of the Facility Agent, pay to the Facility Agent for the account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay) (the Redistributed Amount ); and
(b) as between the relevant Transaction Obligor and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by that Transaction Obligor.
33.5 Exceptions
(a) This Clause 33 ( Sharing among the Finance Parties ) shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against the relevant Transaction Obligor.
(b) A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:
(i) it notified that other Finance Party of the legal or arbitration proceedings; and
(ii) that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.
SECTION 11
ADMINISTRATION
34 PAYMENT MECHANICS
34.1 Payments to the Facility Agent
(a) On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor or Lender shall make an amount equal to such payment available to the Facility Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Facility Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.
(b) Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to euro, in a principal financial centre in such Participating Member State or London, as specified by the Facility Agent) and with such bank as the Facility Agent, in each case, specifies.
34.2 Distributions by the Facility Agent
Each payment received by the Facility Agent under the Finance Documents for another Party shall, subject to Clause 34.3 ( Distributions to an Obligor ) and Clause 34.4 ( Clawback and pre-funding ) be made available by the Facility Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Facility Agent by not less than five Business Days notice with a bank specified by that Party in the principal financial centre of the country of that currency (or, in relation to euro, in the principal financial centre of a Participating Member State or London), as specified by that Party or, in the case of an Advance, to such account of such person as may be specified by the Borrowers in a Utilisation Request.
34.3 Distributions to an Obligor
The Facility Agent may (with the consent of the Obligor or in accordance with Clause 35 ( Set-Off )) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.
34.4 Clawback and pre-funding
(a) Where a sum is to be paid to the Facility Agent under the Finance Documents for another Party, the Facility Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.
(b) Unless paragraph (c) below applies, if the Facility Agent pays an amount to another Party and it proves to be the case that the Facility Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Facility Agent shall on demand refund the same to the Facility Agent together with interest on that amount from the date of payment to the date of receipt by the Facility Agent, calculated by the Facility Agent to reflect its cost of funds.
(c) If the Facility Agent is willing to make available amounts for the account of the Borrowers before receiving funds from the Lenders then if and to the extent that the Facility Agent
does so but it proves to be the case that it does not then receive funds from a Lender in respect of a sum which it paid to the Borrowers:
(i) the Borrowers shall on demand refund it to the Facility Agent; and
(ii) the Lender by whom those funds should have been made available or, if the Lender fails to do so, the Borrowers shall on demand pay to the Facility Agent the amount (as certified by the Facility Agent) which will indemnify the Facility Agent against any funding cost incurred by it as a result of paying out that sum before receiving those funds from that Lender.
34.5 Application of receipts; partial payments
(a) If the Facility Agent or the Security Agent (as applicable) receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Facility Agent or the Security Agent (as applicable) shall apply that payment towards the obligations of that Obligor under the Finance Documents in the following order:
(i) first , in or towards payment pro rata of any unpaid fees, costs and expenses of, and any other amounts owing to, the Facility Agent, the Security Agent, any Receiver or any Delegate under the Finance Documents;
(ii) secondly , in or towards payment pro rata of any accrued interest and fees due but unpaid to the Lenders under this Agreement;
(iii) thirdly , in or towards payment pro rata of any principal due but unpaid to the Lenders under this Agreement;
(iv) fourthly , in or towards payment pro rata of any other sum due to any Finance Party but unpaid under the Finance Documents.
(b) The Facility Agent shall, if so directed by the Majority Lenders, vary, or instruct the Security Agent to vary (as applicable), the order set out in sub-paragraphs (ii) to (iv) of paragraph (a) above.
(c) Paragraphs (a) and (b) above will override any appropriation made by an Obligor.
34.6 No set-off by Obligors
All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.
34.7 Business Days
(a) Any payment under the Finance Documents which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
(b) During any extension of the due date for payment of any principal or an Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.
34.8 Currency of account
(a) Subject to paragraphs (b) and (c) below, dollars is the currency of account and payment for any sum due from an Obligor under any Finance Document.
(b) Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.
(c) Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.
34.9 Change of currency
(a) Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:
(i) any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Facility Agent (after consultation with the Borrowers); and
(ii) any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Facility Agent (acting reasonably).
(b) If a change in any currency of a country occurs, this Agreement will, to the extent the Facility Agent (acting reasonably and after consultation with the Borrowers) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.
34.10 Currency Conversion
(a) For the purpose of, or pending any payment to be made by any Servicing Party under any Finance Document, such Servicing Party may convert any moneys received or recovered by it from one currency to another, at a market rate of exchange.
(b) The obligations of any Obligor to pay in the due currency shall only be satisfied to the extent of the amount of the due currency purchased after deducting the costs of conversion.
34.11 Disruption to Payment Systems etc.
If either the Facility Agent determines (in its discretion) that a Disruption Event has occurred or the Facility Agent is notified by a Borrower that a Disruption Event has occurred:
(a) the Facility Agent may, and shall if requested to do so by a Borrower, consult with the Borrowers with a view to agreeing with the Borrowers such changes to the operation or administration of the Facility as the Facility Agent may deem necessary in the circumstances;
(b) the Facility Agent shall not be obliged to consult with the Borrowers in relation to any changes mentioned in paragraph (a) above if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes;
(c) the Facility Agent may consult with the Finance Parties in relation to any changes mentioned in paragraph (a) above but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;
(d) any such changes agreed upon by the Facility Agent and the Borrowers shall (whether or not it is finally determined that a Disruption Event has occurred) be binding upon the Parties and any Transaction Obligors as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents notwithstanding the provisions of Clause 43 ( Amendments and Waivers );
(e) the Facility Agent shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever (including, without limitation for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Facility Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 34.11 ( Disruption to Payment Systems etc. ); and
(f) the Facility Agent shall notify the Finance Parties of all changes agreed pursuant to paragraph (d) above.
35 SET-OFF
A Finance Party may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
36 BAIL-IN
Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the parties to a Finance Document, each Party acknowledges and accepts that any liability of any party to a Finance Document under or in connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:
(a) any Bail-In Action in relation to any such liability, including (without limitation):
(i) a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;
(ii) a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and
(iii) a cancellation of any such liability; and
(b) a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.
37 NOTICES
37.1 Communications in writing
Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.
37.2 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 for any communication or document to be made or delivered under or in connection with the Finance Documents are:
(a) in the case of the Borrowers, that specified in Schedule 1 ( The Parties );
(b) in the case of each Lender or any other Obligor, that specified in Schedule 1 ( The Parties ) or, if it becomes a Party after the date of this Agreement, that notified in writing to the Facility Agent on or before the date on which it becomes a Party;
(c) in the case of the Facility Agent, that specified in Schedule 1 ( The Parties ); and
(d) in the case of the Security Agent, that specified in Schedule 1 ( The Parties ),
or any substitute address, fax number or department or officer as the Party may notify to the Facility Agent (or the Facility Agent may notify to the other Parties, if a change is made by the Facility Agent) by not less than five Business Days notice.
37.3 Delivery
(a) Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:
(i) if by way of fax, when received in legible form; or
(ii) if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,
and, if a particular department or officer is specified as part of its address details provided under Clause 37.2 ( Addresses ), if addressed to that department or officer.
(b) Any communication or document to be made or delivered to a Servicing Party will be effective only when actually received by that Servicing Party and then only if it is expressly marked for the attention of the department or officer of that Servicing Party specified in Schedule 1 ( The Parties ) (or any substitute department or officer as that Servicing Party shall specify for this purpose).
(c) All notices from or to a Transaction Obligor shall be sent through the Facility Agent unless otherwise specified in any Finance Document.
(d) Any communication or document made or delivered to the Borrowers in accordance with this Clause will be deemed to have been made or delivered to each of the Transaction Obligors.
(e) Any communication or document which becomes effective, in accordance with paragraphs (a) to (d) above, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.
37.4 Notification of address and fax number
Promptly upon receipt of notification of an address and fax number or change of address or fax number pursuant to Clause 37.2 ( Addresses ) or changing its own address or fax number, the Facility Agent shall notify the other Parties.
37.5 Electronic communication
(a) Any communication to be made between any two Parties under or in connection with the Finance Documents may be made by electronic mail or other electronic means (including, without limitation, by way of posting to a secure website) if those two Parties:
(i) notify each other in writing of their electronic mail address and/or any other information required to enable the transmission of information by that means; and
(ii) notify each other of any change to their address or any other such information supplied by them by not less than five Business Days notice.
(b) Any such electronic communication as specified in paragraph (a) above to be made between an Obligor and a Finance Party may only be made in that way to the extent that those two Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication.
(c) Any such electronic communication as specified in paragraph (a) above made between any two Parties will be effective only when actually received (or made available) in readable form and in the case of any electronic communication made by a Party to the Facility Agent or the Security Agent only if it is addressed in such a manner as the Facility Agent or the Security Agent shall specify for this purpose.
(d) Any electronic communication which becomes effective, in accordance with paragraph (c) above, after 5.00 p.m. in the place in which the Party to whom the relevant communication is sent or made available has its address for the purpose of this Agreement shall be deemed only to become effective on the following day.
(e) Any reference in a Finance Document to a communication being sent or received shall be construed to include that communication being made available in accordance with this Clause 37.5 ( Electronic communication ).
37.6 English language
(a) Any notice given under or in connection with any Finance Document must be in English.
(b) All other documents provided under or in connection with any Finance Document must be:
(i) in English; or
(ii) if not in English, and if so required by the Facility Agent, accompanied by a certified English translation prepared by a translator approved by the Facility Agent and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
38 CALCULATIONS AND CERTIFICATES
38.1 Accounts
In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.
38.2 Certificates and determinations
Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.
38.3 Day count convention
Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.
39 PARTIAL INVALIDITY
If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity
or enforceability of the remaining provisions under the law of that jurisdiction nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
40 REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of any Secured Party, any right or remedy under a Finance Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any Finance Document. No election to affirm any Finance Document on the part of a Secured Party shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law.
41 SETTLEMENT OR DISCHARGE CONDITIONAL
Any settlement or discharge under any Finance Document between any Finance Party and any Transaction Obligor shall be conditional upon no security or payment to any Finance Party by any Transaction Obligor or any other person being set aside, adjusted or ordered to be repaid, whether under any insolvency law or otherwise.
42 IRREVOCABLE PAYMENT
If the Facility Agent considers that an amount paid or discharged by, or on behalf of, a Transaction Obligor or by any other person in purported payment or discharge of an obligation of that Transaction Obligor to a Secured Party under the Finance Documents is capable of being avoided or otherwise set aside on the liquidation or administration of that Transaction Obligor or otherwise, then that amount shall not be considered to have been unconditionally and irrevocably paid or discharged for the purposes of the Finance Documents.
43 AMENDMENTS AND WAIVERS
43.1 Required consents
(a) Subject to Clause 43.2 ( All Lender matters ) and Clause 43.3 ( Other exceptions ) any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and, in the case of an amendment, the Obligors and any such amendment or waiver will be binding on all Parties.
(b) The Facility Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 43 ( Amendments and Waivers ).
(c) Without prejudice to the generality of Clause 30.8 ( Rights and discretions ), the Facility Agent may engage, pay for and rely on the services of lawyers in determining the consent level required for and effecting any amendment, waiver or consent under this Agreement.
43.2 All Lender matters
Subject to Clause 43.4 ( Replacement of Screen Rate ), an amendment of or waiver or consent in relation to any term of any Finance Document that has the effect of changing or which relates to:
(a) the definition of Majority Lenders in Clause 1.1 ( Definitions );
(b) a postponement to or extension of the date of payment of any amount under the Finance Documents;
(c) a reduction in the Margin or the amount of any payment of principal, interest, fees or commission payable;
(d) a change in currency of payment of any amount under the Finance Documents;
(e) an increase in any Commitment or the Total Commitments, an extension of any Availability Period or any requirement that a cancellation of Commitments reduces the Commitments rateably under the Facility;
(f) a change to any Obligor other than in accordance with Clause 29 ( Changes to the Obligors );
(g) any provision which expressly requires the consent of all the Lenders;
(h) this Clause 43 ( Amendments and Waivers );
(i) any change to the preamble (Background), Clause 2 ( The Facility ), Clause 3 ( Purpose ), Clause 5 ( Utilisation ), Clause 6.2 ( Effect of cancellation and prepayment on scheduled repayments ), Clause 7.3 ( Mandatory prepayment on sale or Total Loss ), Clause 8 ( Interest ), paragraph (a) of Clause 25.7 ( Provision of valuations ), Clause 28 ( Changes to the Lenders ), Clause 33 ( Sharing among the Finance Parties ), Clause 47 ( Governing Law ) or Clause 48 ( Enforcement );
(j) any release of, or material variation to, any Transaction Security, guarantee, indemnity or subordination arrangement set out in a Finance Document (except in the case of a release of Transaction Security as it relates to the disposal of an asset which is the subject of the Transaction Security and where such disposal is expressly permitted by the Majority Lenders or otherwise under a Finance Document);
(k) (other than as expressly permitted by the provisions of any Finance Document), the nature or scope of:
(i) the guarantees and indemnities granted under Clause 17 ( Guarantee and Indemnity Parent Guarantor );
(ii) the joint and several liability of the Borrowers under Clause 18 ( Joint and Several Liability of the Borrowers );
(iii) the Security Assets; or
(iv) the manner in which the proceeds of enforcement of the Transaction Security are distributed,
(except in the case of sub-paragraphs (iii) and (iv) above, insofar as it relates to a sale or disposal of an asset which is the subject of the Transaction Security where such sale or disposal is expressly permitted under this Agreement or any other Finance Document);
(l) the release of the guarantees and indemnities granted under Clause 17 ( Guarantee and Indemnity Parent Guarantor ) or the release of the joint and several liability of the Borrowers under Clause 18 ( Joint and Several Liability of the Borrowers ) or of any Transaction Security unless permitted under this Agreement or any other Finance Document or relating to a sale or disposal of an asset which is the subject of the Transaction Security where such sale or disposal is expressly permitted under this Agreement or any other Finance Document,
shall not be made, or given, without the prior consent of all the Lenders.
43.3 Other exceptions
(a) An amendment or waiver which relates to the rights or obligations of a Servicing Party, the Arranger or a Reference Bank (each in their capacity as such) may not be effected without the consent of that Servicing Party, the Arranger or that Reference Bank, as the case may be.
(b) The Borrowers and the Facility Agent, the Arranger or the Security Agent, as applicable, may amend or waive a term of a Fee Letter to which they are party.
43.4 Replacement of Screen Rate
(a) Subject to Clause 43.3 ( Other exceptions ), if the Screen Rate is not available for dollars, any amendment or waiver which relates to providing for another benchmark rate to apply in relation to dollars, in place of that Screen Rate (or which relates to aligning any provision of a Finance Document to the use of that benchmark rate) may be made with the consent of the Majority Lenders and the Borrowers.
(b) If any Lender fails to respond to a request for an amendment or waiver described in paragraph (a) above within three Business Days (unless the Borrower and the Facility Agent agree to a longer time period in relation to any request) of that request being made:
(i) its Commitment shall not be included for the purpose of calculating the Total Commitments when ascertaining whether any relevant percentage of Total Commitments has been obtained to approve that request; and
(ii) its status as a Lender shall be disregarded for the purpose of ascertaining whether the agreement of any specified group of Lenders has been obtained to approve that request.
43.5 Obligor Intent
Without prejudice to the generality of Clauses 1.2 ( Construction ), 17.4 ( Waiver of defences ), 18.2 ( Waiver of defences ) each Obligor expressly confirms that it intends that any guarantee contained in this Agreement or any other Finance Document and any Security created by any Finance Document shall extend from time to time to any (however fundamental) variation, increase, extension or addition of or to any of the Finance Documents and/or any facility or amount made available under any of the Finance Documents for the purposes of or in connection with any of the following: business acquisitions of any nature; increasing working capital; enabling investor distributions to be made; carrying out restructurings; refinancing existing facilities; refinancing any other indebtedness; making facilities available to new borrowers; any other variation or extension of the purposes for which any such facility or amount might be made available from time to time; and any fees, costs and/or expenses associated with any of the foregoing.
44 CONFIDENTIAL INFORMATION
44.1 Confidentiality
Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 44.2 ( Disclosure of Confidential Information ) and Clause 44.3 ( Disclosure to numbering service providers ) and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.
44.2 Disclosure of Confidential Information
Any Finance Party may disclose:
(a) to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this paragraph (a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;
(b) to any person:
(i) to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents or which succeeds (or which may potentially succeed) it as Facility Agent or Security Agent and, in each case, to any of that persons Affiliates, Related Funds, Representatives and professional advisers;
(ii) with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Transaction Obligors and to any of that persons Affiliates, Related Funds, Representatives and professional advisers;
(iii) appointed by any Finance Party or by a person to whom sub-paragraph (i) or (ii) of paragraph (b) above applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including, without limitation, any person appointed under paragraph (c) of Clause 30.15 ( Relationship with the other Finance Parties ));
(iv) who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in sub-paragraph (i) or (ii) of paragraph (b) above;
(v) to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;
(vi) to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitrations, administrative or other investigations, proceedings or disputes;
(vii) to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 28.8 ( Security over Lenders rights );
(viii) who is a Party, a member of the Group or any related entity of a Transaction] Obligor;
(ix) as a result of the registration of any Finance Document as contemplated by any Finance Document or any legal opinion obtained in connection with any Finance Document; or
(x) with the consent of the Parent Guarantor;
in each case, such Confidential Information as that Finance Party shall consider appropriate if:
(A) in relation to sub-paragraphs (i), (ii) and (iii) of paragraph (b) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;
(B) in relation to sub-paragraph (iv) of paragraph (b) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;
(C) in relation to sub-paragraphs (v), (vi) and (vii) of paragraph (b) above, the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances;
(c) to any person appointed by that Finance Party or by a person to whom sub-paragraph (i) or (ii) of paragraph (b) above applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this paragraph (c) if the service provider to whom the Confidential Information is to be given has entered in to a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/ Settlement Service Providers or such other form of confidentiality undertaking agreed between the Borrowers and the relevant Finance Party;
(d) to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents and/or the Transaction Obligors if the rating agency to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information.
44.3 Disclosure to numbering service providers
(a) Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Facility and/or one or more Transaction Obligors the following information:
(i) names of Transaction Obligors;
(ii) country of domicile of Transaction Obligors;
(iii) place of incorporation of Transaction Obligors;
(iv) date of this Agreement;
(v) Clause 47 ( Governing Law );
(vi) the names of the Facility Agent and the Arranger;
(vii) date of each amendment and restatement of this Agreement;
(viii) amount of Total Commitments;
(ix) currency of the Facility;
(x) type of Facility;
(xi) ranking of Facility;
(xii) Termination Date for Facility;
(xiii) changes to any of the information previously supplied pursuant to sub-paragraphs (i) to (xii) above; and
(xiv) such other information agreed between such Finance Party and the Borrowers,
to enable such numbering service provider to provide its usual syndicated loan numbering identification services.
(b) The Parties acknowledge and agree that each identification number assigned to this Agreement, the Facility and/or one or more Transaction Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider.
(c) Each Obligor represents, on behalf of itself and the other Transaction Obligors, that none of the information set out in sub-paragraphs (i) to (xiv) of paragraph (a) above is, nor will at any time be, unpublished price-sensitive information.
(d) The Facility Agent shall notify the Parent Guarantor and the other Finance Parties of:
(i) the name of any numbering service provider appointed by the Facility Agent in respect of this Agreement, the Facility and/or one or more Transaction Obligors; and
(ii) the number or, as the case may be, numbers assigned to this Agreement, the Facility and/or one or more Transaction Obligors by such numbering service provider.
44.4 Entire agreement
This Clause 44 ( Confidential Information ) constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.
44.5 Inside information
Each of the Finance Parties acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.
44.6 Notification of disclosure
Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Borrowers:
(a) of the circumstances of any disclosure of Confidential Information made pursuant to sub-paragraph (v) of paragraph (b) of Clause 44.2 ( Disclosure of Confidential Information ) except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and
(b) upon becoming aware that Confidential Information has been disclosed in breach of this Clause 44 ( Confidential Information ).
44.7 Continuing obligations
The obligations in this Clause 44 ( Confidential Information ) are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of 12 months from the earlier of:
(a) the date on which all amounts payable by the Obligors under or in connection with this Agreement have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and
(b) the date on which such Finance Party otherwise ceases to be a Finance Party.
45 CONFIDENTIALITY OF FUNDING RATES AND REFERENCE BANK QUOTATIONS
45.1 Confidentiality and disclosure
(a) The Facility Agent and each Obligor agree to keep each Funding Rate (and, in the case of the Facility Agent, each Reference Bank Quotation) confidential and not to disclose it to anyone, save to the extent permitted by paragraphs (b), (c) and (d) below.
(b) The Facility Agent may disclose:
(i) any Funding Rate (but not, for the avoidance of doubt, any Reference Bank Quotation) to the Borrower pursuant to Clause 8.4 ( Notification of rates of interest ); and
(ii) any Funding Rate or any Reference Bank Quotation to any person appointed by it to provide administration services in respect of one or more of the Finance Documents to the extent necessary to enable such service provider to provide those services if the service provider to whom that information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Facility Agent and the relevant Lender or Reference Bank, as the case may be.
(c) The Facility Agent may disclose any Funding Rate or any Reference Bank Quotation, and each Obligor may disclose any Funding Rate, to:
(i) any of its Affiliates and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives, if any person to whom that Funding Rate or Reference Bank Quotation is to be given pursuant to this sub-paragraph (i) is informed in writing of its confidential nature and that it may be price sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of that Funding Rate or Reference Bank Quotation or is otherwise bound by requirements of confidentiality in relation to it;
(ii) any person to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or
pursuant to any applicable law or regulation if the person to whom that Funding Rate or Reference Bank Quotation is to be given is informed in writing of its confidential nature and that it may be price sensitive information except that there shall be no requirement to so inform if, in the opinion of the Facility Agent or the relevant Obligor, as the case may be, it is not practicable to do so in the circumstances;
(iii) any person to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes if the person to whom that Funding Rate or Reference Bank Quotation is to be given is informed in writing of its confidential nature and that it may be price sensitive information except that there shall be no requirement to so inform if, in the opinion of the Facility Agent or the relevant Obligor, as the case may be, it is not practicable to do so in the circumstances; and
(iv) any person with the consent of the relevant Lender or Reference Bank, as the case may be.
(d) The Facility Agents obligations in this Clause 45 ( Confidentiality of Funding Rates and Reference Bank Quotations ) relating to Reference Bank Quotations are without prejudice to its obligations to make notifications under Clause 8.4 ( Notification of rates of interest ) provided that (other than pursuant to sub-paragraph (i) of paragraph (b) above) the Facility Agent shall not include the details of any individual Reference Bank Quotation as part of any such notification.
45.2 Related obligations
(a) The Facility Agent and each Obligor acknowledge that each Funding Rate (and, in the case of the Facility Agent, each Reference Bank Quotation) is or may be price sensitive information and that its use may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and the Facility Agent and each Obligor undertake not to use any Funding Rate or, in the case of the Facility Agent, any Reference Bank Quotation for any unlawful purpose.
(b) The Facility Agent and each Obligor agree (to the extent permitted by law and regulation) to inform the relevant Lender or Reference Bank, as the case may be:
(i) of the circumstances of any disclosure made pursuant to sub-paragraph (ii) of paragraph (c) of Clause 45.1 ( Confidentiality and disclosure ) except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and
(ii) upon becoming aware that any information has been disclosed in breach of this Clause 45 ( Confidentiality of Funding Rates and Reference Bank Quotations ).
45.3 No Event of Default
No Event of Default will occur under Clause 27.4 ( Other obligations ) by reason only of an Obligors failure to comply with this Clause 45 ( Confidentiality of Funding Rates and Reference Bank Quotations ).
46 COUNTERPARTS
Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.
SECTION 12
GOVERNING LAW AND ENFORCEMENT
47 GOVERNING LAW
This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.
48 ENFORCEMENT
48.1 Jurisdiction
(a) Unless specifically provided in another Finance Document in relation to that Finance Document, the courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with any Finance Document (including a dispute regarding the existence, validity or termination of any Finance Document or any non-contractual obligation arising out of or in connection with any Finance Document) (a Dispute ).
(b) The Obligors accept that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Obligor will argue to the contrary.
(c) This Clause 48.1 ( Jurisdiction ) is for the benefit of the Secured Parties only. As a result, no Secured Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Secured Parties may take concurrent proceedings in any number of jurisdictions.
48.2 Service of process
(a) Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in England and Wales):
(i) irrevocably appoints Grindrod Shipping Services UK Ltd as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and
(ii) agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned.
(b) If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, the Borrowers (on behalf of all the Obligors) must immediately (and in any event within three days of such event taking place) appoint another agent on terms acceptable to the Facility Agent. Failing this, the Facility Agent may appoint another agent for this purpose.
This Agreement has been entered into on the date stated at the beginning of this Agreement.
SCHEDULE 1
THE PARTIES
PART A
THE OBLIGORS
Name of Borrower |
Place of Incorporation |
Registration number
|
Address for
|
|
|
|
|
Unicorn Atlantic Pte. Ltd. |
Singapore |
201015026N |
200 Cantonment Road
Fax: +65 6323 0046
Attn: Chief Financial Officer |
Unicorn Caspian Pte. Ltd. |
Singapore |
201110907M |
|
IVS Bulk 609 Pte. Ltd. |
Singapore |
201101546M |
Name of Parent
|
Place of Incorporation |
Registration number
|
Address for
|
|
|
|
|
Grindrod Shipping Pte. Ltd. |
Singapore |
200407212K |
200 Cantonment Road
Fax: +65 6323 0046
Attn: Chief Financial Officer |
PART B
THE ORIGINAL LENDERS
Name of Original Lender Commitment |
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Address for Communication |
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Commitment
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Crédit Agricole Corporate and Investment Bank, Singapore Branch |
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Crédit Agricole Corporate and Investment Bank
#22-01 Capital Tower
Fax No: + 65 6439 9754
With a copy to:
Crédit Agricole Corporate and Investment Bank
Fax: +44 (0) 20 7214 6689 Attn: Ship Finance Department |
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21,000,000 |
PART C
THE SERVICING PARTIES
SCHEDULE 2
CONDITIONS PRECEDENT
PART A
CONDITIONS PRECEDENT TO UTILISATION REQUEST
1 Obligors
1.1 A copy of the constitutional documents of each Obligor.
1.2 A copy of a resolution of the board of directors of each Obligor:
(a) approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;
(b) authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and
(c) authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, a Utilisation Request and each Selection Notice) to be signed and/or despatched by it under, or in connection with, the Finance Documents to which it is a party.
1.3 An original of the power of attorney of any Obligor authorising a specified person or persons to execute the Finance Documents to which it is a party.
1.4 A specimen of the signature of each person authorised by the resolution referred to in paragraph 1.2 above.
1.5 A copy of a resolution signed by the Parent Guarantor as the holder of the issued shares in each Borrower, approving the terms of, and the transactions contemplated by, the Finance Documents to which that Borrower is a party.
1.6 A certificate of each Obligor (signed by a director) confirming that borrowing or guaranteeing, as appropriate, the Total Commitments would not cause any borrowing, guaranteeing or similar limit binding on that Obligor to be exceeded.
1.7 A certificate of each Obligor that is incorporated outside the UK (signed by a director) certifying either that (i) it has not delivered particulars of any UK Establishment to the Registrar of Companies as required under the Overseas Regulations or (ii) it has a UK Establishment and specifying the name and registered number under which it is registered with the Registrar of Companies.
1.8 A certificate of an authorised signatory of the relevant Obligor certifying that each copy document relating to it specified in this Part A of Schedule 2 ( Conditions Precedent ) is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
2 Finance Documents
2.1 A duly executed original of each Subordination Deed and copies of each Subordination Finance Document.
2.2 A duly executed original of any Finance Document not otherwise referred to in this Schedule 2 ( Conditions Precedent ).
2.3 A duly executed original of any other document required to be delivered by each Finance Document if not otherwise referred to this Schedule 2 ( Conditions Precedent ).
3 Security
3.1 A duly executed original of the Account Security in relation to each Account and of the Shares Security in respect of each Borrower (and of each document to be delivered under each of them).
3.2 A duly executed original of each Subordinated Debt Security.
4 Legal opinions
4.1 A legal opinion of Watson Farley & Williams, legal advisers to the Arranger, the Facility Agent and the Security Agent in England, substantially in the form distributed to the Original Lenders before signing this Agreement.
4.2 If an Obligor is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Arranger, the Facility Agent and the Security Agent in the relevant jurisdiction, substantially in the form distributed to the Original Lenders before signing this Agreement.
5 Other documents and evidence
5.1 Copies of the Pool Agreements and of all documents signed by the Borrowers in connection with it.
5.2 Evidence that any process agent referred to in Clause 48.2 ( Service of process ), if not an Obligor, has accepted its appointment.
5.3 A copy of any other Authorisation or other document, opinion or assurance which the Facility Agent reasonably considers to be necessary or desirable (and provided if it has notified the Borrowers accordingly but not later than three Business Days prior to the end of the Availability Period) in connection with the entry into and performance of the transactions contemplated by any Transaction Document or for the validity and enforceability of any Transaction Document.
5.4 The Original Financial Statements of each Borrower and the Parent Guarantor.
5.5 The original of any mandates or other documents required in connection with the opening or operation of the Accounts.
5.6 Evidence that the fees, costs and expenses then due from the Borrowers pursuant to Clause 11 ( Fees ) and Clause 16 ( Costs and Expenses ) have been paid or will be paid by the first Utilisation Date.
5.7 Such evidence as the Facility Agent may require for the Finance Parties to be able to satisfy each of their know your customer or similar identification procedures in relation to the transactions contemplated by the Finance Documents.
PART B
CONDITIONS PRECEDENT TO UTILISATION
1 Borrowers
A certificate of an authorised signatory of each Borrower certifying that each copy document which it is required to provide under this Part B of Schedule 2 ( Conditions Precedent ) is correct, complete and in full force and effect as at the Utilisation Date of the Advance under Tranche A.
2 Release of Existing Security
An original of each Deed of Release and of each document to be delivered under or pursuant to it, together with evidence satisfactory to the Facility Agent of its due execution by the parties to it.
3 Ship and other security
3.1 A duly executed original of each Mortgage and the Deed of Covenant and General Assignment in respect of each Ship and of each document to be delivered under or pursuant to each of them together with documentary evidence that the Mortgages in respect of each Ship has been duly registered as a valid first priority ship mortgage in accordance with the laws of the jurisdiction of its Approved Flag.
3.2 Documentary evidence that each Ship:
(a) is definitively and permanently registered in the name of the relevant Borrower under the Approved Flag;
(b) is in the absolute and unencumbered ownership of the relevant Borrower save as contemplated by the Finance Documents;
(c) maintains the Approved Classification with the Approved Classification Society free of all overdue recommendations and conditions of the Approved Classification Society; and
(d) is insured in accordance with the provisions of this Agreement and all requirements in this Agreement in respect of insurances have been complied with.
3.3 Documents establishing that each Ship will, as from the Utilisation Date, be managed commercially by its Approved Commercial Manager and managed technically by its Approved Technical Manager on terms acceptable to the Facility Agent acting with the authorisation of all of the Lenders, together with:
(a) a Managers Undertaking for each of the Approved Technical Manager and the Approved Commercial Manager; and
(b) copies of the relevant Approved Technical Managers Document of Compliance and of each Ships Safety Management Certificate (together with any other details of the applicable Safety Management System which the Facility Agent requires) and of any other documents required under the ISM Code and the ISPS Code in relation to each Ship including without limitation an ISSC.
3.4 An opinion from an independent insurance consultant acceptable to the Facility Agent on such matters relating to the Insurances as the Facility Agent may require.
3.5 A valuation of each Ship, addressed to the Facility Agent on behalf of the Finance Parties, stated to be for the purposes of this Agreement and dated not earlier than 14 days before
the Utilisation Date for the Advance from an Approved Valuer which shows an aggregate value for all three Ships of not less than 130 per cent. of the Loan.
4 Legal opinions
Legal opinions of the legal advisers to the Arranger, the Facility Agent and the Security Agent in the jurisdiction of the Approved Flag of each Ship and such other relevant jurisdictions as the Facility Agent may require.
5 Other documents and evidence
Evidence that the fees, costs and expenses then due from the Borrowers pursuant to Clause 11 ( Fees ) and Clause 16 ( Costs and Expenses ) have been paid or will be paid by the Utilisation Date.
SCHEDULE 3
REQUESTS
PART A
UTILISATION REQUEST
From: |
Unicorn Atlantic Pte. Ltd., Unicorn Caspian Pte. Ltd, IVS Bulk 609 Pte. Ltd. |
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To: |
Crédit Agricole Corporate and Investment Bank |
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92547, 12 Place des États Unis, 92120 Montrouge, France |
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Attn: Shipping Department |
Dated: [ · ]
Dear Sirs
Unicorn Atlantic Pte. Ltd., Unicorn Caspian Pte. Ltd, IVS Bulk 609 Pte. Ltd. Facility Agreement dated [ · ] 2017 (the Agreement)
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We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request. |
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2 |
We wish to borrow the Advance on the following terms: |
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Proposed Utilisation Date: |
[ · ] 2017 (or, if that is not a Business Day, the next Business Day) |
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Amount: |
[ · ] or, if less, the Available Facility |
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Interest Period for the first Advance: |
[ · ] Months |
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3 |
We confirm that each condition specified in Clause 4.1 ( Initial conditions precedent ) and Clause 4.2 ( Further conditions precedent ) of the Agreement as they relate to the Advance to which this Utilisation Request refers is satisfied on the date of this Utilisation Request. |
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4 |
The proceeds of this Advance should be credited to [account]. |
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5 |
This Utilisation Request is irrevocable. |
Yours faithfully |
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[ · ] |
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authorised signatory for |
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UNICORN ATLANTIC PTE. LTD. |
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[ · ] |
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authorised signatory for |
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UNICORN CASPIAN PTE. LTD |
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[ · ] |
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authorised signatory for |
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IVS BULK 609 PTE. LTD. |
PART B
SELECTION NOTICE
From: Unicorn Atlantic Pte. Ltd., Unicorn Caspian Pte. Ltd, IVS Bulk 609 Pte. Ltd.
To: Crédit Agricole Corporate and Investment Bank
Dated: [ · ]
Dear Sirs
Unicorn Atlantic Pte. Ltd., Unicorn Caspian Pte. Ltd, IVS Bulk 609 Pte. Ltd. - Facility Agreement dated [ · ] 2017 (the Agreement)
1 We refer to the Agreement. This is a Selection Notice. Terms defined in the Agreement have the same meaning in this Selection Notice unless given a different meaning in this Selection Notice.
2 We request that the next Interest Period for the Loan be [ · ].
3 This Selection Notice is irrevocable.
Yours faithfully |
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[ · ] |
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authorised signatory for |
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UNICORN ATLANTIC PTE. LTD. |
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[ · ] |
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authorised signatory for |
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UNICORN CASPIAN PTE. LTD |
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[ · ] |
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authorised signatory for |
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IVS BULK 609 PTE. LTD. |
SCHEDULE 4
FORM OF TRANSFER CERTIFICATE
To: Crédit Agricole Corporate and Investment Bank as Facility Agent
From: [The Existing Lender] (the Existing Lender ) and [The New Lender] (the New Lender )
Dated: [ · ]
Dear Sirs
Unicorn Atlantic Pte. Ltd., Unicorn Caspian Pte. Ltd, IVS Bulk 609 Pte. Ltd. Facility Agreement dated [ · ] 2017 (the Agreement)
1 We refer to the Agreement. This is a Transfer Certificate. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.
2 We refer to Clause 28.5 ( Procedure for transfer ) of the Agreement:
(a) The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation all of the Existing Lenders rights and obligations under the Agreement and the other Finance Documents which relate to that portion of the Existing Lenders Commitment and participation in the Loan under the Agreement as specified in the Schedule in accordance with Clause 28.5 ( Procedure for transfer ) of the Agreement.
(b) The proposed Transfer Date is [ · ].
(c) The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 37.2 ( Addresses ) of the Agreement are set out in the Schedule.
3 The New Lender expressly acknowledges the limitations on the Existing Lenders obligations set out in paragraph (c) of Clause 28.4 ( Limitation of responsibility of Existing Lenders ) of the Agreement.
4 This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate.
5 This Transfer Certificate and any non-contractual obligations arising out of or in connection with it are governed by English law.
6 This Transfer Certificate has been entered into on the date stated at the beginning of this Transfer Certificate.
Note: The execution of this Transfer Certificate may not transfer a proportionate share of the Existing Lenders interest in the Transaction Security in all jurisdictions. It is the responsibility of the New Lender to ascertain whether any other documents or other formalities are required to perfect a transfer of such a share in the Existing Lenders Transaction Security in any jurisdiction and, if so, to arrange for execution of those documents and completion of those formalities.
THE SCHEDULE
Commitment/rights and obligations to be transferred
[ insert relevant details ]
[Facility Office address, fax number and attention details
for notices and account details for payments.]
[Existing Lender] |
[New Lender] |
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By: [ · ] |
By: [ · ] |
This Transfer Certificate is accepted by the Facility Agent and the Transfer Date is confirmed as [ · ].
[Facility Agent]
By: [ · ]
SCHEDULE 5
FORM OF ASSIGNMENT AGREEMENT
To: Crédit Agricole Corporate and Investment Bank as Facility Agent and Unicorn Atlantic Pte. Ltd., Unicorn Caspian Pte. Ltd and IVS Bulk 609 Pte. Ltd. as Borrowers, for and on behalf of each Transaction Obligor
From: [the Existing Lender] (the Existing Lender ) and [the New Lender] (the New Lender )
Dated: [ · ]
Dear Sirs
Unicorn Atlantic Pte. Ltd., Unicorn Caspian Pte. Ltd, IVS Bulk 609 Pte. Ltd. - Facility Agreement dated [ · ] 2017 (the Agreement)
1 We refer to the Agreement. This is an Assignment Agreement. Terms defined in the Agreement have the same meaning in this Assignment Agreement unless given a different meaning in this Assignment Agreement.
2 We refer to Clause 28.6 ( Procedure for assignment ):
(a) The Existing Lender assigns absolutely to the New Lender all the rights of the Existing Lender under the Agreement, the other Finance Documents and in respect of the Transaction Security which correspond to that portion of the Existing Lenders Commitment and participations in the Loan under the Agreement as specified in the Schedule.
(b) The Existing Lender is released from all the obligations of the Existing Lender which correspond to that portion of the Existing Lenders Commitments and participations in the Loan under the Agreement specified in the Schedule.
(c) The New Lender becomes a Party as a Lender and is bound by obligations equivalent to those from which the Existing Lender is released under paragraph (b) above.
(d) All rights and interests (present, future or contingent) which the Existing Lender has under or by virtue of the Finance Documents are assigned to the New Lender absolutely, free of any defects in the Existing Lenders title and of any rights or equities which the Borrower or any other Transaction Obligor had against the Existing Lender.
3 The proposed Transfer Date is [ · ].
4 On the Transfer Date the New Lender becomes Party to the Finance Documents as a Lender.
5 The Facility Office and address, fax, number and attention details for notices of the New Lender for the purposes of Clause 37.2 ( Addresses ) are set out in the Schedule.
6 The New Lender expressly acknowledges the limitations on the Existing Lenders obligations set out in paragraph (c) of Clause 28.4 ( Limitation of responsibility of Existing Lenders ).
7 This Assignment Agreement acts as notice to the Facility Agent (on behalf of each Finance Party) and, upon delivery in accordance with Clause 28.7 ( Copy of Transfer Certificate or Assignment Agreement to Borrowers ), to the Borrowers (on behalf of each Transaction Obligor) of the assignment referred to in this Assignment Agreement.
8 This Assignment Agreement may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Assignment Agreement.
9 This Assignment Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.
10 This Assignment Agreement has been entered into on the date stated at the beginning of this Assignment Agreement.
Note: The execution of this Assignment Agreement may not transfer a proportionate share of the Existing Lenders interest in the Transaction Security in all jurisdictions. It is the responsibility of the New Lender to ascertain whether any other documents or other formalities are required to perfect a transfer of such a share in the Existing Lenders Transaction Security in any jurisdiction and, if so, to arrange for execution of those documents and completion of those formalities.
THE SCHEDULE
Commitment rights and obligations to be transferred by assignment, release and accession
[ insert relevant details ]
[Facility office address, fax number and attention details for notices
and account details for payments]
[Existing Lender] |
[New Lender] |
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By: [ · ] |
By: [ · ] |
This Assignment Agreement is accepted by the Facility Agent and the Transfer Date is confirmed as [ · ].
Signature of this Assignment Agreement by the Facility Agent constitutes confirmation by the Facility Agent of receipt of notice of the assignment referred to herein, which notice the Facility Agent receives on behalf of each Finance Party.
[Facility Agent]
By:
SCHEDULE 6
FORM OF COMPLIANCE CERTIFICATE
To: Crédit Agricole Corporate and Investment Bank as Facility Agent
From: Grindrod Shipping Pte. Ltd.
Dated: [ · ]
Dear Sirs
Unicorn Atlantic Pte. Ltd., Unicorn Caspian Pte. Ltd, IVS Bulk 609 Pte. Ltd. Facility Agreement dated [ · ] 2017 (the Agreement)
1 We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2 We confirm that:
(a) Book Value Net Worth is not less than $275,000,000 in December 2016 and June 2017 and not less than $250,000,000 in December 2017;
(b) Cash and Cash Equivalents are not less than $35,000,000; and
(c) the ratio of Debt to Market Adjusted Tangible Fixed Assets shall be not more than 75 per cent.
3 We confirm that no Default is continuing.
Signed: |
________________________ |
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________________________ |
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Director |
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Director |
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of |
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of |
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Grindrod Shipping Pte. Ltd. |
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Grindrod Shipping Pte. Ltd. |
for and on behalf of
[ name of Auditors of the Parent Guarantor ]
SCHEDULE 7
DETAILS OF THE SHIPS
Ship name |
Name
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Type |
GRT |
NRT |
Approved
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Approved
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Approved
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Approved
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Approved Technical
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INYALA |
Unicorn Atlantic Pte. Ltd. |
Tanker |
25 400 |
9932 |
Singapore |
ABS |
+A1, Chemical Carrier, Oil Carrier, (E), +AMS, +ACCU,PORT,VEC,TCM,SH, RES, SHCM
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Handytankers K/S |
Unicorn Shipping, a division of Grindrod Shipping South Africa Pty Ltd. |
UMGENI |
Unicorn Caspian Pte. Ltd. |
Tanker |
11271 |
4968 |
Singapore |
BV |
+1A1, Tanker for Chemicals and Oils, ESP, EO, NAV-O, VCS-1, CLEAN, TMON, NAUTICUS
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Broström K/S |
Unicorn Shipping, a division of Grindrod Shipping South Africa Pty Ltd. |
IVS ORCHARD |
IVS Bulk 609 Pte. Ltd. |
Tanker |
20928 |
11786 |
Singapore |
Nippon Kajii Kyokai |
NS, CSR, Bulk Carrier Type A, BC-XII, Grab 20, ESP, IWS, PSCM, MNS |
Grindrod Shipping Pte. Ltd. |
Grindrod Ship Management, a division of Grindrod Shipping Pte Ltd. |
SCHEDULE 8
TIMETABLES
Delivery of a duly completed Utilisation Request (Clause 5.1 ( Delivery of a Utilisation Request )) or a Selection Notice (Clause 9.1 ( Selection of Interest Periods )) |
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Five Business Days before the intended Utilisation Date (Clause 5.1 ( Delivery of a Utilisation Request )) or the expiry of the preceding Interest Period (Clause 9.1 ( Selection of Interest Periods )) |
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Facility Agent notifies the Lenders of the Advance in accordance with Clause 5.4 ( Lenders participation ) |
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Three Business Days before the intended Utilisation Date. |
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LIBOR is fixed |
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Quotation Day as of 11:00 am London time |
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Reference Bank Rate calculated by reference to available quotations in accordance with Clause 10.2 ( Calculation of Reference Bank Rate ) |
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Noon on the Quotation Day |
EXECUTION PAGES
BORROWERS
SIGNED by |
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duly authorised |
) /s/ Natalia Golovataya Attorney-in-fact |
for and on behalf of |
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UNICORN ATLANTIC PTE. LTD |
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in the presence of: |
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Witness signature: |
) /s/ Aimee Myhre |
Witness name: |
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Witness address: |
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SIGNED by |
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duly authorised |
) /s/ Natalia Golovataya Attorney-in-fact |
for and on behalf of |
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UNICORN CASPIAN PTE. LTD |
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in the presence of: |
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Witness signature: |
) /s/ Aimee Myhre |
Witness name: |
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Witness address: |
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SIGNED by |
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duly authorised |
) /s/ Natalia Golovataya Attorney-in-fact |
for and on behalf of |
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IVS BULK 609 PTE. LTD. |
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in the presence of: |
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Witness signature: |
) /s/ Aimee Myhre |
Witness name: |
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Witness address: |
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PARENT GUARANTOR |
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SIGNED by |
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duly authorised |
) /s/ Natalia Golovataya Attorney-in-fact |
for and on behalf of |
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GRINDROD SHIPPING PTE. LTD. |
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in the presence of: |
) |
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Witness signature: |
) /s/ Aimee Myhre |
Witness name: |
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Witness address: |
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ORIGINAL LENDERS |
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SIGNED by |
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duly authorised |
) /s/ Dilman Sebastian |
for and on behalf of |
) /s/ Michael ODonnell Attorney-in-fact |
CRÉDIT AGRICOLE CORPORATE |
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AND INVESTMENT BANK, |
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SINGAPORE BRANCH |
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in the presence of: |
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Witness signature: |
) /s/ Aimee Myhre |
Witness name: |
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Witness address: |
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ARRANGER |
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SIGNED by |
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duly authorised |
) /s/ Dilman Sebastian |
for and on behalf of |
) /s/ Michael ODonnell Attorney-in-fact |
CRÉDIT AGRICOLE CORPORATE |
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AND INVESTMENT BANK |
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in the presence of: |
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Witness signature: |
) /s/ Aimee Myhre |
Witness name: |
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Witness address: |
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FACILITY AGENT |
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SIGNED by |
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duly authorised |
) /s/ Dilman Sebastian |
for and on behalf of |
) /s/ Michael ODonnell Attorney-in-fact |
CRÉDIT AGRICOLE CORPORATE |
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AND INVESTMENT BANK |
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in the presence of: |
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Witness signature: |
) /s/ Aimee Myhre |
Witness name: |
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Witness address: |
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SECURITY AGENT |
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SIGNED by |
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duly authorised |
) /s/ Dilman Sebastian |
for and on behalf of |
) /s/ Michael ODonnell Attorney-in-fact |
CRÉDIT AGRICOLE CORPORATE |
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AND INVESTMENT BANK |
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in the presence of: |
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Witness signature: |
) /s/ Aimee Myhre |
Witness name: |
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Witness address: |
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Extension of Termination Date
From:
CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK
12 Place des États Unis
92120 Montrouge
France
To: UNICORN ATLANTIC PTE. LTD.
UNICORN CASPIAN PTE. LTD.
IVS BULK 609 PTE. LTD.
200 Cantonment Road
#03-01 Southpoint
Singapore 089763
as Borrowers
CC: GRINDROD SHIPPING PTE. LTD.
200 Cantonment Road
#03-01 Southpoint
Singapore 089763
as Parent Guarantor
11 December 2017
Facility Agreement dated 30 March 2017 (as amended, modified or supplemented from time to time, the Facility Agreement) and made between (1) Unicorn Atlantic Pte. Ltd., Unicorn Caspian Pte. Ltd. and IVS Bulk 609 Pte. Ltd as joint and several borrowers (the Borrowers), (2) Grindrod Shipping Pte. Ltd. as parent guarantor (the Parent Guarantor), (3) the banks and financial institutions listed therein at schedule 1 as lenders (the Lenders), (4) Crédit Agricole Corporate and Investment Bank as arranger (the Arranger) (5) Crédit Agricole Corporate and Investment Bank as facility agent (the Facility Agent) and (6) Crédit Agricole Corporate and Investment Bank as security agent (the Security Agent) and relating to a term loan facility of up to $21,000,000 in respect of m.v.s INYALA, UMGENI and IVS ORCHARD.
1. We refer to the Facility Agreement.
2. Words and expressions defined in the Facility Agreement shall have the same meanings when used in this Letter (unless otherwise defined herein).
3. The Borrowers have requested the consent of the Finance Parties to the extension of the Termination Date.
4. We, as Facility Agent acting on behalf of the Finance Parties, confirm the agreement of the Finance Parties to the Borrowers request in paragraph 3 above on and with effect from the date on which the Facility Agent receives the following in form and substance satisfactory to it (the Effective Date ):
(a) a duly executed original of this letter signed by the Borrowers and the Parent Guarantor;
(b) in the case of each Borrower and the Parent Guarantor, documents of the kind specified in Schedule 2, Part A, paragraphs 1.1, 1.2 and 1.3 of the Facility Agreement as amended and supplemented by this Letter and updated with appropriate modifications to refer to this Letter and, in the case of the constitutional documents of the Borrowers and the Parent Guarantor, confirmation that those documents have not been amended or modified since the date copies were last provided to the Facility Agent pursuant to the Facility Agreement;
(c) a favourable legal opinion from lawyers appointed by the Facility Agent on matters concerning the laws of the Republic of Singapore in relation to the capacity of each Borrower and the Parent Guarantor to enter into this letter.
5. We confirm and agree that the Facility Agreement shall be amended with effect from the Effective Date by:
(a) deleting the definition of Termination Date in clause 1.1 ( Definitions ) of the Facility Agreement and replacing it with the following new definition of Termination Date:
Termination Date means 31 March 2018.; and
(b) by amending clause 6.1 to read:
The Borrowers shall repay the Loan by four equal consecutive instalments, each in an amount of $659,500 (each a Repayment Instalment ), on 30 June 2017, 30 September 2017, 31 December 2017 and 30 March 2018 together with a balloon instalment of $18,362,000 (the Balloon Instalment ) payable on the Termination Date.
6. This Letter and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law and the provisions of clauses 48.1 and 48.2 (inclusive) of the Facility Agreement shall apply to this Letter with references to the Borrowers construed so as to include the Parent Guarantor.
7. The definition of, and references throughout each of the Finance Documents to, the Facility Agreement shall be construed as if the same referred to the Facility Agreement as amended and supplemented by this Letter.
8. All other terms and conditions of the Facility Agreement and each of the other Finance Documents shall remain unamended and in full force and effect.
9. This Letter shall constitute a Finance Document.
10. This Letter may be executed in any number of several counterparts and any single counterpart or set of counterparts signed, in either case, by all of the parties thereto shall be deemed to be an original and all counterparts of this Letter when taken together shall constitute one and the same instrument.
11. Please confirm your agreement to the terms of this Letter by signing below.
This Letter has been executed by or on behalf of the parties and has, on the date stated at the beginning of this Letter been delivered as a deed.
Yours faithfully
FACILITY AGENT
EXECUTED AS A DEED |
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by CRÉDIT AGRICOLE CORPORATE AND |
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) /s/ Paul Hogarth Attorney-in-fact |
INVESTMENT BANK |
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acting by |
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expressly authorised in |
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accordance with the laws of France |
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in the presence of: |
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Witness signature: |
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) /s/ Rosalind Roberts |
Witness name: |
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Witness address: |
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) |
We hereby acknowledge receipt of the above Letter and confirm our agreement to the terms hereof and confirm that the Finance Documents to which we are a party (and as amended in accordance with the terms of this Letter) shall remain in full force and effect and shall continue to stand as security for our obligations under the Facility Agreement and the other Finance Documents to which we are a party.
BORROWERS
EXECUTED AS A DEED |
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) |
by UNICORN ATLANTIC PTE. LTD. |
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) |
acting by |
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) /s/ Martyn Wade |
expressly authorised in |
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accordance with the laws of Singapore |
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) |
in the presence of: |
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) |
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Witness signature: |
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) /s/ GC Kingsley-Wilkins |
Witness name: |
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Witness address: |
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) |
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EXECUTED AS A DEED |
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) |
by UNICORN CASPIAN PTE. LTD. |
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) |
acting by |
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) /s/ Martyn Wade |
expressly authorised in |
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) |
accordance with the laws of Singapore |
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) |
in the presence of: |
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) |
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) |
Witness signature: |
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) /s/ GC Kingsley-Wilkins |
Witness name: |
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) |
Witness address: |
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) |
EXECUTED AS A DEED |
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) |
by IVS BULK 609 PTE. LTD. |
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) |
acting by |
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) /s/ Martyn Wade |
expressly authorised in |
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) |
accordance with the laws of Singapore |
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) |
in the presence of: |
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) |
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) |
Witness signature: |
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) /s/ GC Kingsley-Wilkins |
Witness name: |
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) |
Witness address: |
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) |
We hereby confirm that we have read and understood the terms and conditions of the above Letter and agree in all respects to the same and confirm that our obligations under the Facility Agreement and the other Finance Documents to which we are a party shall remain in full force and effect and shall continue to stand as security for the obligations of the Borrowers under the Facility Agreement.
PARENT GUARANTOR |
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EXECUTED AS A DEED |
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) |
by GRINDROD SHIPPING PTE. LTD. |
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) |
acting by |
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) /s/ Martyn Wade |
expressly authorised in |
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) |
accordance with the laws of Singapore |
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) |
in the presence of: |
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) |
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Witness signature: |
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) /s/ GC Kingsley-Wilkins |
Witness name: |
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Witness address: |
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Further Extension of Termination Date
From: CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK
12 Place des États Unis
92120 Montrouge
France
To: UNICORN ATLANTIC PTE. LTD.
UNICORN CASPIAN PTE. LTD.
IVS BULK 609 PTE. LTD.
200 Cantonment Road
#03-01 Southpoint
Singapore 089763
as Borrowers
CC: GRINDROD SHIPPING PTE. LTD.
200 Cantonment Road
#03-01 Southpoint
Singapore 089763
as Parent Guarantor
27 March 2018
Facility Agreement dated 30 March 2017 (as amended, modified or supplemented from time to time, the Facility Agreement) and made between (1) Unicorn Atlantic Pte. Ltd., Unicorn Caspian Pte. Ltd. and IVS Bulk 609 Pte. Ltd as joint and several borrowers (the Borrowers), (2) Grindrod Shipping Pte. Ltd. as parent guarantor (the Parent Guarantor), (3) the banks and financial institutions listed therein at schedule 1 as lenders (the Lenders), (4) Crédit Agricole Corporate and Investment Bank as arranger (the Arranger) (5) Crédit Agricole Corporate and Investment Bank as facility agent (the Facility Agent) and (6) Crédit Agricole Corporate and Investment Bank as security agent (the Security Agent) and relating to a term loan facility of up to $21,000,000 in respect of m.v.s INYALA, UMGENI and IVS ORCHARD.
1. We refer to the Facility Agreement.
2. Words and expressions defined in the Facility Agreement shall have the same meanings when used in this Letter (unless otherwise defined herein).
3. The Borrowers have requested the consent of the Finance Parties to the extension of the Termination Date to 29 June 2018.
4. We, as Facility Agent acting on behalf of the Finance Parties, confirm the agreement of the Finance Parties to the Borrowers request in paragraph 3 above on and with effect from the date on which the Facility Agent receives the following in form and substance satisfactory to it (the Effective Date ):
(a) a duly executed original of this letter signed by the Borrowers and the Parent Guarantor; and
(b) in the case of each Borrower and the Parent Guarantor, documents of the kind specified in Schedule 2, Part A, paragraphs 1.1, 1.2 and 1.3 of the Facility Agreement as amended and supplemented by this Letter and updated with appropriate modifications to refer to this Letter and, in the case of the constitutional documents of the Borrowers and the Parent Guarantor, confirmation that those documents have not been amended or modified since the date copies were last provided to the Facility Agent pursuant to the Facility Agreement.
5. We confirm and agree that the Facility Agreement shall be amended with effect from the Effective Date by:
(a) deleting the definition of Termination Date in clause 1.1 ( Definitions ) of the Facility Agreement and replacing it with the following new definition of Termination Date:
Termination Date means 29 June 2018.; and
(b) by construing clause 6.1 so that the fourth instalment in the amount of $659,500 is payable on 29 March 2018 and the balloon instalment of $18,362,000 is payable on the extended Termination Date (being 29 June 2018).
6. This Letter and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law and the provisions of clauses 48.1 and 48.2 (inclusive) of the Facility Agreement shall apply to this Letter with references to the Borrowers construed so as to include the Parent Guarantor.
7. The definition of, and references throughout each of the Finance Documents to, the Facility Agreement shall be construed as if the same referred to the Facility Agreement as amended and supplemented by this Letter.
8. All other terms and conditions of the Facility Agreement and each of the other Finance Documents shall remain unamended and in full force and effect.
9. This Letter shall constitute a Finance Document.
10. This Letter may be executed in any number of several counterparts and any single counterpart or set of counterparts signed, in either case, by all of the parties thereto shall be deemed to be an original and all counterparts of this Letter when taken together shall constitute one and the same instrument.
11. Please confirm your agreement to the terms of this Letter by signing below.
This Letter has been executed by or on behalf of the parties and has, on the date stated at the beginning of this Letter been delivered as a deed.
Yours faithfully
FACILITY AGENT
EXECUTED AS A DEED |
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by CRÉDIT AGRICOLE CORPORATE AND |
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) |
INVESTMENT BANK |
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) |
acting by |
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) /s/ Justin Lande |
expressly authorised in |
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accordance with the laws of France |
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) |
in the presence of: |
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) |
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Witness signature: |
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) /s/ Julie Glauser |
Witness name: |
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) |
Witness address: |
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We hereby acknowledge receipt of the above Letter and confirm our agreement to the terms hereof and confirm that the Finance Documents to which we are a party (and as amended in accordance with the terms of this Letter) shall remain in full force and effect and shall continue to stand as security for our obligations under the Facility Agreement and the other Finance Documents to which we are a party.
BORROWERS |
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EXECUTED AS A DEED |
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) |
by UNICORN ATLANTIC PTE. LTD. |
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) |
acting by |
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) /s/ Hugh William Scheffer |
expressly authorised in |
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) |
accordance with the laws of Singapore |
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) |
in the presence of: |
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) |
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) |
Witness signature: |
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) /s/ Yvette Kingsley-Wilkins |
Witness name: |
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) |
Witness address: |
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) |
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EXECUTED AS A DEED |
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) |
by UNICORN CASPIAN PTE. LTD. |
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) |
acting by |
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) /s/ Hugh William Scheffer |
expressly authorised in |
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) |
accordance with the laws of Singapore |
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) |
in the presence of: |
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) |
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) |
Witness signature: |
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) /s/ Yvette Kingsley-Wilkins |
Witness name: |
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) |
Witness address: |
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) |
EXECUTED AS A DEED |
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) |
by IVS BULK 609 PTE. LTD. |
|
) |
acting by |
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) /s/ Hugh William Scheffer |
expressly authorised in |
|
) |
accordance with the laws of Singapore |
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) |
in the presence of: |
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) |
|
|
) |
Witness signature: |
|
) /s/ Yvette Kingsley-Wilkins |
Witness name: |
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) |
Witness address: |
|
) |
We hereby confirm that we have read and understood the terms and conditions of the above Letter and agree in all respects to the same and confirm that our obligations under the Facility Agreement and the other Finance Documents to which we are a party shall remain in full force and effect and shall continue to stand as security for the obligations of the Borrowers under the Facility Agreement.
PARENT GUARANTOR |
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EXECUTED AS A DEED |
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) |
by GRINDROD SHIPPING PTE. LTD. |
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) |
acting by |
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) /s/ Hugh William Scheffer |
expressly authorised in |
|
) |
accordance with the laws of Singapore |
|
) |
in the presence of: |
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) |
|
|
) /s/ Yvette Kingsley-Wilkins |
Witness signature: |
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) |
Witness name: |
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) |
Witness address: |
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|
Execution Version
US$27,000,000
FACILITY AGREEMENT
Dated 9 December, 2016
for
GRINDROD MARITIME LLC
as Borrower
guaranteed by
GRINDROD SHIPPING PTE. LTD.
GRINDROD LIMITED
as Guarantors
with
DVB BANK SE SINGAPORE BRANCH
acting as Facility Agent
DVB BANK SE SINGAPORE BRANCH
acting as Security Agent
and
DVB BANK SE
acting as Account Bank
relating to the financing of
m.t. Matuku
Index
Clause |
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Page |
|
|
|
Section 1 Interpretation |
2 |
|
1 |
Definitions and Interpretation |
2 |
Section 2 The Facility |
23 |
|
2 |
The Facility |
23 |
3 |
Purpose |
23 |
4 |
Conditions of Drawdown |
23 |
Section 3 Drawdown |
25 |
|
5 |
Drawdown |
25 |
Section 4 Repayment, Prepayment and Cancellation |
26 |
|
6 |
Repayment |
26 |
7 |
Prepayment and Cancellation |
26 |
Section 5 Costs of Drawdown |
29 |
|
8 |
Interest |
29 |
9 |
Interest Periods |
29 |
10 |
Changes to the Calculation of Interest |
30 |
11 |
Fees |
32 |
Section 6 Additional Payment Obligations |
33 |
|
12 |
Tax Gross Up and Indemnities |
33 |
13 |
Increased Costs |
36 |
14 |
Other Indemnities |
37 |
15 |
Mitigation by the Finance Parties |
40 |
16 |
Costs and Expenses |
40 |
Section 7 Guarantee |
42 |
|
17 |
Guarantee and Indemnity |
42 |
Section 8 Representations, Undertakings and Events of Default |
45 |
|
18 |
Representations |
45 |
19 |
Information Undertakings |
51 |
20 |
Financial Covenants |
54 |
21 |
General Undertakings |
56 |
22 |
Insurance Undertakings |
61 |
23 |
Bareboat Charterer Undertakings |
66 |
24 |
Vessel Undertakings |
67 |
25 |
Security Cover |
72 |
26 |
Accounts and Application of Earnings |
73 |
27 |
Events of Default |
75 |
Section 9 Changes to Parties |
81 |
|
28 |
Changes to the Lenders |
81 |
29 |
Changes to the Transaction Obligors |
85 |
Section 10 The Finance Parties |
87 |
|
30 |
The Facility Agent |
87 |
31 |
The Security Agent |
96 |
32 |
Conduct of Business by the Finance Parties |
110 |
33 |
Sharing among the Finance Parties |
110 |
Section 11 Administration |
112 |
|
34 |
Payment Mechanics |
112 |
35 |
Set-Off |
115 |
36 |
Bail-in |
115 |
37 |
Notices |
116 |
38 |
Calculations and Certificates |
117 |
39 |
Partial Invalidity |
118 |
40 |
Remedies and Waivers |
118 |
41 |
Settlement or Discharge Conditional |
118 |
42 |
Irrevocable Payment |
118 |
43 |
Amendments and Waivers |
118 |
44 |
Confidentiality |
120 |
45 |
Counterparts |
123 |
Section 12 Governing Law and Enforcement |
124 |
|
46 |
Governing Law |
124 |
47 |
Enforcement |
124 |
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|
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Schedule 1 The Parties |
125 |
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Part A The Obligors |
125 |
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Part B The Original Lenders |
126 |
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Part C The Servicing Parties |
127 |
|
Schedule 2 Conditions Precedent and Subsequent |
128 |
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Part A Conditions precedent to Drawdown Request |
128 |
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Part B Conditions Precedent to Disbursement |
131 |
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Part C Conditions Subsequent |
133 |
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Schedule 3 Requests |
134 |
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Part A Drawdown Request |
134 |
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Part B Selection Notice |
135 |
|
Schedule 4 Form of Transfer Certificate |
136 |
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Schedule 5 Form of Assignment Agreement |
138 |
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Schedule 6 Form of Compliance Certificate |
140 |
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Schedule 7 Timetables |
141 |
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Schedule 8 Classification Society Undertaking |
142 |
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Part A Letter to Approved Classification Society |
142 |
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Part B Undertaking from Approved Classification Society |
143 |
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|
Execution |
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Execution Pages |
144 |
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Schedules |
|
THIS AGREEMENT is made on 9 December, 2016
PARTIES
(1) GRINDROD MARITIME LLC , a company formed in the Republic of the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 as borrower (the Borrower )
(2) GRINDROD SHIPPING PTE. LTD. , a company incorporated in Singapore whose registered office is at 200 Cantonment Road, #03-01 Southpoint, Singapore 089763 as guarantor ( GSPL )
(3) GRINDROD LIMITED , a company incorporated in South Africa with registration number 1966/009846/06 whose registered office is at Quadrant House, 115 Margaret Mncadi Avenue, Durban 4001 South Africa as guarantor (the Parent Guarantor , and together with GSPL the Guarantors and each a Guarantor )
(4) THE FINANCIAL INSTITUTIONS listed in Part B of Schedule 1 ( The Parties ) as lenders (the Original Lenders )
(5) DVB BANK SE SINGAPORE BRANCH, as agent of the other Finance Parties (the Facility Agent )
(6) DVB BANK SE SINGAPORE BRANCH, as security agent for the Creditor Parties (the Security Agent )
(7) DVB BANK SE acting through its office at Platz der Republik 6, 60325, Frankfurt/Main, Germany as account bank (the Account Bank )
BACKGROUND
The Original Lenders have agreed to make available to the Borrower a term loan facility of up to US$27,000,000 for the purposes referred to in Clause 3.1 ( Purpose ).
OPERATIVE PROVISIONS
SECTION 1
INTERPRETATION
1 DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement:
Account Bank means DVB Bank SE acting through its office at Platz der Republik 6, 60325, Frankfurt/Main, Germany or such other bank or financial institution acceptable to the Facility Agent (acting on the instructions of the Lenders) .
Accounts means:
(a) the Earnings Account;
(b) the Retention Account; and
(c) with the express written consent of the Facility Agent, any other accounts opened by the Borrower with the Account Bank, the Facility Agent or the Security Agent for the purposes of the Finance Documents.
Account Security means a document creating Security over any Account in agreed form.
Advance means the borrowing of the Facility under this Agreement.
Affiliate means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
Approved Broker means any firm or firms of insurance brokers approved in writing by the Facility Agent, acting with the authorisation of the Lenders.
Approved Classification means, as at the date of this Agreement, 1A1 Tanker for chemicals and oil BIS BWM(E(s)) Clean COAT-PSPC(B) CSR E0 ESP Recyclable SPM TMON VCS(2) with the Approved Classification Society or the equivalent classification with another Approved Classification Society.
Approved Classification Society means, as at the date of this Agreement, DNV GL or any other classification society which is a member of the International Association of Classification Societies and has been approved in writing by the Facility Agent acting with the authorisation of the Majority Lenders.
Approved Flag means New Zealand, Singapore, Marshall Islands or such other flag approved in writing by the Facility Agent acting with the authorisation of all the Lenders.
Approved Technical Manager means any person approved in writing by the Facility Agent, acting with the authorisation of the Majority Lenders, as the technical manager of the Vessel.
Approved Valuer means each of Clarksons, Braemar ACM, MSI Ltd, Arrow Valuations (a division of Arrow Research Ltd.), Compass Maritime Services, LLC and Fearnleys AS (or any Affiliate of such person through which valuations are commonly issued) and any other firm or firms of independent sale and purchase shipbrokers approved in writing by the Facility Agent, acting with the authorisation of the Lenders.
Assignment Agreement means an agreement substantially in the form set out in Schedule 5 ( Form of Assignment Agreement ) or any other form agreed between the relevant assignor and assignee.
Authorisation means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation, legalisation or registration.
Availability Period means the period from and including the date of this Agreement to and including the earlier of:
(a) 23 December 2016 or such later date as the Facility Agent, acting with the authorisation of the Lenders, may agree in writing with the Borrower; and
(b) the date on which the Commitments are cancelled under the terms of this Agreement; or
any later date approved in writing by the Facility Agent, acting with the authorisation of all of the Lenders.
Available Commitment means a Lenders Commitment minus:
(a) the amount of its participation in the outstanding Loan; and
(b) in relation to the proposed Drawdown, the amount of its participation in the Advance that is due to be made on or before the proposed Drawdown Date.
Available Facility means the aggregate for the time being of each Lenders Available Commitment.
Bail-In Action means the exercise of any Write-down and Conversion Powers.
Bail-In Legislation means:
(a) in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and
(b) in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation.
Bareboat Charter means each of the First Bareboat Charter and the Second Bareboat Charter.
Bareboat Charterer means each of the First Bareboat Charterer and the Second Bareboat Charterer.
Bareboat Charterers Assignment and Direct Agreement means the agreement entered into by and between (i) the Security Agent, (ii) the Borrower and (iii) each Bareboat Charterer providing for:
(a) assignments by the Bareboat Charterers in relation to the earnings, insurances and requisition compensation in respect of the Vessel;
(b) quiet enjoyment undertakings granted by the Security Agent in favour of each Bareboat Charterer; and
(c) step-in rights in relation to the Borrower under the First Bareboat Charter in favour of the Security Agent,
in agreed form.
Break Costs means the amount (if any) by which:
(a) the interest (excluding the Margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in the Loan or Unpaid Sum to the last day of the current Interest Period in relation to the Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;
exceeds
(b) the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.
Business Day means a day (other than a Saturday or Sunday) on which banks are open for general business:
(a) in relation to provisions of this Agreement relating to the calculation of LIBOR, in London;
(b) in relation to provisions of this Agreement relating to payment obligations in dollars, in New York; and
(c) in relation to all other provisions of this Agreement, in Singapore, London, Frankfurt and South Africa.
CACIB Facility Agent means Crédit Agricole Corporate and Investment Bank acting in its role as facility agent under the CACIB Facility.
CACIB Facility means the loan facility of (originally) US$123,000,000 as documented by the loan agreement dated 7 July 2011 (as amended from time to time) made between (i) GSPL as borrower, (ii) the banks and financial institutions listed therein as lenders, (iii) the banks and financial institutions listed therein as swap banks, (iv) the mandated lead arrangers as such term is defined therein, (v) the CACIB Facility Agent and (vi) Crédit Agricole Corporate and Investment Bank as security agent.
Charter means each Bareboat Charter, the Time Charter and any other charter relating to the Vessel, or other contract for its employment, whether or not already in existence.
Charterer means each Bareboat Charterer and the Time Charterer.
Closing Date means the date on which this Agreement is executed by all the Parties.
Code means the US Internal Revenue Code of 1986.
Commitment means:
(a) in relation to an Original Lender, the amount set opposite its name under the heading Commitment in Part B of Schedule 1 ( The Parties ) and the amount of any other Commitment transferred to it under this Agreement; and
(b) in relation to any other Lender, the amount of any Commitment transferred to it under this Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
Compliance Certificate means a certificate in the form set out in Schedule 6 ( Form of Compliance Certificate ) or in any other form agreed between GSPL and the Facility Agent.
Confidential Information means all information relating to any Obligor, the Group, the Finance Documents or the Facility of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Facility from either:
(a) any member of the Group or any of its advisers; or
(b) another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any member of the Group or any of its advisers,
in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:
(i) is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 44 ( Confidentiality ); or
(ii) is identified in writing at the time of delivery as non-confidential by any member of the Group or any of its advisers; or
(iii) is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with the Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.
Confidentiality Undertaking means a confidentiality undertaking in substantially the appropriate form recommended by the LMA from time to time or in any other form agreed between the Borrower and the Facility Agent.
Corresponding Debt means any amount, other than any Parallel Debt, which an Obligor owes to a Creditor Party under or in connection with the Finance Documents.
Creditor Party means each Finance Party from time to time party to this Agreement and any Receiver or Delegate.
Deed of Covenant means the deed of covenant collateral to the Mortgage and creating Security over the Vessel in agreed form.
Default means an Event of Default or a Potential Event of Default.
Delegate means any delegate, agent, attorney, co-trustee or other person appointed by the Security Agent.
Disruption Event means either or both of:
(a) a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or
(b) the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other, Party:
(i) from performing its payment obligations under the Finance Documents; or
(ii) from communicating with other Parties in accordance with the terms of the Finance Documents,
and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
Document of Compliance has the meaning given to it in the ISM Code.
dollars and US$ mean the lawful currency, for the time being, of the United States of America.
Drawdown means the drawdown of the Facility.
Drawdown Date means the date of the Drawdown, being the date on which the Advance is to be made.
Drawdown Request means a notice substantially in the form set out in Part A of Schedule 3 ( Requests ).
Earnings means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Borrower, either Bareboat Charterer or the Security Agent and which arise out of the use or operation of the Vessel, including (but not limited to):
(a) the following, save to the extent that any of them is, with the prior written consent of the Facility Agent, pooled or shared with any other person:
(i) all freight, hire and passage moneys;
(ii) compensation payable to the Borrower, that Bareboat Charterer or the Security Agent in the event of requisition of the Vessel for hire;
(iii) remuneration for salvage and towage services;
(iv) demurrage and detention moneys;
(v) damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Vessel;
(vi) all moneys which are at any time payable under any Insurances in relation to loss of hire;
(vii) all monies which are at any time payable to the Borrower or that Bareboat Charterer in relation to general average contribution; and
(b) if and whenever the Vessel is employed on terms whereby any moneys falling within sub-paragraphs (i) to (vi) of paragraph (a) above are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Vessel.
Earnings Account means:
(a) an account in the name of the Borrower with the Account Bank with account number 2910059120, designated Earnings Account; or
(b) any other account (with that or another office of the Account Bank or with a bank or financial institution other than the Account Bank) which is designated by the Facility Agent as the Earnings Account of the Borrower for the purposes of this Agreement.
EEA Member Country means any member state of the European Union, Iceland, Liechtenstein and Norway.
Environmental Approval means any present or future permit, ruling, variance or other Authorisation required under Environmental Laws.
Environmental Claim means any claim by any governmental, judicial or regulatory authority or any other person which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law and, for this purpose, claim includes a claim for damages, compensation, contribution, injury, fines, losses and penalties or any other payment of any kind, including in relation to clean-up and removal, whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.
Environmental Incident means:
(a) any release, emission, spill or discharge into the Vessel or into or upon the air, sea, land or soils (including the seabed) or surface water of Environmentally Sensitive Material within or from the Vessel; or
(b) any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water from a vessel other than the Vessel and which involves a collision between the Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and/or the Vessel and/or any Transaction Obligor and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or
(c) any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water otherwise than from the Vessel and in connection with which the Vessel is actually or potentially liable to be arrested and/or where any Transaction Obligor and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action, other than in accordance with an Environmental Approval.
Environmental Law means any present or future law relating to pollution or protection of human health or the environment, to conditions in the workplace, to the carriage, generation, handling, storage, use, release or spillage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material.
Environmentally Sensitive Material means and includes all contaminants, oil, oil products, toxic substances and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous.
EU Bail-In Legislation Schedule means the document described as such and published by the Loan Market Association (or any successor person) from time to time.
Event of Default means any event or circumstance specified as such in Clause 27 ( Events of Default ).
Facility means the term loan facility made available under this Agreement as described in Clause 2 ( The Facility ).
Facility Office means the office or offices notified by a Lender to the Facility Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than 5 Business
Days written notice) as the office or offices through which it will perform its obligations under this Agreement.
FATCA means:
(a) sections 1471 to 1474 of the Code or any associated regulations;
(b) any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or
(c) any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.
FATCA Application Date means:
(a) in relation to a withholdable payment described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014;
(b) in relation to a withholdable payment described in section 1473(1)(A)(ii) of the Code (which relates to gross proceeds from the disposition of property of a type that can produce interest from sources within the US), 1 January 2019; or
(c) in relation to a passthru payment described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2019,
or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.
FATCA Deduction means a deduction or withholding from a payment under a Finance Document required by FATCA.
FATCA Exempt Party means a Party that is entitled to receive payments free from any FATCA Deduction.
Fee Letter means any letter or letters dated on or about the date of this Agreement between any of the Facility Agent and the Security Agent and any Obligor setting out any of the fees referred to in Clause 11 ( Fees ).
Finance Document means:
(a) this Agreement;
(b) any Fee Letter;
(c) the Drawdown Request;
(d) any Security Document;
(e) the Subordination Deed;
(f) any other document which is executed for the purpose of establishing any priority or subordination arrangement in relation to the Secured Liabilities; or
(g) any other document designated as such by the Facility Agent and the Borrower.
Finance Party means the Facility Agent, the Security Agent, the Account Bank or a Lender.
Financial Indebtedness means any indebtedness for or in relation to:
(a) moneys borrowed;
(b) any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;
(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
(d) the amount of any liability in relation to any lease or hire purchase contract which would, in accordance with GAAP, be treated as a balance sheet liability (other than any liability in respect of a lease or hire purchase contract which would, in accordance with GAAP in force prior to 1 January 2019 have been treated as an operating lease);
(e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);
(f) any amount raised under any other transaction (including any forward sale or purchase agreement) of a type not referred to in any other paragraph of this definition having the commercial effect of a borrowing;
(g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that derivative transaction, that amount) shall be taken into account);
(h) any counter-indemnity obligation in relation to a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and
(i) the amount of any liability in relation to any guarantee or indemnity for any of the items referred to in paragraphs (a) to (f) above.
First Bareboat Charter means the bareboat charterparty agreement dated 23 July 2015, as amended and supplemented by the addendum thereto dated 6 May 2016 and further amended and supplemented by an addendum entered or to be entered into on or around the date of this Agreement, and originally made between GSPL as owner, the First Bareboat Charterer as charterer and the First Bareboat Charter Guarantor as charter guarantor and under which the Borrower was nominated as owner of the Vessel by GSPL.
First Bareboat Charterer means Nyathi Shipping B.V. a private company with limited liability ( besloten vennootschap met beperkte aansprakelijkheid ) incorporated under the laws of the Netherlands, having its registered office in Amsterdam, the Netherlands, with its address at Herikerbergweg 238, Luna ArenA, 1101CM Amsterdam, the Netherlands, registered with the trade register of the Dutch Chamber of Commerce under file number 34288028.
First Bareboat Charter Guarantee means the guarantee set out in clause 48 of the First Bareboat Charter and any other guarantee, bond, letter of credit or other instrument (whether or not already issued) supporting the First Bareboat Charter.
First Bareboat Charter Guarantor means ASP Holdings Limited and any other guarantor providing a guarantee pursuant to a First Bareboat Charter Guarantee.
GAAP means generally accepted accounting principles acceptable to the Facility Agent, including IFRS.
General Assignment means the general assignment granted by the Borrower to the Security Agent creating Security over (amongst other things):
(a) the Earnings, the Insurances and any Requisition Compensation; and
(b) the First Bareboat Charter and the First Bareboat Charter Guarantee,
in agreed form.
Group means GSPL and each wholly owned Subsidiary of GSPL for the time being.
Guarantee means the guarantee of the Guarantors contained in this Agreement.
Holding Company means, in relation to a person, any other person in relation to which it is a Subsidiary.
IFRS means international accounting standards within the meaning of the IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements.
Indemnified Person has the meaning given to it in Clause 14.2 ( Other indemnities ).
Indirect Tax means any goods and services tax, consumption tax, value added tax or any tax of a similar nature.
Indirect Tax Group means two or more companies or limited liability partnerships which register as a single taxable entity for Indirect Tax purposes.
Insurances means, in relation to the Vessel:
(a) all policies and contracts of insurance, including entries of the Vessel in any protection and indemnity or war risks association, effected in relation to the Vessel, the Earnings or otherwise in relation to the Vessel whether before, on or after the date of this Agreement; and
(b) all rights and other assets relating to, or derived from, any of such policies, contracts or entries, including any rights to a return of premium and any rights in relation to any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Agreement.
Interest Period means, in relation to the Advance or the Loan, each period determined in accordance with Clause 9 ( Interest Periods ) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 ( Default interest ).
Interpolated Screen Rate means, in relation to LIBOR for the Advance, the Loan or any Unpaid Sum, the rate which results from interpolating on a linear basis between:
(a) the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period of the Advance, the Loan or that Unpaid Sum; and
(b) the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of the Advance, the Loan or that Unpaid Sum,
each as of the Specified Time on the Quotation Day for the currency of the Advance, the Loan or that Unpaid Sum.
ISM Code means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (including the guidelines on its implementation), adopted by the
International Maritime Organisation, as the same may be amended or supplemented from time to time.
ISPS Code means the International Ship and Port Facility Security (ISPS) Code as adopted by the International Maritime Organizations (IMO) Diplomatic Conference of December 2002, as the same may be amended or supplemented from time to time.
ISSC means an International Ship Security Certificate issued under the ISPS Code.
Legal Reservations means:
(a) the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors;
(b) the time barring of claims under the Limitation Acts, the possibility that an undertaking to assume liability for or indemnify a person against non-payment of UK stamp duty may be void and defences of set-off or counterclaim;
(c) similar principles, rights and defences under the laws of any Relevant Jurisdiction; and
(d) any other matters which are set out as qualifications or reservations as to matters of law of general application in any legal opinion delivered pursuant to Clause 4 ( Conditions of Drawdown ).
Lender means:
(a) any Original Lender; and
(b) any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 28 ( Changes to the Lenders ),
which in each case has not ceased to be a Party in accordance with this Agreement.
LIBOR means, in relation to the Advance, the Loan or any Unpaid Sum:
(a) the applicable Screen Rate;
(b) (if no Screen Rate is available for the Interest Period of the Advance, the Loan or that Unpaid Sum), the applicable Interpolated Screen Rate; or
(c) if:
(i) no Screen Rate is available for the currency of the Advance, the Loan or that Unpaid Sum); or
(ii) no Screen Rate is available for the Interest Period of the Advance, the Loan or that Unpaid Sum and it is not possible to calculate an Interpolated Screen Rate for the Advance, the Loan or that Unpaid Sum,
the Reference Bank Rate,
as of, in the case of paragraphs (a) and (c) above, the Specified Time on the Quotation Day for dollars for the Advance, the Loan or that Unpaid Sum and for a period equal in length to the Interest Period of the Advance, the Loan or that Unpaid Sum and, if any such rate is below zero, LIBOR shall be deemed to be zero.
Limitation Acts means the Limitation Act 1980 and the Foreign Limitation Periods Act 1984.
LMA means the Loan Market Association.
Loan means the loan to be made available under the Facility or the aggregate principal amount outstanding for the time being of the borrowings under the Facility.
Major Casualty means any casualty to the Vessel in relation to which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds US$500,000 or the equivalent in any other currency.
Majority Lenders means:
(a) if no Advance has yet been made, a Lender or Lenders whose Commitments aggregate more than 66 2 / 3 per cent. of the Total Commitments; or
(b) at any other time, a Lender or Lenders whose participations in the Loan aggregate more than 66 2 / 3 per cent. of the amount of the Loan then outstanding or, if the Loan has been repaid or prepaid in full, a Lender or Lenders whose participations in the Loan immediately before repayment or prepayment in full aggregate more than 66 2 / 3 per cent. of the Loan immediately before such repayment.
Managers Undertaking means a letter of undertaking entered into or to be entered into by an Approved Technical Manager in favour of the Security Agent in agreed form.
Margin means 2.45 per cent. per annum or otherwise as determined in accordance with paragraph (b)(i) of Clause 6.1 ( Repayment of Loan ).
Market Disruption Event has the meaning given to it in Clause 10.2 ( Market disruption ).
Market Value means, in relation to the Vessel or any other vessel, at any date, the market value of the Vessel or vessel shown by the arithmetic mean of two valuations (or, if there is a discrepancy of 10 per cent or more between those two valuations, three valuations), each addressed to the Facility Agent and prepared:
(a) unless otherwise specified, as at a date not more than 14 days previously;
(b) by an Approved Valuer or Approved Valuers, both selected and appointed by the Facility Agent and, where three valuations are required, by a third Approved Valuer selected and appointed by the Borrower (but still addressed to the Facility Agent);
(c) without physical inspection of the Vessel or vessel; and
(d) on the basis of a sale for prompt delivery for cash on normal arms length commercial terms as between a willing seller and a willing buyer, free of any Charter,
after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale.
Material Adverse Effect means in the reasonable opinion of the Majority Lenders a material adverse effect on:
(a) the business, operations, property, condition (financial or otherwise) or prospects of any member of the Group or the Group as a whole; or
(b) the ability of any Transaction Obligor to perform its obligations under any Finance Document; or
(c) the validity or enforceability of, or the effectiveness or ranking of any Security granted or intended to be granted pursuant to any of, the Finance Documents or the rights or remedies of any Finance Party under any of the Finance Documents.
Maturity Date means the date on which the final Repayment Instalment is payable under Clause 6 ( Repayment ) being the date falling six years or (as the case may be) four years after the Drawdown Date.
Membership Interests Security means a document creating security in respect of the membership interests in the Borrower in agreed form.
Month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:
(a) (subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;
(b) if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and
(c) if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.
The above rules will only apply to the last Month of any period.
Mortgage means the first priority New Zealand statutory ship mortgage on the Vessel and a deed of covenant collateral to said mortgage in agreed form.
New Zealand Security Deed means the specific security deed supplementary to the Mortgage and the Deed of Covenant between the Borrower and the Security Agent in agreed form.
Obligor means the Borrower and each Guarantor.
Original Financial Statements means in relation to each Guarantor, the audited consolidated financial statements of that Guarantor for its financial year ended 31 December 2015.
Overseas Regulations means the Overseas Companies Regulations 2009 (SI 2009/1801).
Parallel Debt means any amount which an Obligor owes to the Security Agent under Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) ) or under that clause as incorporated by reference or in full in any other Finance Document.
Participating Member State means any member state of the European Union that has the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
Party means a party to this Agreement.
Permitted Financial Indebtedness means:
(a) any Financial Indebtedness incurred under the Finance Documents;
(b) any Financial Indebtedness that is subordinated to all Financial Indebtedness incurred under the Finance Documents pursuant to the Subordination Deed and pursuant to, and is assigned in favour of the Security Agent under, the Subordination and Assignment Agreement.
Permitted Security means:
(a) Security created by the Finance Documents;
(b) any netting or set-off arrangement entered into by any member of the Group in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;
(c) liens for unpaid masters and crews wages in accordance with usual maritime practice;
(d) liens for salvage;
(e) liens for masters disbursements incurred in the ordinary course of trading; and
(f) any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel and not as a result of any default or omission by the Borrower and subject, in the case of liens for repair or maintenance, to Clause 24.16 ( Restrictions on chartering, appointment of managers etc. ).
Permitted GSPL Share Sale means a sale of up to 40 per cent. of the shares in GSPL by way of initial public offering at the London Stock Exchange (LSE), New York Stock Exchange (NYSE) or Singapore Stock Exchange (SGX).
Potential Event of Default means any event or circumstance specified in Clause 27 ( Events of Default ) 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.
Prohibited Person means any person (whether designated by name or by reason of being included in a class of persons) against whom Sanctions are directed.
Protected Party has the meaning given to it in Clause 12.1 ( Definitions ).
Quotation Day means, in relation to any period for which an interest rate is to be determined, two Business Days before the first day of that period unless market practice differs in the Relevant Interbank Market in which case the Quotation Day will be determined by the Facility Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).
Receiver means a receiver or receiver and manager or administrative receiver of the whole or any part of the Security Assets.
Reference Bank Rate means the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request by the Reference Banks as the rate at which the relevant Reference Bank could borrow funds in the London interbank market in dollars for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in that currency and for that period.
Reference Banks means the principal London offices of any three of ICE Benchmark Administration Limiteds (or its successors) reference panel banks for dollars (as published by ICE Limited Benchmark Administration Limited or its successor) or such other banks as may be appointed by the Facility Agent in consultation with the Borrower.
Related Fund in relation to a fund (the first fund ), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment
manager or investment adviser is an Affiliate of the investment manager or investment adviser of the first fund.
Relevant Interbank Market means the London interbank market.
Relevant Jurisdiction means, in relation to a Transaction Obligor:
(a) its jurisdiction of incorporation;
(b) any jurisdiction where any asset subject to, or intended to be subject to, any of the Transaction Security created, or intended to be created, by it is situated;
(c) any jurisdiction where it conducts its business; and
(d) the jurisdiction whose laws govern the perfection of any of the Security Documents entered into by it.
Repayment Date means each date on which a Repayment Instalment is required to be paid under Clause 6.1 ( Repayment of Loan ).
Repayment Instalment has the meaning given to it in Clause 6.1 ( Repayment of Loan ).
Repeating Representation means each of the representations set out in Clause 18 ( Representations ) except Clause 18.11 ( Insolvency ), Clause 18.12 ( No filing or stamp taxes ), Clause 18.13 ( Deduction of Tax ) and Clause 18.18 ( No proceedings pending or threatened ) and any representation of any Transaction Obligor made in any other Finance Document that is expressed to be a Repeating Representation or is otherwise expressed to be repeated.
Representative means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.
Requisition means:
(a) any expropriation, confiscation, requisition or acquisition of the Vessel, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority (excluding a requisition for hire for a fixed period not exceeding one year without any right to an extension) unless it is within 30 days redelivered to the full control of the Borrower; and
(b) any arrest, capture, seizure or detention of the Vessel (including any hijacking or theft) unless it is within 30 days redelivered to the full control of the Borrower.
Requisition Compensation includes all compensation or other moneys payable by reason of any Requisition.
Resolution Authority means any body which has authority to exercise any Write-down and Conversion Powers.
Retention Account means:
(a) an account in the name of the Borrower with the Account Bank with account number 2910059138, designated Retention Account; or
(b) any other account (with that or another office of the Account Bank or with a bank or financial institution other than the Account Bank) which is designated by the Facility Agent as the Retention Account of that Borrower for the purposes of this Agreement.
Safety Management Certificate has the meaning given to it in the ISM Code.
Safety Management System has the meaning given to it in the ISM Code.
Sanctions means any economic sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by:
(a) the United States government including, but not limited to, the US Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010;
(b) the United Nations;
(c) the European Union or its Member States, including without limitation, the United Kingdom;
(d) New Zealand;
(e) any country to which any Obligor, or any other member of the Group or any Affiliate of any of them is bound; or
the respective governmental institutions and agencies of any of the foregoing, including without limitation, the Office of Foreign Assets Control of the US Department of Treasure ( OFAC ), the United States Department of State, and her Majestys Treasury ( HMT ) (together Sanctions Authorities ).
Screen Rate means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for dollars for the relevant period displayed on pages LIBOR01 or LIBOR02 of the Reuters screen (or any replacement Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters. If such page or service ceases to be available, the Facility Agent may specify another page or service displaying the relevant rate after consultation with the Borrower.
Second Bareboat Charter means the bareboat charterparty agreement dated 1 May 2016, as amended and supplemented by the addendum thereto entered or to be entered into on or about the date of this Agreement, and made between the Second Bareboat Charterer and the First Bareboat Charterer.
Second Bareboat Charterer means Silver Fern Shipping Limited, a company incorporated in New Zealand with registered number 628372 whose registered office is at Level 8, Resimac House, 45 Johnston Street, Wellington 6011, New Zealand.
Secured Liabilities means all present and future obligations and liabilities, (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of each Transaction Obligor to any Creditor Party under or in connection with each Finance Document.
Security means a mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security.
Security Assets means all of the assets of the Transaction Obligors which from time to time are, or are expressed to be, the subject of the Transaction Security.
Security Document means:
(a) any Membership Interests Security;
(b) any Mortgage;
(c) any Deed of Covenant;
(d) any General Assignment;
(e) any Account Security;
(f) any Managers Undertaking;
(g) the Subordination and Assignment Agreement;
(h) the Bareboat Charterers Assignment and Direct Agreement;
(i) the New Zealand Security Deed;
(j) any other document (whether or not it creates Security) which is executed as security for the Secured Liabilities; or
(k) any other document designated as such by the Facility Agent and the Borrower.
Security Period means the period starting on the date of this Agreement and ending on the date on which the Facility Agent is satisfied that there is no outstanding Commitment in force and that the Secured Liabilities have been irrevocably and unconditionally paid and discharged in full.
Security Property means:
(a) the Transaction Security expressed to be granted in favour of the Security Agent as trustee for the Creditor Parties and all proceeds of that Transaction Security;
(b) all obligations expressed to be undertaken by a Transaction Obligor to pay amounts in relation to the Secured Liabilities to the Security Agent as trustee for the Creditor Parties and secured by the Transaction Security together with all representations and warranties expressed to be given by a Transaction Obligor or any other person in favour of the Security Agent as trustee for the Creditor Parties;
(c) the Security Agents interest in any turnover trust created under the Finance Documents;
(d) any other amounts or property, whether rights, entitlements, choses in action or otherwise, actual or contingent, which the Security Agent is required by the terms of the Finance Documents to hold as trustee on trust for the Creditor Parties,
except:
(i) rights intended for the sole benefit of the Security Agent; and
(ii) any moneys or other assets which the Security Agent has transferred to the Facility Agent or (being entitled to do so) has retained in accordance with the provisions of this Agreement.
Selection Notice means a notice substantially in the form set out in Part B of Schedule 3 ( Requests ) given in accordance with Clause 9 ( Interest Periods ).
Servicing Party means the Facility Agent or the Security Agent.
Specified Time means a time determined in accordance with Schedule 7 ( Timetables ).
Subordinated Finance Document means:
(a) the Subordinated Loan Agreement; and
(b) any other document relating to or evidencing Subordinated Liabilities.
Subordinated Liabilities means all indebtedness owed or expressed to be owed by the Borrower to GSPL whether under the Subordinated Finance Documents or otherwise.
Subordinated Loan Agreement means any loan agreement made between the Borrower and GSPL in relation to intra-group debt owed by the Borrower to GSPL.
Subordination and Assignment Agreement means an agreement entered into or to be entered into by GSPL, the Borrower and the Security Agent in agreed form.
Subordination Deed means the subordination deed entered into or to be entered into by the Borrower, the First Bareboat Charterer, the Second Bareboat Charterer, Commonwealth Bank of Australia ABN 48 123 123 124 and the Security Agent in agreed form.
Subsidiary means a subsidiary within the meaning of section 1159 of the Companies Act 2006.
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).
Tax Credit has the meaning given to it in Clause 12.1 ( Definitions ).
Tax Deduction has the meaning given to it in Clause 12.1 ( Definitions ).
Tax Payment has the meaning given to it in Clause 12.1 ( Definitions ).
Third Parties Act has the meaning given to it in Clause 1.5 ( Third party rights ).
Time Charter means a time charterparty dated 23 July 2015 and made between the Second Bareboat Charterer and the Time Charterer.
Time Charterer means Coastal Oil Logistics Limited a company incorporated in New Zealand with registered number 972809 whose registered office is at 10 th Floor, The Bayley Building, Gr Brandon Street and Lambton Quay, Wellington 6011.
Total Commitments means the aggregate of the Commitments, being US$27,000,000 at the date of this Agreement.
Total Loss means:
(a) actual, constructive, compromised, agreed or arranged total loss of the Vessel; or
(b) any Requisition.
Total Loss Date means, in relation to the Total Loss of the Vessel:
(a) in the case of an actual loss of the Vessel, the date on which it occurred or, if that is unknown, the date when the Vessel was last heard of;
(b) in the case of a constructive, compromised, agreed or arranged total loss of the Vessel, the earlier of:
(i) the date on which a notice of abandonment is given to the insurers; and
(ii) the date of any compromise, arrangement or agreement made by or on behalf of the Borrower with the Vessels insurers in which the insurers agree to treat the Vessel as a total loss; and
(c) in the case of any other type of Total Loss, the date (or the most likely date) on which it appears to the Facility Agent that the event constituting the total loss occurred.
Transaction Document means:
(a) a Finance Document;
(b) a Subordinated Finance Document;
(c) a Bareboat Charter; or
(d) any other document designated as such by the Facility Agent and the Borrower.
Transaction Obligor means each Obligor, each Bareboat Charterer, any Approved Technical Manager who is a member of the Group or any other member of the Group who executes a Transaction Document.
Transaction Security means the Security created or evidenced or expressed to be created or evidenced under the Security Documents.
Transfer Certificate means a certificate in the form set out in Schedule 4 ( Form of Transfer Certificate ) or any other form agreed between the Facility Agent and the Borrower.
Transfer Date means, in relation to an assignment or a transfer, the later of:
(a) the proposed Transfer Date specified in the relevant Assignment Agreement or Transfer Certificate; and
(b) the date on which the Facility Agent executes the relevant Assignment Agreement or Transfer Certificate.
UK Establishment means a UK establishment as defined in the Overseas Regulations.
Unpaid Sum means any sum due and payable but unpaid by a Transaction Obligor under the Finance Documents.
US means the United States of America.
US Tax Obligor means:
(a) a person which is resident for tax purposes in the US; or
(b) a person some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.
Vessel means the 50,000 dwt MR product tanker named MATUKU having IMO number 9657806 and registered in the name of the Borrower under the Approved Flag.
Write-down and Conversion Powers means:
(a) in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule ; and
(b) in relation to any other applicable Bail-In Legislation:
(i) any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and
(ii) any similar or analogous powers under that Bail-In Legislation.
1.2 Construction
(a) Unless a contrary indication appears, a reference in this Agreement to:
(i) the Account Bank , the Facility Agent , any Finance Party , any Lender , any Obligor , any Party , any Creditor Party , the Security Agent , any Transaction Obligor or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under the Finance Documents;
(ii) assets includes present and future properties, revenues and rights of every description;
(iii) a liability which is contingent means a liability which is not certain to arise and/or the amount of which remains unascertained;
(iv) document includes a deed and also a letter, fax or telex;
(v) expense means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable Tax including Indirect Tax;
(vi) a Finance Document , a Security Document or Transaction Document or any other agreement or instrument is a reference to that Finance Document, Security Document or Transaction Document or other agreement or instrument as amended or novated;
(vii) indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;
(viii) law includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;
(ix) proceedings means, in relation to any enforcement provision of a Finance Document, proceedings of any kind, including an application for a provisional or protective measure;
(x) a person includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium or partnership or other entity (whether or not having separate legal personality);
(xi) a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or
supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;
(xii) a provision of law is a reference to that provision as amended or re-enacted;
(xiii) a time of day is a reference to Singapore time;
(xiv) any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall, in respect of a jurisdiction other than England, be deemed to include that which most nearly approximates in that jurisdiction to the English legal term;
(xv) words denoting the singular number shall include the plural and vice versa; and
(xvi) including and in particular (and other similar expressions) shall be construed as not limiting any general words or expressions in connection with which they are used.
(b) Section, Clause and Schedule headings are for ease of reference only and are not to be used for the purposes of construction or interpretation of the Finance Documents.
(c) Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under, or in connection with, any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.
(d) A Potential Event of Default is continuing if it has not been remedied or waived and an Event of Default is continuing if it has not been waived.
1.3 Construction of insurance terms
In this Agreement:
approved means, for the purposes of Clause 22 ( Insurance Undertakings ), approved in writing by the Facility Agent;
excess risks means the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Vessel in consequence of its insured value being less than the value at which the Vessel is assessed for the purpose of such claims;
obligatory insurances means all insurances effected, or which the Borrower is obliged to effect, under Clause 22 ( Insurance Undertakings ) or any other provision of this Agreement or of another Finance Document;
policy includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;
protection and indemnity risks means the usual risks covered by a protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), clause 8 of the Institute Time Clauses (Hulls) (1/10/83)(1/11/95) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision; and
war risks includes the risk of mines and all risks excluded by clause 29 of the International Hull Clauses (1/11/02 or 1/11/03), clause 24 of the Institute Time Clauses (Hulls) (1/11/95) or clause 23 of the Institute Time Clauses (Hulls)(1/10/83).
1.4 Agreed forms of Finance Documents
References in Clause 1.1 ( Definitions ) to any Finance Document being in agreed form are to that Finance Document:
(a) in a form attached to a certificate dated the same date as this Agreement (and signed by the Borrower and the Facility Agent); or
(b) in any other form agreed in writing between the Borrower and the Facility Agent acting with the authorisation of the Majority Lenders or, where Clause 43.2 ( All Lender matters ) applies, all the Lenders.
1.5 Third party rights
(a) Unless expressly provided to the contrary in a Finance Document, a person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the Third Parties Act ) to enforce or to enjoy the benefit of any term of this Agreement.
(b) Notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.
(c) Any Receiver, Delegate or any other person described in paragraph (d) of Clause 14.2 ( Other indemnities ), paragraph (b) of Clause 30.10 ( Exclusion of liability ) or paragraph (b) of Clause 31.11 ( Exclusion of liability ) may, subject to this Clause 1.5 ( Third party rights ) and the Third Parties Act, rely on any Clause of this Agreement which expressly confers rights on it.
SECTION 2
THE FACILITY
2 THE FACILITY
2.1 The Facility
Subject to the terms of this Agreement, the Lenders agree to make available to the Borrower a dollar term loan facility in an aggregate amount not exceeding the Total Commitments.
2.2 Finance Parties rights and obligations
(a) The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
(b) The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from a Transaction Obligor is a separate and independent debt in respect of which a Finance Party shall be entitled to enforce its rights in accordance with paragraph (c) below. The rights of each Finance Party include any debt owing to that Finance Party under the Finance Documents and, for the avoidance of doubt, any part of the Loan or any other amount owed by a Transaction Obligor which relates to a Finance Partys participation in the Facility or its role under a Finance Document (including any such amount payable to the Facility Agent on its behalf) is a debt owing to that Finance Party by that Transaction Obligor.
(c) A Finance Party may, except as specifically provided in the Finance Documents, separately enforce its rights under or in connection with the Finance Documents.
3 PURPOSE
3.1 Purpose
The Borrower shall apply all amounts borrowed by it under the Facility only for the purpose of refinancing part of the acquisition cost of the Vessel in an aggregate principal amount not exceeding the lower of:
(a) US$27,000,000; and
(b) 70 per cent. of the Market Value of the Vessel (as determined not earlier than three weeks before the Drawdown Date and not later than one week before the Drawdown Date, unless otherwise agreed by the Facility Agent).
3.2 Monitoring
No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
4 CONDITIONS OF DRAWDOWN
4.1 Conditions precedent to delivery of a Drawdown Request
The Borrower may not deliver a Drawdown Request unless the Facility Agent has received all of the documents and other evidence listed in Part A of Schedule 2 ( Conditions Precedent and Subsequent ) in form and substance satisfactory to the Facility Agent.
4.2 Conditions precedent to release of the Advance
The Facility Agent shall only be obliged to release the Advance to the Borrower on the Drawdown Date if:
(a) on the Drawdown Date and before the Advance is released:
(i) no Default is continuing or would result from the proposed release; and
(ii) the Repeating Representations to be made by each Transaction Obligor are true;
(b) on the Drawdown Date, the Facility Agent has received, or is satisfied that it will receive, all of the documents and other evidence listed in Part B of Schedule 2 ( Conditions Precedent and Subsequent ) in form and substance satisfactory to the Facility Agent.
4.3 Conditions subsequent
The Borrower undertakes to deliver or cause to be delivered to the Facility Agent within the period stated, the additional documents and other evidence listed in Part C of Schedule 2 ( Conditions Precedent and Subsequent ) in form and substance satisfactory to the Facility Agent.
4.4 Notification of satisfaction of conditions precedent and subsequent
(a) The Facility Agent shall notify the Borrower and the Lenders promptly upon being satisfied as to the satisfaction of the conditions precedent and subsequent referred to in Clause 4.1 ( Conditions precedent to delivery of a Drawdown Request ) and Clause 4.3 ( Conditions subsequent ).
(b) Other than to the extent that the Majority Lenders notify the Facility Agent in writing to the contrary before the Facility Agent gives the notification described in paragraph (a) above, the Lenders authorise (but do not require) the Facility Agent to give that notification. The Facility Agent shall not be liable for any damages, costs or losses whatsoever as a result of giving any such notification.
4.5 Waiver of conditions precedent
If the Majority Lenders, at their discretion, permit the Advance to be released before any of the conditions precedent referred to in Clause 4.1 ( Conditions precedent to delivery of a Drawdown Request ) or 4.2 ( Conditions precedent to release of the Advance ) has been satisfied, the Borrower shall ensure that that condition is satisfied within five Business Days after the Drawdown Date or such later date as the Facility Agent, acting with the authorisation of the Majority Lenders, may agree in writing with the Borrower.
SECTION 3
DRAWDOWN
5 DRAWDOWN
5.1 Delivery of a Drawdown Request
The Borrower may utilise the Facility by delivery to the Facility Agent of a duly completed Drawdown Request not later than the Specified Time.
5.2 Completion of a Drawdown Request
(a) The Drawdown Request is irrevocable and will not be regarded as having been duly completed unless:
(i) the proposed Drawdown Date is a Business Day within the Availability Period;
(ii) the currency and amount of the Drawdown comply with Clause 5.3 ( Currency and amount ); and
(iii) the proposed Interest Period complies with Clause 9 ( Interest Periods ).
(b) Only one Drawdown Request may be delivered.
5.3 Currency and amount
(a) The currency specified in a Drawdown Request must be dollars.
(b) The amount of the proposed Advance must be an amount which is not more than the Total Commitments.
(c) The amount of the proposed Advance must be an amount which would not oblige the Borrower to provide additional security or prepay part of the Advance if the ratio set out in Clause 25 ( Security Cover ) were applied and notice was given by the Facility Agent under Clause 25.1 ( Minimum required security cover ) immediately after the Advance was made.
5.4 Lenders participation
(a) If the conditions set out in this Agreement have been met, each Lender shall make its participation in the Advance available by the Drawdown Date through its Facility Office.
(b) The amount of each Lenders participation in the Advance will be equal to the proportion borne by its Commitment to the Total Commitments immediately before making the Advance.
(c) The Facility Agent shall notify each Lender of the amount of the Advance and the amount of its participation in the Advance by the Specified Time.
5.5 Cancellation of Commitments
The Commitments which are unutilised at the end of the Availability Period shall then be cancelled.
SECTION 4
REPAYMENT, PREPAYMENT AND CANCELLATION
6 REPAYMENT
6.1 Repayment of Loan
(a) Subject to paragraph (b) below, the Borrower shall repay the Loan by 24 consecutive quarterly instalments, the first of which shall be repaid on the date falling three Months after the Drawdown Date, each in the following amounts:
(i) the first 16 such instalments, each in an amount of US$480,000; and
(ii) the following eight such instalments, each in an amount of US$420,000,
(each a Repayment Instalment ), together with a balloon instalment of US$15,960,000 to be paid concurrently with the final Repayment Instalment.
(b) On the date falling four years after the Drawdown Date (the Fourth Anniversary Date ) at the option of the Lenders, in their discretion, following consultation with the Borrower, one of the following shall occur:
(i) The Borrower shall agree an amendment to the Margin to reflect the then current pricing of the Lenders (the Margin Adjustment ); or
(ii) the Borrower shall repay the Loan outstanding in full.
If the Margin Adjustment has not been agreed and documented to the satisfaction of the Facility Agent (acting with the authorisation of all of the Lenders) by no later than five Business Days prior to the last day of the Interest Period ending on, or (as the case may be) immediately before, the Fourth Anniversary Date then the Borrower shall repay the Loan outstanding in full on the Fourth Anniversary Date. Any Margin Adjustment shall take effect on and from the Fourth Anniversary Date.
6.2 Reduction of Repayment Instalments
If any part of the Facility is cancelled, the Repayment Instalments falling after that cancellation, starting with the balloon instalment, shall be reduced in inverse chronological order by the amount cancelled.
6.3 Maturity Date
On the Maturity Date, the Borrower shall additionally pay to the Facility Agent for the account of the Finance Parties all other sums then accrued and owing under the Finance Documents.
6.4 Reborrowing
The Borrower may not reborrow any part of the Facility which is repaid.
7 PREPAYMENT AND CANCELLATION
7.1 Illegality
(a) If it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in the Advance or the Loan or it becomes unlawful for any Affiliate of a Lender for that Lender to do so:
(i) that Lender shall promptly notify the Facility Agent upon becoming aware of that event;
(ii) upon the Facility Agent notifying the Borrower, the Available Commitment of that Lender will be immediately cancelled; and
(iii) the Borrower shall prepay that Lenders participation in the Loan on the last day of the Interest Period for the Loan occurring after the Facility Agent has notified the Borrower or, if earlier, the date specified by the Lender in the notice delivered to the Facility Agent (being no earlier than the last day of any applicable grace period permitted by law) and that Lenders corresponding Commitment shall be cancelled in the amount of the participation prepaid.
(b) Any partial prepayment under this Clause 7.1 ( Illegality ) shall reduce pro rata the amount of each Repayment Instalment falling after that prepayment,starting with the balloon instalment, by the amount prepaid.
7.2 Automatic cancellation
The unutilised Commitment (if any) of each Lender shall be automatically cancelled at close of business on the date on which the Advance is made available.
7.3 Voluntary prepayment of Loan
(a) Subject to paragraph (b) below, the Borrower may, if it gives the Facility Agent not less than five Business Days (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of the Loan (but, if in part, being an amount that reduces the amount of the Loan by a minimum amount of US$500,000 or a multiple of that amount).
(b) The Loan may only be prepaid after the last day of the Availability Period (or, if earlier, the day on which the Available Facility is zero).
(c) Any partial prepayment under this Clause 7.3 ( Voluntary prepayment of Loan ) shall reduce in inverse chronological order the amount of each Repayment Instalment, starting with the balloon instalment, falling after that prepayment by the amount prepaid.
7.4 Mandatory prepayment on sale or Total Loss
If the Vessel is sold or becomes a Total Loss, the Borrower shall repay the Loan. Such repayment shall be made:
(a) in the case of a sale of the Vessel, on or before the date on which the sale is completed by delivery of the Vessel to the buyer;
(b) in the case of any arrest of the Vessel where the Vessel is not within 30 days redelivered to the full control of the Borrower, on or before the date falling 37 days after the date of the arrest of the Vessel; or
(c) in the case of any other Total Loss, on the earlier of (i) the date falling 90 days after the Total Loss Date and (ii) the date of receipt by the Security Agent of the proceeds of insurance relating to such Total Loss.
7.5 Restrictions
(a) Any notice of cancellation or prepayment given by any Party under this Clause 7 ( Prepayment and Cancellation ) shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.
(b) Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to the fee provided for in Clause 11.3 ( Prepayment fee ) and any Break Costs, without premium or penalty.
(c) The Borrower may not reborrow any part of the Facility which is prepaid.
(d) The Borrower shall not repay or prepay all or any part of the Loan or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.
(e) No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.
(f) If the Facility Agent receives a notice under this Clause 7 ( Prepayment and Cancellation ) it shall promptly forward a copy of that notice to either the Borrower or the affected Lender, as appropriate.
SECTION 5
COSTS OF DRAWDOWN
8 INTEREST
8.1 Calculation of interest
The rate of interest on the Loan or any part of the Loan for each Interest Period is the percentage rate per annum which is the aggregate of:
(a) the Margin; and
(b) LIBOR.
8.2 Payment of interest
(a) The Borrower shall pay accrued interest on the Loan on the last day of each Interest Period (each an Interest Payment Date ).
(b) If an Interest Period is longer than three Months, the Borrower shall also pay interest then accrued on the Loan on the dates falling at three Monthly intervals after the first day of the Interest Period.
8.3 Default interest
(a) If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the Unpaid Sum from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is 2 per cent. per annum higher than the rate which would have been payable if the Unpaid Sum had, during the period of non-payment, constituted part of a Loan in the currency of the Unpaid Sum for successive Interest Periods, each of a duration selected by the Facility Agent. Any interest accruing under this Clause 8.3 ( Default interest ) shall be immediately payable by the Obligor on demand by the Facility Agent.
(b) If an Unpaid Sum consists of all or part of the Loan which became due on a day which was not the last day of an Interest Period relating to the Loan:
(i) the first Interest Period for that Unpaid Sum shall have a duration equal to the unexpired portion of the current Interest Period relating to the Loan; and
(ii) the rate of interest applying to that Unpaid Sum during that first Interest Period shall be 2 per cent. per annum higher than the rate which would have applied if that Unpaid Sum had not become due.
(c) Default interest (if unpaid) accruing on an Unpaid Sum will be compounded with the Unpaid Sum at the end of each Interest Period applicable to that Unpaid Sum but will remain immediately due and payable.
8.4 Notification of rates of interest
The Facility Agent shall promptly notify the Lenders and the Borrower of the determination of a rate of interest under this Agreement.
9 INTEREST PERIODS
9.1 Selection of Interest Periods
(a) The first Interest Period for the Loan as specified in the Drawdown Request shall be three Months from the Drawdown Date or such other period as may be agreed in accordance with paragraph (e) below.
(b) Subject to paragraphs (e) and (g) below, the Borrower may select each subsequent Interest Period in respect of the Loan in a Selection Notice.
(c) Each Selection Notice is irrevocable and must be delivered to the Facility Agent by the Borrower not later than the Specified Time.
(d) If the Borrower fails to deliver a Selection Notice to the Facility Agent in accordance with paragraphs (b) and (c) above, the relevant Interest Period will, subject to Clause 9.2 ( Changes to Interest Periods ) and paragraph (g) below, be three Months.
(e) Subject to this Clause 9 ( Interest Periods ), the Borrower may select an Interest Period of three Months or any other period (up to a maximum of 12 Months) agreed between the Borrower and the Facility Agent (acting on the instructions of all the Lenders).
(f) An Interest Period in respect of the Loan shall not extend beyond the Maturity Date.
(g) In respect of a Repayment Instalment, an Interest Period for a part of the Loan equal to such Repayment Instalment shall end on the Repayment Date relating to it if such date is before the end of the Interest Period then current.
(h) Subject to paragraph (i) below, the first Interest Period for the Loan shall start on the Drawdown Date and each subsequent Interest Period shall start on the last day of the preceding Interest Period.
(i) Except for the purposes of paragraph (g) above, the Loan shall have one Interest Period only at any time.
9.2 Changes to Interest Periods
(a) If after the Borrower has selected and the Lenders have agreed an Interest Period longer than six Months, any Lender notifies the Facility Agent within two Business Days after the Specified Time relating to the relevant Drawdown Request or Selection Notice that it is not satisfied that deposits in dollars for a period equal to the Interest Period will be available to it in the Relevant Interbank Market when the Interest Period commences, the Facility Agent shall shorten the Interest Period to six Months.
(b) If the Facility Agent makes any change to an Interest Period referred to in this Clause 9.2 ( Changes to Interest Periods ), it shall promptly notify the Borrower and the Lenders.
9.3 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).
10 CHANGES TO THE CALCULATION OF INTEREST
10.1 Absence of quotations
Subject to Clause 10.2 ( Market disruption ), if LIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by the Specified Time on the Quotation Day, the applicable LIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.
10.2 Market disruption
(a) If a Market Disruption Event occurs in relation to the Advance or the Loan for any Interest Period, then the rate of interest on each Lenders share of the Advance or the Loan for the Interest Period shall be the rate per annum which is the sum of:
(i) the Margin; and
(ii) the rate notified to the Facility Agent by that Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in the Advance or the Loan from whatever source it may reasonably select.
(b) In this Agreement Market Disruption Event means:
(i) at or about noon on the Quotation Day for the relevant Interest Period, LIBOR is to be determined by reference to the Reference Banks and none or only one of the Reference Banks supplies a rate to the Facility Agent to determine LIBOR for dollars for the relevant Interest Period; or
(ii) before close of business in London on the Quotation Day for the relevant Interest Period, the Facility Agent receives notifications from a Lender or Lenders (whose participations in the Loan exceed 25 per cent. of the Loan) that the cost to it or them of obtaining matching deposits in the Relevant Interbank Market would be in excess of LIBOR; or
(iii) at least one Business Day before the start of an Interest Period, the Facility Agent receives notification from a Lender (the Affected Lender ) that for any reason it is unable to obtain dollars in the Relevant Interbank Market in order to fund its participation in the Advance or the Loan.
10.3 Alternative basis of interest or funding, suspension
(a) If a Market Disruption Event occurs and the Facility Agent or the Borrower so requires, the Facility Agent and the Borrower shall enter into negotiations (for a period of not more than 30 days) with a view to agreeing a substitute basis for determining the rate of interest or (as the case may be) an alternative basis for funding.
(b) Any substitute or alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of all the Lenders and the Borrower, be binding on all Parties to the Finance Documents.
(c) If a Market Disruption Event occurs before the Advance is made:
(i) in circumstances falling within sub-paragraph (i) of paragraph (b) of Clause 10.2 ( Market disruption ) or sub-paragraph (ii) of paragraph (b) of Clause 10.2 ( Market disruption ), the Lenders obligation to make the Advance; or
(ii) in circumstances falling within sub-paragraph (iii) of paragraph (b) of Clause 10.2 ( Market disruption ), the Affected Lenders obligation to participate in the Advance,
shall be suspended while the circumstances giving rise to the Market Disruption Event continue.
10.4 Break Costs
(a) The Borrower shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of the Loan or Unpaid Sum being paid by the Borrower on a day other than the last day of an Interest Period for the Loan or Unpaid Sum.
(b) Each Lender shall, as soon as reasonably practicable after a demand by the Facility Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.
11 FEES
11.1 Commitment fee
(a) The Borrower shall pay to the Facility Agent (for the account of each Lender) a fee computed at the rate of 1.1 per cent. per annum on that Lenders Available Commitment from time to time for the Availability Period.
(b) The accrued commitment fee is payable on the last day of each successive period of three Months which ends during the Availability Period, on the last day of the Availability Period and, if cancelled, on the cancelled amount of the relevant Lenders Commitment at the time the cancellation is effective.
11.2 Upfront fee
The Borrower shall pay to the Facility Agent an upfront fee in the amount and at the times agreed in a Fee Letter.
11.3 Prepayment fee
(a) Subject to paragraph (c) below, the Borrower must pay to the Facility Agent for the account of each Lender a prepayment fee on the date of prepayment of all or any part of the Loan.
(b) The amount of the prepayment fee is:
(i) if the prepayment occurs on or before the first anniversary of the Closing Date, three per cent. of the amount prepaid;
(ii) if the prepayment occurs after the first but on or before the second anniversary of the Closing Date, two per cent. of the amount prepaid;
(iii) if the prepayment occurs after the second but on or before the third anniversary of the Closing Date, one per cent. of the amount prepaid; and
(iv) if the prepayment occurs after the third anniversary of the Closing Date half of one per cent. of the amount prepaid; and
(c) No prepayment fee shall be payable under this Clause if the prepayment is made under:
(i) Clause 7.1 ( Illegality );
(ii) Clause 7.3 ( Voluntary prepayment of Loan ) if the prepayment is the result of a refinancing in relation to which the Facility Agent is party as facility agent;
(iii) Clause 7.4 ( Mandatory prepayment on sale or Total Loss ) in the case of a sale, unless the sale is to a member of the Group or any of their respective Affiliates; or
(iv) Clause 25.2 ( Provision of additional security; prepayment ).
SECTION 6
ADDITIONAL PAYMENT OBLIGATIONS
12 TAX GROSS UP AND INDEMNITIES
12.1 Definitions
(a) In this Agreement:
Protected Party means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.
Tax Credit means a credit against, relief or remission for, or repayment of any Tax.
Tax Deduction means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than a FATCA Deduction.
Tax Payment means either the increase in a payment made by an Obligor to a Finance Party under Clause 12.2 ( Tax gross-up ) or a payment under Clause 12.3 ( Tax indemnity ).
(b) Unless a contrary indication appears, in this Clause 12 ( Tax Gross Up and Indemnities ) reference to determines or determined means a determination made in the absolute discretion of the person making the determination.
12.2 Tax gross-up
(a) Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.
(b) The Borrower shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Facility Agent accordingly. Similarly, a Lender shall notify the Facility Agent on becoming so aware in respect of a payment payable to that Lender. If the Facility Agent receives such notification from a Lender it shall notify the Borrower and that Obligor.
(c) If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.
(d) If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.
(e) Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Facility Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.
12.3 Tax indemnity
(a) The Obligors shall (within three Business Days of demand by the Facility Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.
(b) Paragraph (a) above shall not apply:
(i) with respect to any Tax assessed on a Finance Party:
(A) under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or
(B) under the law of the jurisdiction in which that Finance Partys Facility Office is located in respect of amounts received or receivable in that jurisdiction,
if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or
(ii) to the extent a loss, liability or cost:
(A) is compensated for by an increased payment under Clause 12.2 ( Tax gross-up ); or
(B) relates to a FATCA Deduction required to be made by a Party.
(c) A Protected Party making, or intending to make, a claim under paragraph (a) above shall promptly notify the Facility Agent of the event which will give, or has given, rise to the claim, following which the Facility Agent shall notify the Obligors.
(d) A Protected Party shall, on receiving a payment from an Obligor under this Clause 12.3 ( Tax indemnity ), notify the Facility Agent.
12.4 Tax Credit
If an Obligor makes a Tax Payment and the relevant Finance Party determines that:
(a) a Tax Credit is attributable to an increased payment of which that Tax Payment forms part, to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was received; and
(b) that Finance Party has obtained, utilised and retained that Tax Credit,
the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by the Obligor.
12.5 Stamp taxes
The Obligors shall pay and, within three Business Days of demand, indemnify each Creditor Party against any cost, loss or liability which that Creditor Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.
12.6 Indirect Tax
(a) All amounts expressed to be payable under a Finance Document by any Party to a Finance Party which (in whole or in part) constitute the consideration for any supply for Indirect Tax purposes are deemed to be exclusive of any Indirect Tax which is chargeable on that supply, and accordingly, subject to paragraph (b) below, if Indirect Tax is or becomes chargeable on any supply made by any Finance Party to any Party under a Finance Document and such Finance Party is required to account to the relevant tax authority for the Indirect Tax, that Party must pay to such Finance Party (in addition to and at the same time as paying any other
consideration for such supply) an amount equal to the amount of the Indirect Tax (and such Finance Party must promptly provide an appropriate Indirect Tax invoice to that Party).
(b) If Indirect Tax is or becomes chargeable on any supply made by any Finance Party (the Supplier ) to any other Finance Party (the Recipient ) under a Finance Document, and any Party other than the Recipient (the Relevant Party ) is required by the terms of any Finance Document to pay an amount equal to the consideration for that supply to the Supplier (rather than being required to reimburse or indemnify the Recipient in respect of that consideration):
(i) (where the Supplier is the person required to account to the relevant tax authority for the Indirect Tax) the Relevant Party must also pay to the Supplier (at the same time as paying that amount) an additional amount equal to the amount of the Indirect Tax. The Recipient must (where this sub-paragraph (i) applies) promptly pay to the Relevant Party an amount equal to any credit or repayment the Recipient receives from the relevant tax authority which the Recipient reasonably determines relates to the Indirect Tax chargeable on that supply; and
(ii) (where the Recipient is the person required to account to the relevant tax authority for the Indirect Tax) the Relevant Party must promptly, following demand from the Recipient, pay to the Recipient an amount equal to the Indirect Tax chargeable on that supply but only to the extent that the Recipient reasonably determines that it is not entitled to credit or repayment from the relevant tax authority in respect of that Indirect Tax.
(c) Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part of it as represents Indirect Tax, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such Indirect Tax from the relevant tax authority.
(d) Any reference in this Clause 12.6 ( Indirect Tax ) to any Party shall, at any time when such Party is treated as a member of a group for Indirect Tax purposes, include (where appropriate and unless the context otherwise requires) a reference to the representative member of such group at such time (the term representative member to have the same meaning as in the Value Added Tax Act 1994).
(e) In relation to any supply made by a Finance Party to any Party under a Finance Document, if reasonably requested by such Finance Party, that Party must promptly provide such Finance Party with details of that Partys Indirect Tax registration and such other information as is reasonably requested in connection with such Finance Partys Indirect Tax reporting requirements in relation to such supply.
12.7 FATCA Information
(a) Subject to paragraph (c) below, each Party shall, within 10 Business Days of a reasonable request by another Party:
(i) confirm to that other Party whether it is:
(A) a FATCA Exempt Party; or
(B) not a FATCA Exempt Party; and
(ii) supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Partys compliance with FATCA; and
(iii) supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Partys compliance with any other law, regulation, or exchange of information regime.
(b) If a Party confirms to another Party pursuant to sub-paragraph (i) of paragraph (a) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
(c) Paragraph (a) above shall not oblige any Finance Party to do anything and sub-paragraph (iii) of paragraph (a) above shall not oblige any other Party to do anything which would or might in its reasonable opinion constitute a breach of:
(i) any law or regulation;
(ii) any fiduciary duty; or
(iii) any duty of confidentiality.
(d) If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with sub-paragraphs (i) or (ii) of paragraph (a) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.
12.8 FATCA Deduction
(a) Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.
(b) Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment and, in addition, shall notify each Obligor and the Facility Agent and the Facility Agent shall notify the other Finance Parties.
13 INCREASED COSTS
13.1 Increased costs
(a) Subject to Clause 13.3 ( Exceptions ), the Borrower shall, within three Business Days of a demand by the Facility Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of:
(i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation; or
(ii) compliance with any law or regulation made,
after the date of this Agreement.
(b) In this Agreement, Increased Costs means:
(i) a reduction in the rate of return from the Facility or on a Finance Partys (or its Affiliates) overall capital;
(ii) an additional or increased cost; or
(iii) a reduction of any amount due and payable under any Finance Document,
which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document.
13.2 Increased cost claims
(a) A Finance Party intending to make a claim pursuant to Clause 13.1 ( Increased costs ) shall notify the Facility Agent of the event giving rise to the claim, following which the Facility Agent shall promptly notify the Borrower.
(b) Each Finance Party shall, as soon as practicable after a demand by the Facility Agent, provide a certificate confirming the amount of its Increased Costs.
13.3 Exceptions
Clause 13.1 ( Increased costs ) does not apply to the extent any Increased Cost is:
(a) attributable to a Tax Deduction required by law to be made by an Obligor;
(b) attributable to a FATCA Deduction required to be made by a Party;
(c) compensated for by Clause 12.3 ( Tax indemnity ) (or would have been compensated for under Clause 12.3 ( Tax indemnity ) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 12.3 ( Tax indemnity ) applied);
(d) compensated for by any payment made pursuant to Clause 14.3 ( Mandatory Cost ); or
(e) attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.
14 OTHER INDEMNITIES
14.1 Currency indemnity
(a) If any sum due from an Obligor under the Finance Documents (a Sum ), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the First Currency ) in which that Sum is payable into another currency (the Second Currency ) for the purpose of:
(i) making or filing a claim or proof against that Obligor; or
(ii) obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,
that Obligor shall, as an independent obligation, on demand, indemnify each Creditor Party to which that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.
(b) Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.
14.2 Other indemnities
(a) Each Obligor shall, on demand, indemnify each Creditor Party against any cost, loss or liability incurred by it as a result of:
(i) the occurrence of any Event of Default;
(ii) a failure by a Transaction Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 33 ( Sharing among the Finance Parties );
(iii) funding, or making arrangements to fund, its participation in the Advance or the Loan requested by the Borrower in a Drawdown Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Creditor Party alone); or
(iv) the Loan (or part of the Loan) not being prepaid in accordance with a notice of prepayment given by the Borrower.
(b) Each Obligor shall, on demand, indemnify each Finance Party, each Affiliate of a Finance Party and each officer or employee of a Finance Party or its Affiliate (each such person for the purposes of this Clause 14.2 ( Other indemnities ) an Indemnified Person ), against any cost, loss or liability incurred by that Indemnified Person pursuant to or in connection with any litigation, arbitration or administrative proceedings or regulatory enquiry, in connection with or arising out of the entry into and the transactions contemplated by the Finance Documents, having the benefit of any Security constituted by the Finance Documents or which relates to the condition or operation of, or any incident occurring in relation to, the Vessel unless such cost, loss or liability is caused by the gross negligence or wilful misconduct of that Indemnified Person.
(c) Without limiting, but subject to any limitations set out in paragraph (b) above, the indemnity in paragraph (b) above shall cover any cost, loss or liability incurred by each Indemnified Person in any jurisdiction:
(i) arising or asserted under or in connection with any law relating to safety at sea, the ISM Code, any Environmental Law or any Sanctions; or
(ii) in connection with any Environmental Claim.
(d) Any Affiliate or any officer or employee of a Finance Party or of any of its Affiliates may rely on this Clause 14.2 ( Other indemnities ) subject to Clause 1.5 ( Third party rights ) and the provisions of the Third Parties Act.
14.3 Mandatory Cost
The Borrower shall, on demand by the Facility Agent, pay to the Facility Agent for the account of the relevant Lender, such amount which any Lender certifies in a notice to the Facility Agent to be its good faith determination of the amount necessary to compensate it for complying with:
(a) in the case of a Lender lending from a Facility Office in a Participating Member State, the minimum reserve requirements (or other requirements having the same or similar purpose) of the European Central Bank or any other authority or agency which replaces all or any of its functions) in respect of loans made from that Facility Office; and
(b) in the case of any Lender lending from a Facility Office in the United Kingdom, any reserve asset, special deposit or liquidity requirements (or other requirements having the same or similar purpose) of the Bank of England (or any other governmental authority or agency) and/or paying any fees to the Financial Conduct Authority and/or the Prudential Regulation Authority (or any other governmental authority or agency which replaces all or any of their functions),
which, in each case, is referable to that Lenders participation in the Loan.
14.4 Indemnity to the Facility Agent
Each Obligor shall, on demand, indemnify the Facility Agent against:
(a) any cost, loss or liability incurred by the Facility Agent (acting reasonably) as a result of:
(i) investigating any event which it reasonably believes is a Default; or
(ii) acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; or
(iii) instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under the Finance Documents; and
(b) any cost, loss or liability incurred by the Facility Agent (otherwise than by reason of the Facility Agents gross negligence or wilful misconduct) or, in the case of any cost, loss or liability pursuant to Clause 34.11 ( Disruption to Payment Systems etc. ) notwithstanding the Facility Agents negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Facility Agent in acting as Facility Agent under the Finance Documents.
14.5 Indemnity to the Security Agent
(a) Each Obligor shall, on demand, indemnify the Security Agent and every Receiver and Delegate against any cost, loss or liability incurred by any of them:
(i) in relation to or as a result of:
(A) any failure by the Borrower to comply with its obligations under Clause 16 ( Costs and Expenses );
(B) acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised;
(C) the taking, holding, protection or enforcement of the Finance Documents and the Transaction Security;
(D) the exercise of any of the rights, powers, discretions, authorities and remedies vested in the Security Agent and each Receiver and Delegate by the Finance Documents or by law;
(E) any default by any Transaction Obligor in the performance of any of the obligations expressed to be assumed by it in the Finance Documents;
(F) any action by any Transaction Obligor which vitiates, reduces the value of, or is otherwise prejudicial to, the Transaction Security; and
(G) instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under the Finance Documents.
(ii) acting as Security Agent, Receiver or Delegate under the Finance Documents or which otherwise relates to any of the Security Property or the performance of the terms of this Agreement or the other Finance Documents (otherwise, in each case, than by reason of the relevant Security Agents, Receivers or Delegates gross negligence or wilful misconduct).
(b) The Security Agent and every Receiver and Delegate may, in priority to any payment to the Creditor Parties, indemnify itself out of the Security Assets in respect of, and pay and retain, all sums necessary to give effect to the indemnity in this Clause 14.5 ( Indemnity to the Security Agent ) and shall have a lien on the Transaction Security and the proceeds of the enforcement of the Transaction Security for all monies payable to it.
15 MITIGATION BY THE FINANCE PARTIES
15.1 Mitigation
(a) Each Finance Party shall, in consultation with the Borrower, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 7.1 ( Illegality ), Clause 12 ( Tax Gross Up and Indemnities ), Clause 13 ( Increased Costs ) or paragraph (a) of Clause 14.3 ( Mandatory Cost ).
(b) Paragraph (a) above does not in any way limit the obligations of any Transaction Obligor under the Finance Documents.
15.2 Limitation of liability
(a) Each Obligor shall, on demand, indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 15.1 ( Mitigation ).
(b) A Finance Party is not obliged to take any steps under Clause 15 ( Mitigation by the Finance Parties ) if either:
(i) a Default has occurred and is continuing; or
(ii) in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.
16 COSTS AND EXPENSES
16.1 Transaction expenses
The Obligors shall, on demand, pay the Facility Agent and the Security Agent the amount of all costs and expenses (including legal fees) reasonably incurred by any Creditor Party in connection with the negotiation, preparation, printing, execution, syndication and perfection of:
(a) this Agreement and any other documents referred to in this Agreement;
(b) the Transaction Security; and
(c) any other Finance Documents executed after the date of this Agreement.
16.2 Amendment costs
If:
(a) a Transaction Obligor requests an amendment, waiver or consent; or
(b) an amendment is required pursuant to Clause 34.9 ( Change of currency ); or
(c) a Transaction Obligor requests, and the Security Agent agrees to, the release of all or any part of the Security Assets from the Transaction Security,
the Obligors shall, on demand, reimburse each of the Facility Agent and the Security Agent for the amount of all costs and expenses (including legal fees) reasonably incurred by each Creditor Party in responding to, evaluating, negotiating or complying with that request or requirement.
16.3 Enforcement and preservation costs
The Obligors shall, on demand, pay to each Creditor Party the amount of all costs and expenses (including legal fees) incurred by that Creditor Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document or the Transaction Security and with any proceedings instituted by or against that Creditor Party as a consequence of it entering into a Finance Document, taking or holding the Transaction Security, or enforcing those rights.
SECTION 7
GUARANTEE
17 GUARANTEE AND INDEMNITY
17.1 Guarantee and indemnity
Each Guarantor irrevocably and unconditionally:
(a) guarantees to each Finance Party punctual performance by the Borrower of all the Borrowers obligations under the Finance Documents;
(b) undertakes with each Finance Party that whenever the Borrower does not pay any amount when due under or in connection with any Finance Document, it shall immediately on demand pay that amount as if it were the principal obligor; and
(c) agrees with each Finance Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify that Finance Party immediately on demand against any cost, loss or liability it incurs as a result of the Borrower not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document on the date when it would have been due. The amount payable by a Guarantor under this indemnity will not exceed the amount it would have had to pay under this Clause 17 ( Guarantee and Indemnity ) if the amount claimed had been recoverable on the basis of a guarantee.
17.2 Continuing guarantee
This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Transaction Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.
17.3 Reinstatement
If any discharge, release or arrangement (whether in respect of the obligations of any Transaction Obligor or any security for those obligations or otherwise) is made by a Creditor Party in whole or in part on the basis of any payment, security or other disposition which is avoided or must be restored in insolvency, liquidation, administration or otherwise, without limitation, then the liability of each Guarantor under this Clause 17 ( Guarantee and Indemnity ) will continue or be reinstated as if the discharge, release or arrangement had not occurred.
17.4 Waiver of defences
The obligations of each Guarantor under this Clause 17 ( Guarantee and Indemnity ) and in respect of any Transaction Security will not be affected or discharged by an act, omission, matter or thing which, but for this Clause 17.4 ( Waiver of defences ), would reduce, release or prejudice any of its obligations under this Clause 17 ( Guarantee and Indemnity ) or in respect of any Transaction Security (without limitation and whether or not known to it or any Creditor Party) including:
(a) any time, waiver or consent granted to, or composition with, any Transaction Obligor or other person;
(b) the release of any other Transaction Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;
(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect or delay in perfecting, or refusal or neglect to take up or enforce, or delay in taking or enforcing any rights against, or security over assets of, any Transaction Obligor or other person
or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
(d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of a Transaction Obligor or any other person;
(e) any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document or any other document or security including, without limitation, any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security;
(f) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or
(g) any insolvency or similar proceedings.
17.5 Immediate recourse
Each Guarantor waives any right it may have of first requiring any Creditor Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person (including without limitation to commence any proceedings under any Finance Document or to enforce any Transaction Security) before claiming or commencing proceedings under this Clause 17 ( Guarantee and Indemnity ). This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.
17.6 Appropriations
Until all amounts which may be or become payable by the Transaction Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Creditor Party (or any trustee or agent on its behalf) may:
(a) refrain from applying or enforcing any other moneys, security or rights held or received by that Creditor Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and neither Guarantor shall be entitled to the benefit of the same; and
(b) hold in an interest-bearing suspense account any moneys received from either Guarantor or on account of that Guarantors liability under this Clause 17 ( Guarantee and Indemnity ).
17.7 Deferral of Guarantors rights
All rights which either Guarantor at any time has (whether in respect of this guarantee, a mortgage or any other transaction) against the Borrower, any other Transaction Obligor or their respective assets shall be fully subordinated to the rights of the Creditor Parties under the Finance Documents and until the end of the Security Period and unless the Facility Agent otherwise directs, neither Guarantor will exercise any rights which it may have (whether in respect of any Finance Document to which it is a Party or any other transaction) by reason of performance by it of its obligations under the Finance Documents or by reason of any amount being payable, or liability arising, under this Clause 17 ( Guarantee and Indemnity ):
(a) to be indemnified by a Transaction Obligor;
(b) to claim any contribution from any third party providing security for, or any other guarantor of, any Transaction Obligors obligations under the Finance Documents;
(c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Creditor Parties under the Finance Documents or of any other guarantee or
security taken pursuant to, or in connection with, the Finance Documents by any Creditor Party;
(d) to bring legal or other proceedings for an order requiring any Transaction Obligor to make any payment, or perform any obligation, in respect of which the Guarantors have given a guarantee, undertaking or indemnity under Clause 17.1 ( Guarantee and indemnity );
(e) to exercise any right of set-off against any Transaction Obligor; and/or
(f) to claim or prove as a creditor of any Transaction Obligor in competition with any Creditor Party.
If either Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Creditor Parties by the Transaction Obligors under or in connection with the Finance Documents to be repaid in full on trust for the Creditor Parties and shall promptly pay or transfer the same to the Facility Agent or as the Facility Agent may direct for application in accordance with Clause 34 ( Payment Mechanics ).
17.8 Additional security
This guarantee and any other Security given by either Guarantor is in addition to and is not in any way prejudiced by, and shall not prejudice, any other guarantee or Security or any other right of recourse now or subsequently held by any Creditor Party or any right of set-off or netting or right to combine accounts in connection with the Finance Documents.
17.9 Applicability of provisions of Guarantee to other Security
Clauses 17.2 ( Continuing guarantee ), 17.3 ( Reinstatement ), 17.4 ( Waiver of defences ), 17.5 ( Immediate recourse ), 17.6 ( Appropriations ), 17.7 ( Deferral of Guarantors rights ) and 17.8 ( Additional security ) shall apply, with any necessary modifications, to any Security which either Guarantor creates (whether at the time at which it signs this Agreement or at any later time) to secure the Secured Liabilities or any part of them.
SECTION 8
REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT
18 REPRESENTATIONS
18.1 General
Each Obligor makes the representations and warranties set out in this Clause 18 ( Representations ) to each Finance Party on the date of this Agreement.
18.2 Status
(a) It is a limited liability company, duly incorporated and validly existing in good standing under the law of its jurisdiction of incorporation.
(b) It and each of its Subsidiaries has the power to own its assets and carry on its business as it is being conducted.
18.3 Membership interest and ownership
(a) The Borrowers membership interests are 100 per cent. held by GSPL free of any Security or any other claim by GSPL.
(b) None of the membership interests in the Borrower is subject to any option to purchase, pre-emption rights or similar rights.
18.4 Share capital and ownership of GSPL
The legal title to and beneficial interest in the shares in GSPL is held free of any Security directly or indirectly by the Parent Guarantor less any shares sold by way of Permitted GSPL Share Sale.
18.5 Binding obligations
Subject to the Legal Reservations, the obligations expressed to be assumed by it in each Transaction Document to which it is a party are legal, valid, binding and enforceable obligations.
18.6 Validity, effectiveness and ranking of Security
(a) Each Finance Document to which it is a party does now or, as the case may be, will upon execution and delivery and, where applicable, registration as provided for in that Finance Document create, subject to the Legal Reservations, the Security it purports to create over any assets to which such Security, by its terms, relates, and such Security will, when created or intended to be created, be valid and effective.
(b) No third party has or will have any Security (except for Permitted Security) over any assets that are the subject of any Transaction Security granted by it.
(c) The Transaction Security granted by it to the Security Agent or any other Creditor Party has or will when created or intended to be created have first ranking priority or such other priority it is expressed to have in the Finance Documents and is not subject to any prior ranking or pari passu ranking security.
(d) No concurrence, consent or authorisation of any person is required for the creation of or otherwise in connection with any Transaction Security.
18.7 Non-conflict with other obligations
The entry into and performance by it of, and the transactions contemplated by, each Transaction Document to which it is a party do not and will not conflict with:
(a) any law or regulation applicable to it;
(b) the constitutional documents of any member of the Group; or
(c) any agreement or instrument binding upon it or any member of the Group or any member of the Groups assets or constitute a default or termination event (however described) under any such agreement or instrument.
18.8 Power and authority
(a) It has the power to enter into, perform and deliver, and has taken all necessary action to authorise:
(i) its entry into, performance and delivery of, each Transaction Document to which it is or will be a party and the transactions contemplated by those Transaction Documents; and
(ii) in the case of the Borrower, its registration of the Vessel under the Approved Flag.
(b) No limit on its powers will be exceeded as a result of the borrowing, granting of security or giving of guarantees or indemnities contemplated by the Transaction Documents to which it is a party.
18.9 Validity and admissibility in evidence
All Authorisations required or desirable:
(a) to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Transaction Documents to which it is a party; and
(b) to make the Transaction Documents to which it is a party admissible in evidence in its Relevant Jurisdictions,
have been obtained or effected and are in full force and effect.
18.10 Governing law and enforcement
(a) Subject to the Legal Reservations, the choice of governing law of each Transaction Document to which it is a party will be recognised and enforced in its Relevant Jurisdictions.
(b) Subject to the Legal Reservations, any judgment obtained in relation to a Transaction Document to which it is a party in the jurisdiction of the governing law of that Transaction Document will be recognised and enforced in its Relevant Jurisdictions.
18.11 Insolvency
No:
(a) corporate action, legal proceeding or other procedure or step described in paragraph (a) of Clause 27.8 ( Insolvency proceedings ); or
(b) creditors process described in Clause 27.9 ( Creditors process ),
has been taken or, to its knowledge, threatened in relation to a member of the Group; and none of the circumstances described in Clause 27.7 ( Insolvency ) applies to a member of the Group.
18.12 No filing or stamp taxes
Under the laws of its Relevant Jurisdictions it is not necessary that the Finance Documents to which it is a party be registered, filed, recorded, notarised or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents to which it is a party or the transactions contemplated by those Finance Documents except:
(a) registration of the Membership Interest Security with the Accounting and Corporate Regulatory Authority of Singapore, which filings will be made in Singapore promptly after the date of the relevant Finance Documents; and
(b) any other filing, recording or enrolling or any tax or fee payable in relation to any Finance Document which is referred to in any legal opinion delivered pursuant to Clause 4 ( Conditions of Drawdown ) and which will be made or paid promptly after the date of the relevant Finance Document.
18.13 Deduction of Tax
It is not required to make any Tax Deduction from any payment it may make under any Finance Document to which it is a party.
18.14 No default
(a) No Event of Default and, on the date of this Agreement, the Drawdown Date, no Default is continuing or might reasonably be expected to result from the making of the Drawdown or the release of the Advance by the Prepositioning Bank (on the instructions of the Facility Agent) or the entry into, the performance of, or any transaction contemplated by, any Transaction Document.
(b) No other event or circumstance is outstanding which constitutes a default or a termination event (however described) under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries) assets are subject (and which, in the case of the Parent Guarantor, has or is reasonably likely to have a Material Adverse Effect).
18.15 No misleading information
(a) Any factual information provided by any member of the Group for the purposes of this Agreement was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated.
(b) The financial projections contained in any such information have been prepared on the basis of recent historical information and on the basis of reasonable assumptions.
(c) Nothing has occurred or been omitted from any such information and no information has been given or withheld that results in any such information being untrue or misleading in any material respect.
18.16 Financial Statements
(a) In relation to each Guarantor, its Original Financial Statements were prepared in accordance with GAAP consistently applied.
(b) In relation to each Guarantor, its Original Financial Statements give a true and fair view of its financial condition as at the end of the relevant financial year and results of operations during the relevant financial year.
(c) There has been no material adverse change in its assets, business or financial condition (or the assets, business or consolidated financial condition of the Group, in the case of each Guarantor) since 31 December 2015.
(d) Its most recent financial statements delivered pursuant to Clause 19.2 ( Financial statements ):
(i) have been prepared in accordance with Clause 19.4 ( Requirements as to financial statements ); and
(ii) give a true and fair view of (if audited) or fairly represent (if unaudited) its financial condition as at the end of the relevant financial year and operations during the relevant financial year (consolidated in the case of the Guarantor).
(e) Since the date of the most recent financial statements delivered pursuant to Clause 19.2 ( Financial statements ) there has been no material adverse change in its business, assets or financial condition (or the business or consolidated financial condition of the Group, in the case of the Guarantor).
18.17 Pari passu ranking
Its payment obligations 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.
18.18 No proceedings pending or threatened
No litigation, arbitration or administrative proceedings or investigations (including proceedings or investigations relating to any alleged or actual breach of the ISM Code or of the ISPS Code) of or before any court, arbitral body or agency have (to the best of its knowledge and belief (having made due and careful enquiry)) been started or threatened against it or any of its Subsidiaries and which, in the case of the Parent Guarantor and GSPL, (i) has or is reasonably likely to have a Material Adverse Effect and (ii) relates to a claim or claims for a total value in aggregate of over US$200,000, but in all cases excluding any claim that is fully covered by an insurance policy held in the name of the relevant Obligor and that Obligor has provided the Facility Agent with evidence in form and substance acceptable to the Facility Agent of such insurance coverage .
18.19 Validity and completeness of the Transaction Documents
(a) Each of the Transaction Documents to which each Transaction Obligor (other than the Bareboat Charterers) is a party constitutes legal, valid, binding and enforceable obligations of each Transaction Obligor (other than the Bareboat Charterers).
(b) The copies of the Transaction Documents delivered to the Facility Agent before the date of this Agreement are true and complete copies.
(c) No amendments or additions to the Transaction Documents have been agreed nor has any Transaction Obligor waived any of its respective rights under the Transaction Documents.
18.20 Valuations
(a) All information supplied by it or on its behalf to an Approved Valuer for the purposes of a valuation delivered to the Facility Agent in accordance with this Agreement was true and accurate as at the date it was supplied or (if appropriate) as at the date (if any) at which it is stated to be given.
(b) It has not omitted to supply any information to an Approved Valuer which, if disclosed, would adversely affect any valuation prepared by such Approved Valuer.
(c) There has been no change to the factual information provided pursuant to paragraph (a) above in relation to any valuation between the date such information was provided and the date of that valuation which, in either case, renders that information untrue or misleading in any material respect.
18.21 No breach of laws
It has not (and no member of the Group has) breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.
18.22 No Charter
The Vessel is not subject to any Charter other than the Bareboat Charters and the Time Charter.
18.23 Compliance with Environmental Laws
All Environmental Laws relating to the ownership, operation and management of the Vessel and the business of each member of the Group (as now conducted and as reasonably anticipated to be conducted in the future) and the terms of all Environmental Approvals have been complied with.
18.24 No Environmental Claim
No Environmental Claim has been made or threatened against any member of the Group or the Vessel.
18.25 No Environmental Incident
No Environmental Incident has occurred and no person has claimed that an Environmental Incident has occurred.
18.26 ISM and ISPS Code compliance
All requirements of the ISM Code and the ISPS Code as they relate to the Borrower, any Approved Technical Manager and the Vessel have been complied with.
18.27 Taxes paid
(a) It is not and no other member of the Group is materially overdue in the filing of any Tax returns and it is not (and no other member of the Group is) overdue in the payment of any amount in respect of Tax.
(b) No claims or investigations are being, or are reasonably likely to be, made or conducted against it (or any other member of the Group) with respect to Taxes.
18.28 Financial Indebtedness
The Borrower does not have any Financial Indebtedness outstanding other than as permitted by this Agreement.
18.29 Overseas companies
No Obligor has delivered particulars, whether in its name stated in the Finance Documents or any other name, of any UK Establishment to the Registrar of Companies as required under the Overseas Regulations or, if it has so registered, it has provided to the Facility Agent sufficient details to enable an accurate search against it to be undertaken by the Lenders at the Companies Registry.
18.30 Good title to assets
It and each other member of the Group has good, valid and marketable title to, or valid leases or licences of, and all appropriate Authorisations to use, the assets necessary to carry on its business as presently conducted.
18.31 Ownership
(a) The Borrower is the sole legal and beneficial owner of all rights and interests which any Charter and the Bareboat Charterers Assignment and Direct Agreement creates in favour of the Borrower.
(b) The Borrower is the sole legal and beneficial owner of the Vessel, the Earnings and the Insurances.
(c) With effect on and from the date of its creation or intended creation, each Transaction Obligor will be the sole legal and beneficial owner of any asset that is the subject of any Transaction Security created or intended to be created by such Transaction Obligor.
(d) The constitutional documents of each Obligor do not and could not restrict or inhibit any transfer of the membership interests of the Borrower on creation or enforcement of the security conferred by the Security Documents.
18.32 Centre of main interests and establishments
For the purposes of The Council of the European Union Regulation No. 1346/2000 on Insolvency Proceedings (the Regulation ), its centre of main interest (as that term is used in Article 3(1) of the Regulation) is situated in its jurisdiction of incorporation and it has no establishment (as that term is used in Article 2(h) of the Regulation) in any other jurisdiction.
18.33 Place of business
No Obligor has a principal or registered place of business in any country other than as disclosed to the Facility Agent in writing, and agreed to by the Lenders, on or around the date of this Agreement.
18.34 No employee or pension arrangements
The Borrower does not have any employees or any liabilities under any pension scheme.
18.35 Sanctions
(a) No Transaction Obligor:
(i) and no director or officer of a Transaction Obligor, is a Prohibited Person;
(ii) is owned or controlled by or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person; or
(iii) owns or controls a Prohibited Person.
(b) No proceeds of the Loan shall be made available, directly or indirectly, to or for the benefit of a Prohibited Person nor shall they be otherwise directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions.
18.36 US Tax Obligor
No Obligor is a US Tax Obligor.
18.37 Repetition
The Repeating Representations are deemed to be made by each Obligor by reference to the facts and circumstances then existing on the date of the Drawdown Request, the Drawdown Date and the first day of each Interest Period.
19 INFORMATION UNDERTAKINGS
19.1 General
The undertakings in this Clause 19 ( Information Undertakings ) remain in force throughout the Security Period unless the Facility Agent, acting with the authorisation of the Majority Lenders (or, where specified, all the Lenders), may otherwise permit.
19.2 Financial statements
(a) Subject to paragraph (b) below, the Borrower shall supply to the Facility Agent in sufficient copies for all the Lenders:
(i) as soon as they become available, but in any event within 180 days after the end of each of its financial years, the audited consolidated financial statements of each Guarantor for that financial year; and
(ii) as soon as the same become available, but in any event within 90 days after the end of the first half of each of its financial years, the unaudited consolidated financial statement of each Guarantor for that financial half year.
(b) To the extent that the financial statements and other information required to be provided by each Obligor to the Facility Agent under paragraph (a) above are published on the internet by, or on behalf of such Obligor, such statements and information must be made immediately available to the Facility Agent.
19.3 Compliance Certificate
(a) GSPL shall supply to the Facility Agent, with each set of financial statements delivered pursuant to sub-paragraph (i) or sub-paragraph (ii) of paragraph (a) of Clause 19.2 ( Financial statements ), a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 20 ( Financial Covenants ) as at the date as at which those financial statements were drawn up.
(b) Each Compliance Certificate shall be signed by two directors of GSPL and (as appropriate) by the Guarantors auditors.
19.4 Requirements as to financial statements
(a) Each set of financial statements delivered by the Borrower pursuant to Clause 19.2 ( Financial statements ) shall be certified by a director of the company as giving a true and fair view (if audited) or fairly representing (if unaudited) its financial condition and operations as at the date as at which those financial statements were drawn up.
(b) The Borrower shall procure that each set of financial statements of an Obligor delivered pursuant to Clause 19.2 ( Financial statements ) includes or is supplemented by the most up to date details of all off-balance sheet and time charter hire commitments.
(c) The Borrower shall procure that each set of financial statements of an Obligor delivered pursuant to Clause 19.2 ( Financial statements ) is prepared using GAAP, accounting practices and financial reference periods which, in relation to each Guarantor, are consistent with those applied in the preparation of the Original Financial Statements unless, in relation to any set of financial statements, it notifies the Facility Agent that there has been a change in GAAP, the
accounting practices or reference periods and its auditors (or, if appropriate, the auditors of the Obligor) deliver to the Facility Agent:
(i) a description of any change necessary for those financial statements to reflect the GAAP, accounting practices and reference periods upon which that Guarantors Original Financial Statements were prepared; and
(ii) sufficient information, in form and substance as may be reasonably required by the Facility Agent, to enable the Lenders to determine whether Clause 20 ( Financial Covenants ) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and that Guarantors Original Financial Statements.
Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.
19.5 Information: miscellaneous
Each Obligor shall and shall procure that each other Transaction Obligor (to the extent, in the case of the Bareboat Charterers, it is entitled to do so under the terms of the Bareboat Charters) shall supply to the Facility Agent (in sufficient copies for all the Lenders, if the Facility Agent so requests):
(a) all documents dispatched by it to its shareholders (or any class of them) or its creditors generally at the same time as they are dispatched;
(b) promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings or investigations (including proceedings or investigations relating to any alleged or actual breach of the ISM Code or of the ISPS Code) which are current, threatened or pending against any member of the Group and which, in the case of the Parent Guarantor, has or is reasonably likely to have a Material Adverse Effect;
(c) promptly, its constitutional documents where these have been amended or varied, subject to the consent of the Facility Agent if applicable as provided for in paragraph (b) of Clause 21.24 ( Constitutional documents );
(d) promptly, such further information and/or documents regarding:
(i) the Vessel, goods transported on the Vessel, the Earnings or the Insurances;
(ii) the Security Assets;
(iii) compliance of the Transaction Obligors with the terms of the Finance Documents;
(iv) the financial condition, business and operations of any member of the Group,
as any Finance Party (through the Facility Agent) may reasonably request; and
(e) promptly, such further information and/or documents as any Finance Party (through the Facility Agent) may reasonably request so as to enable such Finance Party to comply with any laws applicable to it or as may be required by any regulatory authority.
19.6 Notification of Default
(a) Each Obligor shall notify the Facility Agent (i) of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor); and (ii) promptly upon
becoming aware of the same, of any breach of any Sanctions applicable to the Vessel, any Transaction Obligor or any party to any agreement relating to the Vessel.
(b) Promptly upon a request by the Facility Agent, the Borrower shall supply to the Facility Agent 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).
19.7 Use of websites
(a) Each Obligor may satisfy its obligation under the Finance Documents to which it is a party to deliver any information in relation to those Lenders (the Website Lenders ) which accept this method of communication by posting this information onto an electronic website designated by the Borrower and the Facility Agent (the Designated Website ) if:
(i) the Facility Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;
(ii) both the relevant Obligor and the Facility Agent are aware of the address of and any relevant password specifications for the Designated Website; and
(iii) the information is in a format previously agreed between the relevant Obligor and the Facility Agent.
If any Lender (a Paper Form Lender ) does not agree to the delivery of information electronically then the Facility Agent shall notify the Obligors accordingly and each Obligor shall supply the information to the Facility Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event each Obligor shall supply the Facility Agent with at least one copy in paper form of any information required to be provided by it.
(b) The Facility Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Obligors or any of them and the Facility Agent.
(c) An Obligor shall promptly upon becoming aware of its occurrence notify the Facility Agent if:
(i) the Designated Website cannot be accessed due to technical failure;
(ii) the password specifications for the Designated Website change;
(iii) any new information which is required to be provided under this Agreement is posted onto the Designated Website;
(iv) any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or
(v) if that Obligor becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.
If an Obligor notifies the Facility Agent under sub-paragraph (i) or (v) of paragraph (c) above, all information to be provided by the Obligors under this Agreement after the date of that notice shall be supplied in paper form unless and until the Facility Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.
(d) Any Website Lender may request, through the Facility Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the
Designated Website. The Obligors shall comply with any such request within 10 Business Days.
19.8 Know your customer checks
(a) If:
(i) 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;
(ii) any change in the status of a Transaction Obligor (including, without limitation, a change of ownership of a Transaction Obligor) after the date of this Agreement; or
(iii) a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges a Finance Party (or, in the case of sub-paragraph (iii) 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, each Obligor shall promptly upon the request of any Finance Party supply, or procure the supply of, such documentation and other evidence as is reasonably requested by a Servicing Party (for itself or on behalf of any other Finance Party) or any Lender (for itself or, in the case of the event described in sub-paragraph (iii) above, on behalf of any prospective new Lender) in order for such Finance Party or, in the case of the event described in sub-paragraph (iii) 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.
(b) Each Lender shall promptly upon the request of a Servicing Party supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Servicing Party (for itself) in order for that Servicing Party 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.
20 FINANCIAL COVENANTS
20.1 Financial covenants
The Borrower will ensure that the consolidated financial position of the Group shall at all times during the Security Period be such that:
(a) Book Value Net Worth is not less than US$275,000,000 in 2016 and not less than US$250,000,000 in 2017;
(b) Cash and Cash Equivalents of not less than US$30,000,000; and
(c) the ratio of Debt to Market Adjusted Tangible Fixed Assets shall be not more than 75 per cent.
20.2 Financial covenant definitions
In this Clause 20 ( Financial Covenants ):
Book Value Net Worth means the aggregate amount (without double counting) of the book value of the following:
(a) the amounts paid up, or credited as paid up, on the issued share capital of the Group;
(b) any credit balance on the consolidated profit and loss account of the Group; and
(c) any amount standing to the credit of any other consolidated capital and revenue reserves of the Group including any share premium account and capital redemption reserve,
less the aggregate amount (without double counting) of the following:
(a) any debt balance on the consolidated profit and loss account of the Group; and
(b) any reserves attributable to interests of minority shareholders in any subsidiary (whether direct or indirect) of the Group,
all as determined in accordance with IFRS applied in the preparation of the Latest Accounts but adjusted by:
(i) deducting any dividend or other distribution declared, recommended or made by the Group;
(ii) deducting any amount attributable to goodwill or any other intangible asset;
(iii) reflecting any variation required to be made to the asset value attributable to any ship owned by the Group in order to reflect the book value of any such ship;
(iv) excluding any amount attributable to deferred taxation;
(v) excluding any amount attributable to minority interests; and
(vi) eliminating inconsistencies (if any) between the accounting principles;
Cash and Cash Equivalents means the cash and cash equivalents set out in the Latest Accounts;
Debt means the aggregate (without double counting) of secured or unsecured bank loans, finance lease obligations, bonds and any other financial obligations included as a liability on the balance sheet in terms of IFRS, but excluding the mark to market of swaps and other derivative instruments and excluding contingent liabilities as shown in the Latest Accounts;
Latest Accounts means, at any date, the audited consolidated accounts of the Group most recently delivered to the Facility Agent under paragraph (a) of Clause 19.2 ( Financial statements ); and
Market Adjusted Tangible Fixed Assets means the aggregate of the book value of:
(a) ships (including ships under construction) either wholly or partially owned by the Group; and
(b) land and buildings either wholly or partially owned by the Group,
as stated in the Latest Accounts adjusted by such amount to reflect the current open market value of such assets evidenced to the Facility Agents satisfaction and acceptable to the Lenders.
20.3 Favoured nations
(a) The Borrower undertakes to procure that the Finance Parties shall receive equal treatment with creditors under any other financing which any Obligor (other than the Parent Guarantor) or any other member of the Group has entered or will enter into in relation to any financial covenant on terms similar to those set out in this Clause 20 ( Financial Covenants ) which that Obligor or any other member of the Group provide.
(b) Accordingly, should the Borrower provide to any other creditor additional or more favourable financial covenants than those which the Finance Parties have been provided under this Clause 20 ( Financial Covenants ), the Borrower shall advise the Facility Agent of those financial covenants and, if required, shall enter into such documentation supplemental to the Finance Documents as the Facility Agent may require in order to achieve parity with the lenders under such other financing.
(c) For the avoidance of doubt this Clause 20.3 ( Favoured nations ) shall not apply to any commercial terms applicable to any financing rating to pricing and interest rates, tenor or fees.
21 GENERAL UNDERTAKINGS
21.1 General
The undertakings in this Clause 21 ( General Undertakings ) remain in force throughout the Security Period except as the Facility Agent, acting with the authorisation of the Majority Lenders (or, where specified, all the Lenders) may otherwise permit.
21.2 Authorisations
Each Obligor shall, and shall procure that each other Transaction Obligor will, 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 Facility Agent of,
any Authorisation required under any law or regulation of a Relevant Jurisdiction or the state of the Approved Flag at any time of the Vessel to enable it to:
(i) perform its obligations under the Transaction Documents to which it is a party;
(ii) ensure the legality, validity, enforceability or admissibility in evidence in any Relevant Jurisdiction or in the state of the Approved Flag at any time of the Vessel or any Transaction Document to which it is a party; and
(iii) own and operate the Vessel (in the case of the Borrower).
21.3 Compliance with laws
Each Obligor shall comply in all respects with all laws and regulations to which it may be subject, if failure so to comply has or is reasonably likely to have a Material Adverse Effect.
21.4 Environmental compliance
Each Obligor shall, and shall procure that each other Transaction Obligor will, and each Guarantor shall ensure that each other member of the Group will:
(a) comply with all Environmental Laws;
(b) obtain, maintain and ensure compliance with all requisite Environmental Approvals;
(c) implement procedures to monitor compliance with and to prevent liability under any Environmental Law,
where failure to do so has or is reasonably likely to have a Material Adverse Effect.
21.5 Environmental claims
Each Obligor shall, and shall procure that each other Transaction Obligor will, (through the Guarantor), promptly upon becoming aware of the same, inform the Facility Agent in writing of:
(a) any Environmental Claim against any member of the Group which is current, pending or threatened; and
(b) any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any member of the Group,
where the claim, if determined against that member of the Group, has or is reasonably likely to have a Material Adverse Effect.
21.6 Taxation
(a) Each Obligor shall and each Guarantor shall ensure that each other member of the Group will pay and discharge all Taxes imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:
(i) such payment is being contested in good faith;
(ii) adequate reserves are maintained for those Taxes and the costs required to contest them have been disclosed in its latest financial statements delivered to the Facility Agent under Clause 19.2 ( Financial statements ); and
(iii) such payment can be lawfully withheld.
(b) No Obligor shall change its residence for Tax purposes.
21.7 Overseas companies
Each Obligor shall promptly inform the Facility Agent if it delivers to the Registrar particulars required under the Overseas Regulations of any UK Establishment and it shall comply with any directions given to it by the Facility Agent regarding the recording of any Transaction Security on the register which it is required to maintain under The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009.
21.8 Pari passu ranking
Each Obligor shall ensure that at all times any unsecured and unsubordinated claims of a Finance Party against it under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.
21.9 Title
(a) The Borrower shall hold the legal title to, and own the entire beneficial interest in:
(i) the First Bareboat Charter and its assignment under the Bareboat Charterers Assignment and Direct Agreement;
(ii) its Earnings and Insurances; and
(iii) with effect on and from its creation or intended creation, any other assets the subject of any Transaction Security created or intended to be created by the Borrower.
(b) Each Guarantor shall hold the legal title to, and own the entire beneficial interest in with effect on and from its creation or intended creation, any assets the subject of any Transaction Security created or intended to be created by it.
21.10 Negative pledge
(a) The Borrower shall not create or permit to subsist any Security over any of its assets or revenues.
(b) The Borrower shall not:
(i) sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor;
(ii) sell, transfer or otherwise dispose of any of its receivables on recourse terms;
(iii) enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or
(iv) enter into any other preferential arrangement having a similar effect,
in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.
(c) Paragraphs (a) and (b) above do not apply to any Permitted Security.
21.11 Disposals
(a) The Borrower shall not, enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset (including without limitation the Vessel, the Earnings or the Insurances).
(b) Paragraph (a) above does not apply to any Charter to which Clause 24.16 ( Restrictions on chartering, appointment of managers etc. ) applies.
21.12 Merger
No Obligor shall enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction.
21.13 Change of business
(a) Each Guarantor shall procure that no substantial change is made to the general nature of the business of that Guarantor or the Group from that carried on at the date of this Agreement.
(b) The Borrower shall not engage in any business other than the ownership and operation of the Vessel.
21.14 Financial Indebtedness
The Borrower shall not incur or permit to be outstanding any Financial Indebtedness except Permitted Financial Indebtedness.
21.15 Expenditure
The Borrower shall not incur any expenditure, except for general administration expenditure reasonably incurred in the ordinary course of its business and expenditure reasonably incurred in the ordinary course of owning, operating, maintaining and repairing the Vessel.
21.16 Membership interests
The Borrower shall not:
(a) purchase, cancel or diversify any of its membership interests;
(b) issue any further membership interests, except to GSPL and provided such membership interests are made subject to the terms of the Membership Interests Security immediately upon the issue thereof in a manner satisfactory to the Security Agent and the terms of the Membership Interests Security are complied with; or
(c) appoint any further director or officer (unless the provisions of the Membership Interests Security are complied with).
21.17 Dividends
(a) The Borrower shall not make or pay any dividend or other distribution (in cash or in kind) in respect of its membership interests.
(b) GSPL shall not make or pay any dividend or other distribution (in cash or in kind) in respect of its share capital following the occurrence of a Default which is continuing or where the making or payment of such dividend or distribution would (i) cause a breach of Clause 20 ( Financial Covenants ) or (ii) otherwise cause a Default.
21.18 Accounts
The Borrower shall not open or maintain any account with any bank or financial institution except the Accounts.
21.19 Other transactions
The Borrower shall not:
(a) be the creditor in respect of any loan or any form of credit to any person other than where such loan or form of credit is Permitted Financial Indebtedness;
(b) give or allow to be outstanding any guarantee or indemnity to or for the benefit of any person in respect of any obligation of any other person or enter into any document under which it assumes any liability of any other person other than any guarantee or indemnity given under the Finance Documents.
(c) enter into any material agreement other than:
(i) the Transaction Documents to which it is a party;
(ii) any other agreement expressly allowed under any other term of this Agreement; and
(d) enter into any transaction on terms which are, in any respect, less favourable to the Borrower than those which it could obtain in a bargain made at arms length; or
(e) acquire any shares or other securities other than US or UK Treasury bills and certificates of deposit issued by major North American or European banks.
21.20 Unlawfulness, invalidity and ranking; Security imperilled
No Obligor shall, and the Obligors shall procure that no other Transaction Obligor will, do (or fail to do) or cause or permit another person to do (or omit to do) anything which is likely to:
(a) make it unlawful for a Transaction Obligor to perform any of its obligations under the Transaction Documents;
(b) cause any obligation of a Transaction Obligor under the Transaction Documents to cease to be legal, valid, binding or enforceable;
(c) cause any Transaction Document to cease to be in full force and effect;
(d) cause any Transaction Security to rank after, or lose its priority to, any other Security; and
(e) imperil or jeopardise the Transaction Security.
21.21 Separate corporate existence
The Borrower shall maintain separate corporate existence and identity, shall keep separate records, books and accounts and shall not co-mingle its assets nor become a member of a Indirect Tax Group.
21.22 Accounting reference date
No Obligor shall change its year end accounting reference date.
21.23 Securitisation
Each Obligor shall, assist the Facility Agent and/or any Lender in achieving a successful securitisation (or similar transaction) in respect of the Facility and the Finance Documents and such Obligors reasonable costs for providing such assistance shall be met by the relevant Lender. The Borrower, if requested by the Facility Agent, shall provide documentation evidencing the purchase price of the Vessel when acquired by the Borrower.
21.24 Constitutional documents
(a) Without prejudice to Clause 21.16 ( Membership interests ) and the terms of any Membership Interests Security, no Obligor shall allow any amendment or variation to its constitutional documents unless such amendment or variation would clearly be immaterial to this Agreement and the other Finance Documents.
(b) For the avoidance of doubt, the Borrower shall not change its name.
21.25 Further assurance
(a) Each Obligor shall (and each Guarantor shall procure that each member of the Group will) promptly, and in any event within the time period specified by the Security Agent do all such acts (including procuring or arranging any registration, notarisation or authentication or the giving of any notice) or execute or procure execution of all such documents (including assignments, transfers, mortgages, charges, notices, instructions, acknowledgments, proxies and powers of attorney), as the Security Agent may specify (and in such form as the Security Agent may require in favour of the Security Agent or its nominee(s)):
(i) to create, perfect, vest in favour of the Security Agent or protect the priority of the Security or any right of any kind created or intended to be created under or evidenced by the Finance Documents (which may include the execution of a mortgage, charge, assignment or other Security over all or any of the assets which are, or are intended to be, the subject of the Transaction Security) or for the exercise of any rights, powers and remedies of the Security Agent, any Receiver or the Creditor Parties provided by or pursuant to the Finance Documents or by law;
(ii) to confer on the Security Agent or confer on the Creditor Parties Security over any property and assets of that Obligor located in any jurisdiction equivalent or similar to the Security intended to be conferred by or pursuant to the Finance Documents;
(iii) to facilitate or expedite the realisation and/or sale of, the transfer of title to or the grant of, any interest in or right relating to the assets which are, or are intended to be, the subject of the Transaction Security or to exercise any power specified in any Finance Document in respect of which the Security has become enforceable; and/or
(iv) to enable or assist the Security Agent to enter into any transaction to commence, defend or conduct any proceedings and/or to take any other action relating to any item of the Security Property.
(b) Each Obligor shall (and each Guarantor shall procure that each member of the Group will) take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Security conferred or intended to be conferred on the Security Agent or the Creditor Parties by or pursuant to the Finance Documents.
(c) At the same time as an Obligor delivers to the Security Agent any document executed by itself pursuant to this Clause 21.25 ( Further assurance ), that Obligor shall deliver to the Security Agent reasonable evidence that that Obligors execution of such document has been duly authorised by it.
22 INSURANCE UNDERTAKINGS
22.1 General
The undertakings in this Clause 22 ( Insurance Undertakings ) remain in force throughout the Security Period except as the Facility Agent, acting with the authorisation of the Majority Lenders (or, where specified, all the Lenders) may otherwise permit.
22.2 Maintenance of obligatory insurances
The Borrower shall keep the Vessel insured at its expense, or shall procure that the Vessel is insured by the Bareboat Charterers (or either of them), against:
(a) hull and machinery plus freight interest and hull interest and/or increased value and any other usual marine risks (including excess risks);
(b) war risks (including the London Blocking and Trapping addendum or its equivalent);
(c) protection and indemnity risks (including liability for oil pollution for an amount of no less than US$1,000,000,000 and excess war risk P&I cover) on standard Club Rules, covered by a Protection and Indemnity association which is a member of the International Group of Protection and Indemnity Associations (or, if the International Group ceases to exist, any other leading protection and indemnity association or other leading provider of protection and indemnity insurance) (including, without limitation, the proportion (if any) of any collision liability not covered under the terms of the hull cover);
(d) freight, demurrage and defence; and
(e) any other risks against which the Facility Agent considers, having regard to practices and other circumstances prevailing at the relevant time, it would be reasonable for the Borrower to insure and which are specified by the Facility Agent by notice to the Borrower.
22.3 Terms of obligatory insurances
The Borrower shall effect such insurances (or, as the case may be, shall procure that such insurances are effected):
(a) in dollars;
(b) in the case of hull and machinery and usual marine risks and war risks, in an amount on an agreed value basis at least the greater of:
(i) 120 per cent. of the Loan; and
(ii) the Market Value of the Vessel;
(c) in the case of oil pollution liability risks, for an aggregate amount equal to the highest level of cover from time to time available under basic protection and indemnity club entry and in the international marine insurance market but such amount shall not be less than US$1,000,000,000;
(d) in the case of protection and indemnity risks, in respect of the full tonnage of the Vessel;
(e) in the case of the hull and machinery insurance, on the basis that the deductible is not higher than the Major Casualty figure;
(f) in the case where the Vessel is insured on a fleet policy, on the basis that each vessel insured on that fleet policy is deemed to be insured on an individual basis;
(g) on approved terms; and
(h) through Approved Brokers and with approved insurance companies and/or underwriters or, in the case of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations.
22.4 Further protections for the Finance Parties
In addition to the terms set out in Clause 22.3 ( Terms of obligatory insurances ), the Borrower shall procure that the obligatory insurances shall:
(a) subject always to paragraph (b), name no-one other than the Borrower, the First Bareboat Charterer and the Second Bareboat Charterer as co-assureds unless the interest of every other named insured is limited:
(i) in respect of any obligatory insurances for hull and machinery and war risks;
(A) to any provable out-of-pocket expenses that it has incurred and which form part of any recoverable claim on underwriters; and
(B) to any third party liability claims where cover for such claims is provided by the policy (and then only in respect of discharge of any claims made against it); and
(ii) in respect of any obligatory insurances for protection and indemnity risks, to any recoveries it is entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against it;
and every other such named insured has undertaken in writing to the Security Agent (in such form as it requires) that any deductible shall be apportioned between the Borrower, the First Bareboat Charterer, the Second Bareboat Charterer, and every other named insured in proportion to the gross claims made or paid by each of them and that it shall do all things necessary and provide all documents, evidence and information to enable the Security Agent
to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;
(b) whenever the Facility Agent requires, name (or be amended to name) the Security Agent as additional named insured for its rights and interests, warranted no operational interest and with full waiver of rights of subrogation against the Security Agent, but without the Security Agent being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance;
(c) name the Security Agent as loss payee with such directions for payment as the Facility Agent may specify;
(d) provide that all payments by or on behalf of the insurers under the obligatory insurances to the Security Agent shall be made without set off, counterclaim or deductions or condition whatsoever;
(e) provide that the obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Security Agent or any other Finance Party; and
(f) provide that the Security Agent may make proof of loss if the Borrower fails to do so.
22.5 Renewal of obligatory insurances
The Borrower shall:
(a) at least 10 days before the expiry of any obligatory insurance:
(i) notify the Facility Agent of the Approved Brokers (or other insurers) and any protection and indemnity or war risks association through or with which the Borrower, or (as the case may be) the relevant Bareboat Charterer, proposes to renew that obligatory insurance and of the proposed terms of renewal; and
(ii) obtain the Facility Agents approval to the matters referred to in sub-paragraph (i) of paragraph (a) above;
(b) at least 14 days before the expiry of any obligatory insurance, renew, or (as the case may be) procure the renewal of, that obligatory insurance in accordance with the Facility Agents approval pursuant to paragraph (a) above; and
(c) procure that the Approved Brokers and/or the approved war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal notify the Facility Agent in writing of the terms and conditions of the renewal.
22.6 Copies of policies; letters of undertaking
The Borrower shall ensure that the Approved Brokers provide the Security Agent with:
(a) pro forma copies of all policies relating to the obligatory insurances which they are to effect or renew; and
(b) a letter or letters or undertaking in a form required by the Facility Agent and including undertakings by the Approved Brokers that:
(i) they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of Clause 22.4 ( Further protections for the Finance Parties );
(ii) they will hold such policies, and the benefit of such insurances, to the order of the Security Agent in accordance with such loss payable clause;
(iii) they will advise the Security Agent immediately of any material change to the terms of the obligatory insurances;
(iv) they will, if they have not received notice of renewal instructions from the Borrower, the First Bareboat Charterer or (as the case may be) the Second Bareboat Charterer, or their respective agents, notify the Security Agent not less than 14 days before the expiry of the obligatory insurances;
(v) if they receive instructions to renew the obligatory insurances, they will promptly notify the Facility Agent of the terms of the instructions;
(vi) they will not set off against any sum recoverable in respect of a claim relating to the Vessel under such obligatory insurances any premiums or other amounts due to them or any other person whether in respect of the Vessel or otherwise, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums or other amounts and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts; and
(vii) they will arrange for a separate policy to be issued in respect of the Vessel forthwith upon being so requested by the Facility Agent.
22.7 Copies of certificates of entry
The Borrower shall ensure that any protection and indemnity and/or war risks associations in which the Vessel is entered provide the Security Agent with:
(a) a certified copy of the certificate of entry for the Vessel;
(b) a letter or letters of undertaking in such form as may be required by the Facility Agent; and
(c) a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to the Vessel.
22.8 Deposit of original policies
The Borrower shall ensure that all policies relating to obligatory insurances are deposited with the Approved Brokers through which the insurances are effected or renewed.
22.9 Payment of premiums
The Borrower shall punctually pay, or (as the case may be) procure payment by the relevant Bareboat Charterer of, all premiums or other sums payable in respect of the obligatory insurances and produce all relevant receipts when so required by the Facility Agent or the Security Agent.
22.10 Guarantees
The Borrower shall ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect.
22.11 Compliance with terms of insurances
(a) The Borrower shall not do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part.
(b) Without limiting paragraph (a) above, the Borrower shall:
(i) take all necessary action and comply with all requirements which may from time to time be applicable to the obligatory insurances, and (without limiting the obligation contained in sub-paragraph (iii) of paragraph (b) of Clause 22.6 ( Copies of policies; letters of undertaking )) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Facility Agent has not given its prior approval;
(ii) not make any changes relating to the classification or classification society or manager or operator of the Vessel approved by the underwriters of the obligatory insurances;
(iii) make (and promptly supply copies to the Facility Agent of) all quarterly or other voyage declarations which may be required by the protection and indemnity risks association in which the Vessel is entered to maintain cover for trading to the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990 or any other applicable legislation); and
(iv) not employ the Vessel, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.
22.12 Alteration to terms of insurances
The Borrower shall not make or agree to any alteration to the terms of any obligatory insurance or waive any right relating to any obligatory insurance.
22.13 Settlement of claims
The Borrower shall:
(a) not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty; and
(b) do all things necessary and provide all documents, evidence and information to enable the Security Agent to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.
22.14 Provision of copies of communications
The Borrower shall provide the Security Agent, at the time of each such communication, with copies of all written communications between the Borrower and:
(a) the Approved Brokers;
(b) the approved protection and indemnity and/or war risks associations; and
(c) the approved insurance companies and/or underwriters,
which relate directly or indirectly to:
(i) the Borrowers obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and
(ii) any credit arrangements made between the Borrower and any of the persons referred to in paragraphs (a) or (b) above relating wholly or partly to the effecting or maintenance of the obligatory insurances.
22.15 Provision of information
The Borrower shall promptly provide the Facility Agent (or any persons which it may designate) with any information which the Facility Agent (or any such designated person) requests for the purpose of:
(a) obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurances effected or proposed to be effected; and/or
(b) effecting, maintaining or renewing any such insurances as are referred to in Clause 22.16 ( Mortgagees interest, additional perils and mortgagees rights insurances ) or dealing with or considering any matters relating to any such insurances,
and the Borrower shall, forthwith upon demand, indemnify the Facility Agent in respect of all fees and other expenses incurred by or for the account of the Facility Agent in connection with any such report as is referred to in paragraph (a) above.
22.16 Mortgagees interest, additional perils and mortgagees rights insurances
The Security Agent shall be entitled from time to time to effect, maintain and renew:
(a) a mortgagees interest insurance in an amount equal to 120 per cent. of the Loan;
(b) a mortgagees interest additional perils (pollution) insurance in an amount equal to 120 per cent. of the Loan;
(c) a mortgagees rights insurance in an amount equal to 120 per cent. of the Loan,
and the Borrower shall upon demand fully indemnify the Finance Parties in respect of all premiums and other expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any such insurance or dealing with, or considering, any matter arising out of any such insurance.
23 BAREBOAT CHARTERER UNDERTAKINGS
23.1 General
The undertakings in this Clause 23 ( Bareboat Charterer Undertakings ) remain in force throughout the Security Period except as the Facility Agent, acting with the authorisation of the Majority Lenders (or, where specified, all the Lenders) may otherwise permit.
23.2 No variation, release etc. of Bareboat Charters
The Borrower shall not, whether by a document, by conduct, by acquiescence or in any other way:
(a) materially vary the First Bareboat Charter and shall procure that there is no material variation to the Second Bareboat Charter; or
(b) release, waive, suspend, subordinate or permit to be lost or impaired any interest or right of any kind which the Borrower has at any time to, in or in connection with either Bareboat Charter or in relation to any matter arising out of or in connection with either Bareboat Charter.
23.3 Provision of information relating to Bareboat Charters
Without prejudice to Clause 19.5 ( Information: miscellaneous ) the Borrower shall:
(a) without limitation to Clause 23.2 ( No variation, release etc. of Bareboat Charters ), immediately inform the Facility Agent of any variation (which is not material) to either Bareboat Charter and details of the variations or amendments made;
(b) immediately inform the Facility Agent if any breach of either Bareboat Charter occurs or a serious risk of such a breach arises and of any other event or matter affecting either Bareboat Charter;
(c) provide the Facility Agent, promptly after service, with copies of all notices served on or by the Borrower under or in connection with either Bareboat Charter; and
(d) provide the Facility Agent with any information which it requests about any interest or right of any kind which the Borrower has at any time to, in or in connection with either Bareboat Charter or in relation to any matter arising out of or in connection with either Bareboat Charter.
23.4 No assignment etc. of Bareboat Charters
The Borrower shall not, and shall procure that neither Bareboat Charterer will, assign, novate, transfer or dispose of any of its rights or obligations under either Bareboat Charter other than under the Finance Documents.
24 VESSEL UNDERTAKINGS
24.1 General
The undertakings in this Clause 24 ( Vessel Undertakings ) remain in force throughout the Security Period except as the Facility Agent, acting with the authorisation of the Majority Lenders (or, where specified, all the Lenders) may otherwise permit.
24.2 Vessels names and registration
The Borrower shall:
(a) keep the Vessel registered in its name under the Approved Flag from time to time at its port of registration;
(b) not do or allow to be done anything as a result of which such registration might be suspended, cancelled or imperilled; and
(c) not change the name of the Vessel.
24.3 Repair and classification
The Borrower shall keep the Vessel in a good and safe condition and state of repair:
(a) consistent with first class ship ownership and management practice; and
(b) so as to maintain the Approved Classification free of overdue recommendations and conditions.
24.4 Classification society undertaking
The Borrower shall instruct (by sending a letter in the form set out in Part A of Schedule 8 ( Classification Society Undertaking )) the Approved Classification Society, and procure that the Approved Classification Society undertakes with the Security Agent (by entering into an undertaking in the form set out in Part B of Schedule 8 ( Classification Society Undertaking )):
(a) to send to the Security Agent, following receipt of a written request from the Security Agent, certified true copies of all original class records held by the Approved Classification Society in relation to the Vessel;
(b) to allow the Security Agent (or its agents), at any time and from time to time, to inspect the original class and related records of the Borrower and the Vessel at the offices of the Approved Classification Society and to take copies of them;
(c) to notify the Security Agent immediately in writing (at TM.Singapore@dvbbank.com and techcom@dvbbank.com) if the Approved Classification Society:
(i) receives notification from the Borrower or any person that the Vessels Approved Classification Society is to be changed; or
(ii) becomes aware of any facts or matters which may result in or have resulted in a change, suspension, discontinuance, withdrawal or expiry of the Vessels class under the rules or terms and conditions of the Borrower or the Vessels membership of the Approved Classification Society;
(d) following receipt of a written request from the Security Agent:
(i) to confirm that the Borrower is not in default of any of its contractual obligations or liabilities to the Approved Classification Society, including confirmation that it has paid in full all fees or other charges due and payable to the Approved Classification Society; or
(ii) to confirm that the Borrower is in default of any of its contractual obligations or liabilities to the Approved Classification Society, to specify to the Security Agent in reasonable detail the facts and circumstances of such default, the consequences of such default, and any remedy period agreed or allowed by the Approved Classification Society.
24.5 Modifications
The Borrower shall not make any modification or repairs to, or replacement of, the Vessel or equipment installed on it which would or might materially alter the structure, type or performance characteristics of the Vessel or materially reduce its value.
24.6 Removal and installation of parts
(a) Subject to paragraph (b) below, the Borrower shall not remove any material part of the Vessel, or any item of equipment installed on the Vessel unless:
(i) the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed;
(ii) the replacement part or item is free from any Security in favour of any person other than the Security Agent; and
(iii) the replacement part or item becomes, on installation on the Vessel, the property of the Borrower and subject to the security constituted by the Mortgage, the Deed of Covenant and/or the New Zealand Security Deed.
(b) The Borrower may install equipment owned by a third party if the equipment can be removed without any risk of damage to the Vessel.
24.7 Surveys
The Borrower shall submit the Vessel regularly to all periodic or other surveys which may be required for classification purposes and, if so required by the Facility Agent, provide the Facility Agent, with copies of all survey reports.
24.8 Inspection
(a) The Borrower shall permit the Security Agent (acting through surveyors or other persons appointed by it for that purpose) to board the Vessel at all reasonable times to inspect its condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections.
(b) The cost of all inspections under this Clause 24.8 ( Inspection ) shall be for the account of the Borrower.
24.9 Prevention of and release from arrest
(a) The Borrower shall promptly (or, to the extent it is entitled to do so under the terms of the Bareboat Charters, procure that the relevant Bareboat Charterer shall) discharge:
(i) all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against the Vessel, the Earnings or the Insurances;
(ii) all Taxes, dues and other amounts charged in respect of the Vessel, the Earnings or the Insurances; and
(iii) all other outgoings whatsoever in respect of the Vessel, the Earnings or the Insurances.
(b) The Borrower shall immediately and, forthwith upon receiving notice of the arrest of the Vessel or of its detention in exercise or purported exercise of any lien or claim, procure its release by providing (or, to the extent it is entitled to do so under the terms of the Bareboat Charters, procuring the relevant Bareboat Charterer provides) bail or otherwise as the circumstances may require.
24.10 Compliance with laws etc.
The Borrower shall:
(a) comply, or procure compliance with all laws or regulations:
(i) relating to its business generally; and
(ii) relating to the Vessel, its ownership, employment, operation, management and registration,
including, but not limited to, the ISM Code, the ISPS Code, all Environmental Laws, all Sanctions and the laws of the Approved Flag;
(b) obtain, comply with and do all that is necessary to maintain in full force and effect any Environmental Approvals;
(c) without limiting paragraph (a) above, not employ the Vessel nor allow its employment, operation or management in any manner contrary to any law or regulation including but not limited to the ISM Code, the ISPS Code, all Environmental Laws and all Sanctions; and
(d) not appoint any manager or agent to manage the Vessel unless such party is an Approved Technical Manager and undertakes to procure that any agreement entered into relating to the management, employment or operation of the Vessel contains a clause in which the counterparty undertakes to comply with all Sanctions. The Borrower shall further procure that any Approved Technical Manager shall enter into a Managers Undertaking if requested to do so.
24.11 ISPS Code
Without limiting paragraph (a) of Clause 24.10 ( Compliance with laws etc. ), the Borrower shall:
(a) procure that the Vessel and the company responsible for the Vessels compliance with the ISPS Code comply with the ISPS Code; and
(b) maintain an ISSC for the Vessel; and
(c) notify the Facility Agent immediately in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC.
24.12 Trading in war zones
In the event of hostilities in any part of the world (whether war is declared or not), the Borrower shall not cause or permit the Vessel to enter or trade to any zone which is declared a war zone by any government or by the Vessels war risks insurers unless:
(a) the prior written consent of the Security Agent acting on the instructions of the Majority Lenders has been given; and
(b) the Borrower has (at its expense) effected any special, additional or modified insurance cover which the Security Agent acting on the instructions of the Majority Lenders may require.
24.13 Monitoring
(a) The Borrower shall (or shall procure that any Charterer and any Approved Technical Manager shall) allow the Security Agent (or its agents), at any time and from time to time, to access all information pertaining to the Vessel (including the movement of the Vessel) using any and all available means.
(b) All costs incurred by the Security Agent (and any of its agents) under paragraph (a) of Clause 24.13 ( Monitoring ) above shall be for the account of the Lenders.
24.14 Provision of information
Without prejudice to Clause 19.5 ( Information: miscellaneous ) the Borrower shall promptly provide the Facility Agent with any information which it requests regarding:
(a) inspections of the Vessel including any independent inspection reports;
(b) the Vessel, its employment, position and engagements;
(c) the Earnings and payments and amounts due to its master and crew;
(d) any expenditure incurred, or likely to be incurred, in connection with the operation, maintenance or repair of the Vessel and any payments made by it in respect of the Vessel;
(e) any towages and salvages; and
(f) its compliance, any Approved Technical Managers compliance and the compliance of the Vessel with the ISM Code and the ISPS Code,
and, upon the Facility Agents request, provide copies of any current Bareboat Charter relating to the Vessel, of any current guarantee of any such Bareboat Charter, the Vessels Safety Management Certificate and any relevant Document of Compliance.
24.15 Notification of certain events
The Borrower shall immediately notify the Facility Agent by fax, confirmed forthwith by letter, of:
(a) any casualty to the Vessel which is or is likely to be or to become a Major Casualty;
(b) any occurrence as a result of which the Vessel has become or is, by the passing of time or otherwise, likely to become a Total Loss;
(c) any requisition of the Vessel for hire;
(d) any requirement or recommendation made in relation to the Vessel by any insurer or classification society or by any competent authority which is not immediately complied with;
(e) any arrest or detention of the Vessel, any exercise or purported exercise of any lien on the Vessel or the Earnings or any requisition of the Vessel for hire;
(f) any intended dry docking of the Vessel;
(g) any Environmental Claim made against the Borrower or in connection with the Vessel, or any Environmental Incident;
(h) any claim for breach of the ISM Code or the ISPS Code being made against the Borrower, any Approved Technical Manager or otherwise in connection with the Vessel; or
(i) any other matter, event or incident, actual or threatened, the effect of which will or could lead to the ISM Code or the ISPS Code not being complied with,
and the Borrower shall keep the Facility Agent advised in writing on a regular basis and in such detail as the Facility Agent shall require as to the Borrowers, any Approved Technical Managers or any other persons response to any of those events or matters.
24.16 Restrictions on chartering, appointment of managers etc.
The Borrower shall not:
(a) let the Vessel on demise charter for any period other than under the First Bareboat Charter;
(b) enter into any time, voyage or consecutive voyage charter in respect of the Vessel;
(c) (without limitation to Clause 23 ( Bareboat Charterer Undertakings ), change, cancel or terminate the First Bareboat Charter or any associated First Bareboat Charter Guarantee;
(d) appoint a manager, or permit the appointment of a manager, of the Vessel other than an Approved Technical Manager or agree to any alteration to the terms of any Approved Technical Managers appointment;
(e) de activate or lay up the Vessel; or
(f) put the Vessel into the possession of any person for the purpose of work being done upon it in an amount exceeding or likely to exceed US$500,000 (or the equivalent in any other currency) unless that person has first given to the Security Agent and in terms satisfactory to it a written undertaking not to exercise any lien on the Vessel or the Earnings for the cost of such work or for any other reason.
24.17 Notice of Mortgage
The Borrower shall keep the Mortgage registered against the Vessel as a valid first priority mortgage, carry on board the Vessel a certified copy of the Mortgage and place and maintain in a conspicuous place in the navigation room and the masters cabin of the Vessel a framed printed notice stating that the Vessel is mortgaged by the Borrower to the Security Agent.
24.18 Sharing of Earnings
The Borrower shall not enter into any agreement or arrangement for the sharing of any Earnings.
24.19 Notification of compliance
The Borrower shall promptly provide the Facility Agent from time to time with evidence (in such form as the Facility Agent requires) that it is complying with this Clause 24 ( Vessel Undertakings ).
24.20 Nuclear materials
The Borrower shall not permit the Vessel to carry any nuclear material or any nuclear waste.
25 SECURITY COVER
25.1 Minimum required security cover
Clause 25.2 ( Provision of additional security; prepayment ) applies if the Facility Agent notifies the Borrower that:
(a) the Market Value of the Vessel; plus
(b) the net realisable value of additional Security previously provided under this Clause 25.1 ( Minimum required security cover ),
is below:
(i) until the second anniversary of the Drawdown Date, 120 per cent. of the Loan;
(ii) on and from the second anniversary of the Drawdown Date until the fourth anniversary of the Drawdown Date, 125 per cent. of the Loan; and
(iii) on and from the fourth anniversary of the Drawdown Date, 130 per cent. of the Loan.
25.2 Provision of additional security; prepayment
(a) If the Facility Agent serves a notice on the Borrower under Clause 25.1 ( Minimum required security cover ), the Borrower shall, on or before the date falling one Month after the date (the Prepayment Date ) on which the Facility Agents notice is served, prepay such part of the Loan as shall eliminate the shortfall.
(b) The Borrower may, instead of making a prepayment as described in paragraph (a) above, provide, or ensure that a third party has provided, additional security which, in the opinion of the Facility Agent acting on the instructions of the Majority Lenders:
(i) has a net realisable value at least equal to the shortfall; and
(ii) is documented in such terms as the Facility Agent may approve or require,
before the Prepayment Date; and conditional upon such security being provided in such manner, it shall satisfy such prepayment obligation.
25.3 Value of additional vessel security
The net realisable value of any additional security which is provided under Clause 25.2 ( Provision of additional security ; prepayment) and which consists of Security over a vessel shall be the Market Value of the vessel concerned.
25.4 Valuations binding
Any valuation under this Clause 25 ( Security Cover ) shall be binding and conclusive as regards the Borrower.
25.5 Provision of information
(a) The Borrower shall promptly provide the Facility Agent and any shipbroker acting under this Clause 25 ( Security Cover ) with any information which the Facility Agent or the shipbroker may request for the purposes of the valuation.
(b) If the Borrower fails to provide the information referred to in paragraph (a) above by the date specified in the request, the valuation may be made on any basis and assumptions which the shipbroker or the Facility Agent considers prudent.
25.6 Prepayment mechanism
Any prepayment pursuant to Clause 25.2 ( Provision of additional security; prepayment ) shall be made in accordance with the relevant provisions of Clause 7 ( Prepayment and Cancellation ) and shall be treated as a voluntary prepayment pursuant to Clause 7.3 ( Voluntary prepayment of Loan ).
25.7 Provision of valuations
(a) The Facility Agent shall be entitled to test the security requirements under Clause 25.1 ( Minimum required security cover ) by reference to valuations in respect of the Vessel from the required number of Approved Valuers semi-annually and on dates to be selected by the Facility Agent.
(b) The Facility Agent shall at the request of the Lenders additionally be entitled to test the security cover requirement under Clause 25.1 ( Minimum required security cover ) by reference to a valuation in respect of the Vessel from the required number of Approved Valuers at any time and each such valuation shall be at the expense of the Lenders except where the Borrower is by means of such valuation(s) shown to be in breach of Clause 25.1 ( Minimum required security cover ).
(c) The Market Value of the Vessel shall be determined by the arithmetic average of two valuations of the Vessel each as given by an Approved Valuer selected and appointed by the Facility Agent.
(d) If one such valuation in respect of the Vessel obtained pursuant to paragraphs (c) above differs by at least 10 per cent. from the other valuation, then a third valuation for the Vessel shall be obtained from an Approved Valuer selected and appointed by the Borrower and the Market Value of the Vessel shall be the arithmetic average of all three such valuations.
(e) The Facility Agent may at any time after a Default has occurred and is continuing obtain valuations of the Vessel and any other vessel over which additional security has been created in accordance with Clause 25.2 ( Provision of additional security ; prepayment) from Approved Valuers to enable the Facility Agent to determine the Market Values of the Vessel and any other vessel.
(f) The valuations referred to in paragraph (a), (b), (c) and (d) above shall be obtained at the cost and expense of the Borrower (except where specified in paragraph (b) above) and the Borrower shall within three Business Days of demand by the Facility Agent pay to the Facility Agent all costs and expenses incurred by it in obtaining any such valuation.
26 ACCOUNTS AND APPLICATION OF EARNINGS
26.1 Account bank
Subject to Clause 26.8 ( Location of Accounts ), each Account must be held with the Account Bank.
26.2 Accounts
(a) The Borrower must operate each Account in accordance with this Clause 26 ( Accounts and Application of Earnings ) and the provisions of the Account Security.
(b) Account Security must be provided in respect of any Account opened after the date of this Agreement.
26.3 Payment of Earnings
(a) The Borrower shall ensure that, subject only to the provisions of the General Assignment, all the Earnings are paid in to the Earnings Account.
(b) At the end of each calendar month, provided that the provisions contained in Clause 26.4 ( Monthly retentions ) are complied with and no Default has occurred and is continuing (or would occur from a release of funds from the Earnings Account), the Borrower may withdraw any surplus in the Earnings Account.
26.4 Monthly retentions
The Borrower shall ensure that, in each calendar month after the Delivery Date, on such dates as the Facility Agent may from time to time specify, there is transferred to the Retention Account out of the Earnings received in the Earnings Account during the preceding calendar month:
(a) one-third of the amount of the Repayment Instalment falling due under Clause 6.1 ( Repayment of Loan ) on the next Repayment Date; and
(b) the relevant fraction of the aggregate amount of interest on the Loan which is payable on the next due date for payment of interest on the Loan under this Agreement.
The relevant fraction is a fraction of which:
(i) the numerator is one; and
(ii) the denominator is:
(A) the number of months comprised in the then current Interest Period; or
(B) if the period is shorter, the number of months from the later of the commencement of the current Interest Period or the last due date for payment of interest on the Loan to the next due date for payment of interest on the Loan under this Agreement).
26.5 Application of Earnings
The Borrower shall transfer from the Retention Account to the Facility Agent:
(a) on each Repayment Date, the amount of the Repayment Instalment then due on the Repayment Date;
(b) on the last day of each Interest Period, the amount of interest then due on that date; and
(c) on any day on which an amount is otherwise due from the Borrower under a Finance Document, an amount necessary to meet that due amount,
and the Borrower irrevocably authorises and instructs:
(i) the Account Bank to make those transfers in accordance with the instructions of the Facility Agent (copied to the Security Agent, who, as security taker under the Accounts Security, agrees for itself and on behalf of the other pledgees that such transfers may be made);
(ii) the Facility Agent to apply the transferred amounts in payment of the relevant Repayment Instalment, interest amount or other amount due.
26.6 Shortfall in Earnings
(a) If the credit balance on the Earnings Account is insufficient in any calendar month for the required amount to be transferred to the Retention Account under Clause 26.4 ( Monthly retentions ), the Borrower shall make up the amount of the insufficiency on demand from the Facility Agent.
(b) Without prejudicing the Facility Agents right to make such demand at any time, the Facility Agent may, if so authorised by the Majority Lenders, permit the Borrower to make up all or part of the insufficiency by increasing the amount of any transfer to the Retention Account under Clause 26.4 ( Monthly retentions ) from the Earnings received in the next or subsequent calendar months.
(c) The Borrower may not make up all or any part of the insufficiency from the Minimum Liquidity Amount.
26.7 Application of funds
Until an Event of Default occurs, the Facility Agent shall on each Repayment Date and on each due date for the payment of interest under this Agreement distribute to the Finance Parties in accordance with Clause 34.2 ( Distributions by the Facility Agent ) so much of the then balance on the Retention Account as equals:
(a) the Repayment Instalment due on that Repayment Date; and
(b) the amount of interest payable on that Interest Payment Date,
in discharge of the Borrowers liability for that Repayment Instalment or that interest.
26.8 Location of Accounts
The Borrower shall promptly:
(a) comply with any requirement of the Facility Agent as to the location or relocation of the Accounts (or any of them); and
(b) execute any documents which the Facility Agent specifies to create or maintain in favour of the Security Agent Security over (and/or rights of set-off, consolidation or other rights in relation to) each Account.
27 EVENTS OF DEFAULT
27.1 General
Each of the events or circumstances set out in this Clause 27 ( Events of Default ) is an Event of Default except for Clause 27.19 ( Acceleration ) and Clause 27.20 ( Enforcement of security ).
27.2 Non-payment
An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless:
(a) its failure to pay is caused by:
(i) administrative or technical error; or
(ii) a Disruption Event; and
(b) payment is made within three Business Days of its due date.
27.3 Specific obligations
A breach occurs of Clause 4.5 ( Waiver of conditions precedent ), Clause 20 ( Financial Covenants ), Clause 21.9 ( Title ), Clause 21.10 ( Negative pledge ), Clause 21.20 ( Unlawfulness, invalidity and ranking; Security imperilled ), Clause 22.2 ( Maintenance of obligatory insurances ), Clause 22.3 ( Terms of obligatory insurances ), Clause 22.5 ( Renewal of obligatory insurances ) or Clause 25 ( Security Cover ).
27.4 Other obligations
(a) An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 27.2 ( Non-payment ) and Clause 27.3 ( Specific obligations )).
(b) No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within five Business Days of the Facility Agent giving notice to the Borrower or (if earlier) any Obligor becoming aware of the failure to comply.
27.5 Misrepresentation
Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made.
27.6 Cross default
(a) Any Financial Indebtedness of any member of the Group is not paid when due nor within any originally applicable grace period.
(b) Any Financial Indebtedness of any member of the Group is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).
(c) Any commitment for any Financial Indebtedness of any member of the Group is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).
(d) Any creditor of any member of the Group becomes entitled to declare any Financial Indebtedness of any member of the Group due and payable prior to its specified maturity as a result of an event of default (however described).
(e) No Event of Default will occur under this Clause 27.6 ( Cross default ) in respect of a person other than the Borrower if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) to (d) above is less than US$100,000 (or its equivalent in any other currency).
27.7 Insolvency
(a) Any Obligor or any other member of the Group:
(i) is unable or admits inability to pay its debts as they fall due;
(ii) is deemed to, or is declared to, be unable to pay its debts under applicable law;
(iii) suspends or threatens to suspend making payments on any of its debts; or
(iv) by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors (excluding any Finance Party in its capacity as such) with a view to rescheduling any of its indebtedness.
(b) The value of the assets of any Obligor or any other member of the Group is less than its liabilities (taking into account contingent and prospective liabilities).
(c) A moratorium is declared in respect of any indebtedness of any Obligor or any other member of the Group. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.
27.8 Insolvency proceedings
(a) Any corporate action, legal proceedings or other procedure or step is taken in relation to:
(i) the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of any Obligor or any other member of the Group (other than in respect to solvent liquidation of a member of the Group which is not an Obligor);
(ii) a composition, compromise, assignment or arrangement with any creditor of any Obligor or any other member of the Group;
(iii) the appointment of a liquidator, receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of any Obligor or any other member of the Group or any of its assets; or
(iv) enforcement of any Security over any assets of any Obligor or any other member of the Group,
or any analogous procedure or step is taken in any jurisdiction.
(b) Paragraph (a) above shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement.
27.9 Creditors process
Any expropriation, attachment, sequestration, distress, detention or execution or any analogous process in any jurisdiction affects:
(a) the Vessel (other than an arrest where paragraph (a) of Clause 7.4 ( Mandatory prepayment on sale or Total Loss ) shall apply); or
(b) any other asset or assets of an Obligor or any other member of the Group.
27.10 Ownership of the Obligors
(a) GSPL ceases to own one hundred per cent of the membership interests of the Borrower.
(b) GSPL ceases to control the Borrower.
(c) The legal title to and beneficial interest in the shares in GSPL cease to be held directly or indirectly by the Parent Guarantor (subject to any shares in GSPL being sold by way of Permitted GSPL Share Sale).
(d) For the purpose of paragraph (b) above control means:
(i) the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:
(A) cast, or control the casting of, more than 51 per cent. of the maximum number of votes that might be cast at a general meeting of the Borrower; or
(B) appoint or remove all, or the majority, of the directors or other equivalent officers of the Borrower; or
(C) give directions with respect to the operating and financial policies of the Borrower with which the directors or other equivalent officers of the Borrower are obliged to comply; and/or
(ii) the holding beneficially of not less than 60 per cent. of the issued share capital of the Borrower (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital).
(e) Without the Majority Lenders prior consent, any other change has occurred after the date of this Agreement in the legal or beneficial ownership of any of the membership interests in the Borrower, or in the ultimate control of the voting rights attaching to any of those interests.
27.11 Unlawfulness, invalidity and ranking
(a) It is or becomes unlawful for a Transaction Obligor to perform any of its obligations under any Finance Document to which it is a party.
(b) Any obligation of a Transaction Obligor under any Finance Document to which it is a party is not or ceases to be legal, valid, binding or enforceable.
(c) Any Finance Document ceases to be in full force and effect or to be continuing or is or purports to be determined or any Transaction Security is alleged by a party to it (other than a Finance Party) to be ineffective.
(d) Any Transaction Security proves to have ranked after, or loses its priority to, any other Security.
27.12 Security imperilled; flag instability
(a) Subject to the Legal Reservations, any Security created or intended to be created by a Finance Document is in any way imperilled or in jeopardy.
(b) The state of the Approved Flag of the Vessel is or becomes involved in hostilities or civil war or there is a seizure of power in such state by unconstitutional means, or any other event occurs in relation to the Vessel, the Mortgage or the Approved Flag and in the reasonable opinion of the Facility Agent such event is likely to have a Material Adverse Effect unless the Borrower, within 14 days of the occurrence of such event (or such longer period as may be agreed by the Facility Agent acting with the authorisation of all of the Lenders) re-registers the Vessel on an alternative flag approved pursuant to Clause 24.2 ( Vessels names and registration ) and subject to:
(i) the Vessel remaining subject to Security created by a first priority or preferred ship mortgage on the Vessel and, if appropriate, a first priority deed of covenant collateral to that mortgage (or equivalent first priority security) on substantially the same terms as the Mortgage and if applicable, a Deed of Covenant and on such other terms and in such other form as the Facility Agent, acting with the authorisation of all of the Lenders, shall reasonably approve or require; and
(ii) the execution of such other documentation amending and supplementing the Finance Documents, as the Facility Agent, acting with the authorisation of all of the Lenders, shall reasonably approve or require.
27.13 Cessation of business
Any Obligor suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business.
27.14 Cancellation of any Charter
Any Charter is cancelled or terminated.
27.15 Expropriation
The authority or ability of any Obligor or any other member of the Group to conduct its business is limited or wholly or substantially curtailed by any seizure, expropriation, nationalisation, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority or other person in relation to any Obligor or any other member of the Group or any of its assets.
27.16 Repudiation and rescission of agreements
An Obligor rescinds or purports to rescind or repudiates or purports to repudiate a Transaction Document or any of the Transaction Security or evidences an intention to rescind or repudiate a Transaction Document or any Transaction Security.
27.17 Litigation
Any litigation, arbitration, administrative, governmental, regulatory or other investigations, proceedings or disputes are commenced or threatened in relation to any of the Transaction Documents or the transactions contemplated in any of the Transaction Documents or against any Obligor or any other member of the Group or its assets which has or is reasonably likely to have a Material Adverse Effect.
27.18 Material adverse change
Any event or circumstance occurs which has or is reasonably likely to have a Material Adverse Effect.
27.19 Acceleration
On and at any time after the occurrence of an Event of Default which is continuing the Facility Agent may, and shall if so directed by the Majority Lenders, by notice to the Borrower:
(a) cancel the Total Commitments, whereupon they shall immediately be cancelled;
(b) declare that all or part of the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon it shall become immediately due and payable; and/or
(c) declare that all or part of the Loan be payable on demand, whereupon it shall immediately become payable on demand by the Facility Agent acting on the instructions of the Majority Lenders,
and the Facility Agent may serve notices under paragraphs (a), (b) and (c) above simultaneously or on different dates and the Security Agent may take any action referred to in Clause 27.20 ( Enforcement of security ) if no such notice is served or simultaneously with or at any time after the service of any of such notice.
27.20 Enforcement of security
On and at any time after the occurrence of an Event of Default which is continuing the Security Agent may, and shall if so directed by the Majority Lenders, take any action which, as a result of the Event of Default or any notice served under Clause 27.19 ( Acceleration ), the Security Agent is entitled to take under any Finance Document or any applicable law or regulation.
SECTION 9
CHANGES TO PARTIES
28 CHANGES TO THE LENDERS
28.1 Assignments and transfers by the Lenders
Subject to this Clause 28 ( Changes to the Lenders ), a Lender (the Existing Lender ) may:
(a) assign any of its rights; or
(b) transfer by novation any of its rights and obligations,
under the Finance Documents to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the New Lender ).
28.2 Conditions of assignment or transfer
(a) Subject to paragraph (b) of this Clause, the consent of the Borrower (or any other Transaction Obligor) is not required for an assignment or transfer by an Existing Lender. The consent of the Facility Agent is required for an assignment or transfer by an Existing Lender, such consent not to be unreasonably withheld.
(b) The consent of the Borrower is required for a transfer by an Existing Lender to an equity fund or credit fund unless the transfer is made at a time when an Event of Default has occurred and is continuing.
(c) The consent of the Borrower (where such consent is required) to a transfer must not be unreasonably withheld or delayed. The Borrower will be deemed to have given its consent five Business Days after the Existing Lender has requested it unless consent is expressly withheld by the Borrower within that time.
(d) The consent of the Borrower to a transfer must not be withheld solely because the assignment or transfer may result in an increase to any amount payable under Clause 14.3 ( Mandatory Cost ).
(e) An assignment will only be effective on:
(i) receipt by the Facility Agent (whether in the Assignment Agreement or otherwise) of written confirmation from the New Lender (in form and substance satisfactory to the Facility Agent) that the New Lender will assume the same obligations to the other Creditor Parties as it would have been under if it were an Original Lender; and
(ii) performance by the Facility Agent of all necessary know your customer or other similar checks under all applicable laws and regulations in relation to such assignment to a New Lender, the completion of which the Facility Agent shall promptly notify to the Existing Lender and the New Lender.
(f) A transfer will only be effective if the procedure set out in Clause 28.5 ( Procedure for transfer ) is complied with.
(g) If:
(i) a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and
(ii) as a result of circumstances existing at the date the assignment, transfer or change occurs, a Transaction Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 12 ( Tax Gross Up and Indemnities ) or under that clause as incorporated by reference or in full in any other Finance Document or Clause 13 ( Increased Costs ),
then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred. This paragraph (g) shall not apply in respect of an assignment or transfer made in the ordinary course of the primary syndication of the Facility.
(h) Each New Lender, by executing the relevant Transfer Certificate or Assignment Agreement, confirms, for the avoidance of doubt, that:
(i) the Facility Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the transfer or assignment becomes effective in accordance with this Agreement and that it is bound by that decision to the same extent as the Existing Lender would have been had it remained a Lender; and
(ii) it has received a copy of each of the Security Documents which are governed by German law and which are account pledges, is aware of the contents of such account pledges and expressly consents to the declarations of the Security Agent made on behalf of the New Lender (as future pledgee) in such account pledges.
28.3 Assignment or transfer fee
The New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Facility Agent (for its own account) a fee of US$5,000.
28.4 Limitation of responsibility of Existing Lenders
(a) Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:
(i) the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents, the Transaction Security or any other documents;
(ii) the financial condition of any Transaction Obligor;
(iii) the performance and observance by any Transaction Obligor of its obligations under the Finance Documents or any other documents; or
(iv) the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,
and any representations or warranties implied by law are excluded.
(b) Each New Lender confirms to the Existing Lender and the other Finance Parties and the Creditor Parties that it:
(i) has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Transaction Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender or any other Finance Party in connection with any Finance Document or the Transaction Security; and
(ii) will continue to make its own independent appraisal of the creditworthiness of each Transaction Obligor (and to the extent possible, each Charterer) and its related entities throughout the Security Period.
(c) Nothing in any Finance Document obliges an Existing Lender to:
(i) accept a re-transfer or re-assignment from a New Lender of any of the rights and obligations assigned or transferred under this Clause 28 ( Changes to the Lenders ); or
(ii) support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Transaction Obligor of its obligations under the Finance Documents or otherwise.
28.5 Procedure for transfer
(a) Subject to the conditions set out in 28.2 ( Conditions of assignment or transfer ), a transfer is effected in accordance with paragraph (c) below when the Facility Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Facility Agent shall, subject to paragraph (b) below as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with this Agreement and delivered in accordance with this Agreement, execute that Transfer Certificate. Upon execution by the Facility Agent, the Security Agent shall also execute the Transfer Certificate.
(b) The Facility Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary know your customer or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.
(c) Subject to Clause 28.9 ( Pro rata interest settlement ), on the Transfer Date:
(i) to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents and in respect of the Transaction Security, each of the Transaction Obligors and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and in respect of the Transaction Security and their respective rights against one another under the Finance Documents and in respect of the Transaction Security shall be cancelled (being the Discharged Rights and Obligations );
(ii) each of the Transaction Obligors and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Transaction Obligor and the New Lender have assumed and/or acquired the same in place of that Transaction Obligor and the Existing Lender;
(iii) the Facility Agent, the Security Agent, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves and in respect of the Transaction Security as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Facility Agent, the Security Agent and the Existing Lenders shall each be released from further obligations to each other under the Finance Documents; and
(iv) the New Lender shall become a Party as a Lender.
28.6 Procedure for assignment
(a) Subject to the conditions set out in Clause 28.2 ( Conditions of assignment or transfer ) an assignment may be effected in accordance with paragraph (c) below when the Facility Agent executes an otherwise duly completed Assignment Agreement delivered to it by the Existing Lender and the New Lender. The Facility Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Assignment Agreement appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Assignment Agreement. Upon execution by the Facility Agent, the Security Agent shall also execute the Assignment Agreement.
(b) The Facility Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary know your customer or other similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.
(c) Subject to Clause 28.9 ( Pro rata interest settlement ), on the Transfer Date:
(i) the Existing Lender will assign absolutely to the New Lender its rights under the Finance Documents and in respect of the Transaction Security expressed to be the subject of the assignment in the Assignment Agreement;
(ii) the Existing Lender will be released from the obligations (the Relevant Obligations ) expressed to be the subject of the release in the Assignment Agreement (and any corresponding obligations by which it is bound in respect of the Transaction Security); and
(iii) the New Lender shall become a Party as a Lender and will be bound by obligations equivalent to the Relevant Obligations.
(d) Lenders may utilise procedures other than those set out in this Clause 28.6 ( Procedure for assignment ) to assign their rights under the Finance Documents (but not, without the consent of the relevant Transaction Obligor or unless in accordance with Clause 28.5 ( Procedure for transfer ), to obtain a release by that Transaction Obligor from the obligations owed to that Transaction Obligor by the Lenders nor the assumption of equivalent obligations by a New Lender) provided that they comply with the conditions set out in Clause 28.2 ( Conditions of assignment or transfer ).
28.7 Copy of Transfer Certificate or Assignment Agreement to Borrower
The Facility Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate or an Assignment Agreement, send to the Borrower a copy of that Transfer Certificate or Assignment Agreement.
28.8 Security over Lenders rights
In addition to the other rights provided to Lenders under this Clause 28 ( Changes to the Lenders ), each Lender may without consulting with or obtaining consent from any Transaction Obligor, at any time charge, assign or otherwise create Security in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:
(a) any charge, assignment or other Security to secure obligations to a federal reserve or central bank; and
(b) in the case of any Lender which is a fund, any charge, assignment or other Security granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities,
except that no such charge, assignment or Security shall:
(i) release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security for the Lender as a party to any of the Finance Documents; or
(ii) require any payments to be made by a Transaction Obligor other than or in excess of, or grant to any person any more extensive rights than, those required to be made or granted to the relevant Lender under the Finance Documents.
28.9 Pro rata interest settlement
If the Facility Agent has notified the Lenders that it is able to distribute interest payments on a pro rata basis to Existing Lenders and New Lenders then (in respect of any transfer pursuant to Clause 28.5 ( Procedure for transfer ) or any assignment pursuant to Clause 28.6 ( Procedure for assignment ) the Transfer Date of which, in each case, is after the date of such notification and is not on the last day of an Interest Period):
(a) any interest or fees in respect of the relevant participation which are expressed to accrue by reference to the lapse of time shall continue to accrue in favour of the Existing Lender up to but excluding the Transfer Date ( Accrued Amounts ) and shall become due and payable to the Existing Lender (without further interest accruing on them) on the last day of the current Interest Period (or, if the Interest Period is longer than six Months, on the next of the dates which falls at six Monthly intervals after the first day of that Interest Period); and
(b) The rights assigned or transferred by the Existing Lender will not include the right to the Accrued Amounts, so that, for the avoidance of doubt:
(i) when the Accrued Amounts become payable, those Accrued Amounts will be payable to the Existing Lender; and
(ii) the amount payable to the New Lender on that date will be the amount which would, but for the application of this Clause 28.9 ( Pro rata interest settlement ), have been payable to it on that date, but after deduction of the Accrued Amounts.
(c) In this Clause 28.9 ( Pro rata interest settlement ) references to Interest Period shall be construed to include a reference to any other period for accrual of fees.
28.10 Parent Guarantors consent
The Parent Guarantor consents to any splitting of claims that may arise as a result of any Lender exercising any of its rights under this Clause 28 ( Changes to the Lenders ).
29 CHANGES TO THE TRANSACTION OBLIGORS
29.1 Assignment or transfer by Transaction Obligors
No Transaction Obligor may assign any of its rights or transfer any of its rights or obligations under any Finance Document to which it is a party.
29.2 Release of security
(a) If a disposal of any asset subject to security created by a Security Document is made in the following circumstances:
(i) the disposal is permitted by the terms of any Finance Document;
(ii) the Majority Lenders agree to the disposal;
(iii) the disposal is being made at the request of the Security Agent in circumstances where any security created by the Security Documents has become enforceable; or
(iv) the disposal is being effected by enforcement of a Security Document,
the Security Agent may release the asset(s) being disposed of from any security over those assets created by a Security Document. However, the proceeds of any disposal (or an amount corresponding to them) must be applied in accordance with the requirements of the Finance Documents (if any).
(b) If the Security Agent is satisfied that a release is allowed under this Clause 29.2 ( Release of security ) (at the request and expense of the Borrower) each Finance Party must enter into any document and do all such other things which are reasonably required to achieve that release. Each other Finance Party irrevocably authorises the Security Agent to enter into any such document. Any release will not affect the obligations of any other Transaction Obligor under the Finance Documents.
SECTION 10
THE FINANCE PARTIES
30 THE FACILITY AGENT
30.1 Appointment of the Facility Agent
(a) Each other Finance Party appoints the Facility Agent to act as its agent under and in connection with the Finance Documents.
(b) Each other Finance Party authorises the Facility Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Facility Agent under, or in connection with, the Finance Documents together with any other incidental rights, powers, authorities and discretions.
30.2 Instructions
(a) The Facility Agent shall:
(i) unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Facility Agent in accordance with any instructions given to it by:
(A) all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and
(B) in all other cases, the Majority Lenders; and
(ii) not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with sub-paragraph (i) above (or, if this Agreement stipulates the matter is a decision for any other Finance Party or group of Finance Parties, from that Finance Party or group of Finance Parties).
(b) The Facility Agent shall be entitled to request instructions, or clarification of any instruction, from the Majority Lenders (or, if the relevant Finance Document stipulates the matter is a decision for any other Finance Party or group of Finance Parties, from that Finance Party or group of Finance Parties) as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or discretion and the Facility Agent may refrain from acting unless and until it receives any such instructions or clarification that it has requested.
(c) Save in the case of decisions stipulated to be a matter for any other Finance Party or group of Finance Parties under the relevant Finance Document and unless a contrary indication appears in a Finance Document, any instructions given to the Facility Agent by the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties.
(d) Paragraph (a) above shall not apply:
(i) where a contrary indication appears in a Finance Document;
(ii) where a Finance Document requires the Facility Agent to act in a specified manner or to take a specified action;
(iii) in respect of any provision which protects the Facility Agents own position in its personal capacity as opposed to its role of Facility Agent for the relevant Finance Parties.
(e) If giving effect to instructions given by the Majority Lenders would in the Facility Agents opinion have an effect equivalent to an amendment or waiver referred to in Clause 43 ( Amendments and Waivers ), the Facility Agent shall not act in accordance with those instructions unless consent to it so acting is obtained from each Party (other than the Facility Agent) whose consent would have been required in respect of that amendment or waiver.
(f) In exercising any discretion to exercise a right, power or authority under the Finance Documents where it has not received any instructions as to the exercise of that discretion the Facility Agent shall do so having regard to the interests of all the Finance Parties.
(g) The Facility Agent may refrain from acting in accordance with any instructions of any Finance Party or group of Finance Parties until it has received any indemnification and/or security that it may in its discretion require (which may be greater in extent than that contained in the Finance Documents and which may include payment in advance) for any cost, loss or liability (together with any applicable Indirect Tax) which it may incur in complying with those instructions.
(h) Without prejudice to the remainder of this Clause 30.2 ( Instructions ), in the absence of instructions, the Facility Agent shall not be obliged to take any action (or refrain from taking action) even if it considers acting or not acting to be in the best interests of the Finance Parties. The Facility Agent may act (or refrain from acting) as it considers to be in the best interest of the Finance Parties.
(i) The Facility Agent is not authorised to act on behalf of a Finance Party (without first obtaining that Finance Partys consent) in any legal or arbitration proceedings relating to any Finance Document. This paragraph (i) shall not apply to any legal or arbitration proceeding relating to the perfection, preservation or protection of rights under the Security Documents or enforcement of the Transaction Security or Security Documents.
30.3 Duties of the Facility Agent
(a) The Facility Agents duties under the Finance Documents are solely mechanical and administrative in nature.
(b) Subject to paragraph (c) below, the Facility Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Facility Agent for that Party by any other Party.
(c) Without prejudice to Clause 28.7 ( Copy of Transfer Certificate or Assignment Agreement to Borrower ), paragraph (b) above shall not apply to any Transfer Certificate or any Assignment Agreement.
(d) Except where a Finance Document specifically provides otherwise, the Facility Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
(e) If the Facility Agent receives notice from a Party referring to any Finance Document, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.
(f) If the Facility Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Facility Agent or the Security Agent) under this Agreement, it shall promptly notify the other Finance Parties.
(g) The Facility Agent shall have only those duties, obligations and responsibilities expressly specified in the Finance Documents to which it is expressed to be a party (and no others shall be implied).
30.4 No fiduciary duties
(a) Nothing in any Finance Document constitutes the Facility Agent as a trustee or fiduciary of any other person.
(b) The Facility Agent shall not be bound to account to other Finance Party for any sum or the profit element of any sum received by it for its own account.
30.5 Application of receipts
Except as expressly stated to the contrary in any Finance Document, any moneys which the Facility Agent receives or recovers in its capacity as Facility Agent shall be applied by the Facility Agent in accordance with Clause 34.5 ( Application of receipts; partial payments ).
30.6 Business with the Group
The Facility Agent may accept deposits from, lend money to, and generally engage in any kind of banking or other business with, any member of the Group.
30.7 Rights and discretions
(a) The Facility Agent may:
(i) rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised;
(ii) assume that:
(A) any instructions received by it from the Majority Lenders, any Finance Parties or any group of Finance Parties are duly given in accordance with the terms of the Finance Documents; and
(B) unless it has received notice of revocation, that those instructions have not been revoked; and
(iii) rely on a certificate from any person:
(A) as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of that person; or
(B) to the effect that such person approves of any particular dealing, transaction, step, action or thing,
as sufficient evidence that that is the case and, in the case of paragraph (A) above, may assume the truth and accuracy of that certificate.
(b) The Facility Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Finance Parties) that:
(i) no Default has occurred (unless it has actual knowledge of a Default arising under Clause 27.2 ( Non-payment ));
(ii) any right, power, authority or discretion vested in any Party or any group of Finance Parties has not been exercised; and
(iii) any notice or request made by the Borrower (other than a Drawdown Request or a Selection Notice) is made on behalf of and with the consent and knowledge of all the Transaction Obligors.
(c) The Facility Agent may engage and pay for the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts.
(d) Without prejudice to the generality of paragraph (c) above or paragraph (e) below, the Facility Agent may at any time engage and pay for the services of any lawyers to act as independent counsel to the Facility Agent (and so separate from any lawyers instructed by the Lenders) if the Facility Agent in its reasonable opinion deems this to be desirable.
(e) The Facility Agent may rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Facility Agent or by any other Party) and shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying.
(f) The Facility Agent may act in relation to the Finance Documents and the Security Property through its officers, employees and agents and shall not:
(i) be liable for any error of judgment made by any such person; or
(ii) be bound to supervise, or be in any way responsible for any loss incurred by reason of misconduct, omission or default on the part of any such person,
unless such error or such loss was directly caused by the Facility Agents gross negligence or wilful misconduct.
(g) Unless a Finance Document expressly provides otherwise the Facility Agent may disclose to any other Party any information it reasonably believes it has received as agent under the Finance Documents.
(h) Notwithstanding any other provision of any Finance Document to the contrary, the Facility Agent is not obliged to do or omit to do anything if it would or might, in its reasonable opinion, constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.
(i) Notwithstanding any provision of any Finance Document to the contrary, the Facility Agent is not obliged to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties, obligations or responsibilities or the exercise of any right, power, authority or discretion if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not reasonably assured to it.
30.8 Responsibility for documentation
The Facility Agent is not responsible or liable for:
(a) the adequacy, accuracy or completeness of any information (whether oral or written) supplied by the Facility Agent, the Security Agent, a Transaction Obligor or any other person in, or in connection with, any Transaction Document or the transactions contemplated in the Transaction Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document;
(b) the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document or the Security Property or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Transaction Document or the Security Property; or
(c) any determination as to whether any information provided or to be provided to any Finance Party or Creditor Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise.
30.9 No duty to monitor
The Facility Agent shall not be bound to enquire:
(a) whether or not any Default has occurred;
(b) as to the performance, default or any breach by any Transaction Obligor of its obligations under any Transaction Document; or
(c) whether any other event specified in any Transaction Document has occurred.
30.10 Exclusion of liability
(a) Without limiting paragraph (b) below (and without prejudice to paragraph (e) of Clause 34.11 ( Disruption to Payment Systems etc. ) or any other provision of any Finance Document excluding or limiting the liability of the Facility Agent), the Facility Agent will not be liable for (unless directly caused by its gross negligence or wilful misconduct):
(i) any damages, costs or losses to any person, any diminution in value, or any liability whatsoever arising as a result of taking or not taking any action under or in connection with any Transaction Document or the Security Property;
(ii) exercising, or not exercising, any right, power, authority or discretion given to it by, or in connection with, any Transaction Document, the Security Property or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Transaction Document or the Security Property; or
(iii) any shortfall which arises on the enforcement or realisation of the Security Property; or
(iv) without prejudice to the generality of paragraphs (i) to (iii) above, any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of:
(A) any act, event or circumstance not reasonably within its control; or
(B) the general risks of investment in, or the holding of assets in, any jurisdiction,
including (in each case and without limitation) such damages, costs, losses, diminution in value or liability arising as a result of nationalisation, expropriation or other governmental actions; any regulation, currency restriction, devaluation or fluctuation; market conditions affecting the execution or settlement of transactions or the value of assets (including any Disruption Event); breakdown, failure or malfunction of any third party transport, telecommunications, computer services or systems; natural disasters or acts of God; war, terrorism, insurrection or revolution; or strikes or industrial action.
(b) No Party other than the Facility Agent may take any proceedings against any officer, employee or agent of the Facility Agent in respect of any claim it might have against the Facility Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Transaction Document or any Security Property and any officer, employee or agent of the Facility Agent may rely on this Clause subject to Clause 1.5 ( Third party rights ) and the provisions of the Third Parties Act.
(c) The Facility Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Facility Agent if the Facility Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Facility Agent for that purpose.
(d) Nothing in this Agreement shall oblige the Facility Agent to carry out:
(i) any know your customer or other checks in relation to any person; or
(ii) any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Finance Party,
on behalf of any Finance Party and each Finance Party confirms to the Facility Agent that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Facility Agent.
(e) Without prejudice to any provision of any Finance Document excluding or limiting the Facility Agents liability, any liability of the Facility Agent arising under or in connection with any Transaction Document or the Security Property shall be limited to the amount of actual loss which has been finally judicially determined to have been suffered (as determined by reference to the date of default of the Facility Agent or, if later, the date on which the loss arises as a result of such default) but without reference to any special conditions or circumstances known to the Facility Agent at any time which increase the amount of that loss. In no event shall the Facility Agent be liable for any loss of profits, goodwill, reputation, business opportunity or anticipated saving, or for special, punitive, indirect or consequential damages, whether or not the Facility Agent has been advised of the possibility of such loss or damages.
30.11 Lenders indemnity to the Facility Agent
(a) Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Facility Agent, within three Business Days of demand, against any cost, loss or liability incurred by the Facility Agent (otherwise than by reason of the Facility Agents gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 34.11 ( Disruption to Payment Systems etc. ) notwithstanding the Facility Agents negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Facility Agent) in acting as Facility Agent under the Finance Documents (unless the Facility Agent has been reimbursed by a Transaction Obligor pursuant to a Finance Document).
(b) Subject to paragraph (c) below, the Borrower shall immediately on demand reimburse any Lender for any payment that Lender makes to the Facility Agent pursuant to paragraph (a) above.
(c) Paragraph (b) above shall not apply to the extent that the indemnity payment in respect of which the Lender claims reimbursement relates to a liability of the Facility Agent to an Obligor.
30.12 Resignation of the Facility Agent
(a) The Facility Agent may resign and appoint one of its Affiliates as successor by giving notice to the other Finance Parties and the Borrower.
(b) Alternatively, the Facility Agent may resign by giving 30 days notice to the other Finance Parties and the Borrower, in which case the Majority Lenders may appoint a successor Facility Agent.
(c) If the Majority Lenders have not appointed a successor Facility Agent in accordance with paragraph (b) above within 20 days after notice of resignation was given, the retiring Facility Agent may appoint a successor Facility Agent.
(d) If the Facility Agent wishes to resign because (acting reasonably) it has concluded that it is no longer appropriate for it to remain as agent and the Facility Agent is entitled to appoint a successor Facility Agent under paragraph (c) above, the Facility Agent may (if it concludes (acting reasonably) that it is necessary to do so in order to persuade the proposed successor Facility Agent to become a party to this Agreement as Facility Agent) agree with the proposed
successor Facility Agent amendments to this Clause 30 ( The Facility Agent ) and any other term of this Agreement dealing with the rights or obligations of the Facility Agent consistent with then current market practice for the appointment and protection of corporate trustees together with any reasonable amendments to the agency fee payable under this Agreement which are consistent with the successor Facility Agents normal fee rates and those amendments will bind the Parties.
(e) The retiring Facility Agent shall make available to the successor Facility Agent such documents and records and provide such assistance as the successor Facility Agent may reasonably request for the purposes of performing its functions as Facility Agent under the Finance Documents. The Borrower shall, within three Business Days of demand, reimburse the retiring Facility Agent for the amount of all costs and expenses (including legal fees) properly incurred by it in making available such documents and records and providing such assistance.
(f) The Facility Agents resignation notice shall only take effect upon the appointment of a successor.
(g) Upon the appointment of a successor, the retiring Facility Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under paragraph (e) above) but shall remain entitled to the benefit of Clause 14.4 ( Indemnity to the Facility Agent ) and this Clause 30 ( The Facility Agent ) and any other provisions of a Finance Document which are expressed to limit or exclude its liability (or to indemnify it) in acting as Facility Agent. Any fees for the account of the retiring Facility Agent shall cease to accrue from (and shall be payable on) that date). Any successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
(h) The Majority Lenders may, by notice to the Facility Agent, require it to resign in accordance with paragraph (b) above. In this event, the Facility Agent shall resign in accordance with paragraph (b) above but the cost referred to in paragraph (e) above shall be for the account of the Borrower.
(i) The consent of the Borrower (or any other Transaction Obligor) is not required for an assignment or transfer of rights and/or obligations by the Facility Agent.
(j) The Facility Agent shall resign in accordance with paragraph (b) above (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Facility Agent pursuant to paragraph (c) above) if on or after the date which is three months before the earliest FATCA Application Date relating to any payment to the Facility Agent under the Finance Documents, either:
(i) the Facility Agent fails to respond to a request under Clause 12.7 ( FATCA Information ) and a Lender reasonably believes that the Facility Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
(ii) the information supplied by the Facility Agent pursuant to Clause 12.7 ( FATCA Information ) indicates that the Facility Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or
(iii) the Facility Agent notifies the Borrower and the Lenders that the Facility Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
and (in each case) a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Facility Agent were a FATCA Exempt Party, and that Lender, by notice to the Facility Agent, requires it to resign.
30.13 Confidentiality
(a) In acting as Facility Agent for the Finance Parties, the Facility Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.
(b) If information is received by a division or department of the Facility Agent other than the division or department responsible for complying with the obligations assumed by it under the Finance Documents, that information may be treated as confidential to that division or department, and the Facility Agent shall not be deemed to have notice of it nor shall it be obliged to disclose such information to any Party.
30.14 Relationship with the other Finance Parties
(a) Subject to Clause 28.9 ( Pro rata interest settlement ), the, Facility Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Facility Agents principal office as notified to the Finance Parties from time to time) as the Lender acting through its Facility Office:
(i) entitled to or liable for any payment due under any Finance Document on that day; and
(ii) entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day,
unless it has received not less than five Business Days prior notice from that Lender to the contrary in accordance with the terms of this Agreement.
(b) Each Finance Party shall supply the Facility Agent with any information that the Security Agent may reasonably specify (through the Facility Agent) as being necessary or desirable to enable the Security Agent to perform its functions as Security Agent. Each Finance Party shall deal with the Security Agent exclusively through the Facility Agent and shall not deal directly with the Security Agent.
(c) Any Lender may by notice to the Facility Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or despatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted under Clause 37.5 ( Electronic communication ) electronic mail address and/or any other information required to enable the sending and receipt of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address, department and officer by that Lender for the purposes of Clause 37.2 ( Addresses ) and sub-paragraph (ii) of paragraph (a) of Clause 37.5 ( Electronic communication ) and the Facility Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Lender.
30.15 Credit appraisal by the Finance Parties
Without affecting the responsibility of any Transaction Obligor for information supplied by it or on its behalf in connection with any Transaction Document, each Finance Party confirms to the Facility Agent that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under, or in connection with, any Transaction Document including but not limited to:
(a) the financial condition, status and nature of each member of the Group;
(b) the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document, the Security Property and any other agreement, arrangement or document entered into,
made or executed in anticipation of, under or in connection with any Transaction Document or the Security Property;
(c) whether that Finance Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under, or in connection with, any Transaction Document, the Security Property, the transactions contemplated by the Transaction Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document or the Security Property;
(d) the adequacy, accuracy or completeness of any information provided by the Facility Agent, any Party or by any other person under, or in connection with, any Transaction Document, the transactions contemplated by any Transaction Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document; and
(e) the right or title of any person in or to or the value or sufficiency of any part of the Security Assets, the priority of any of the Transaction Security or the existence of any Security affecting the Security Assets.
30.16 Reference Banks
The Facility Agent shall (if so instructed by the Majority Lenders and in consultation with the Borrower) replace a Reference Bank with another bank or financial institution.
30.17 Facility Agents management time
Any amount payable to the Facility Agent under Clause 14.4 ( Indemnity to the Facility Agent ), Clause 16 ( Costs and Expenses ) and Clause 30.11 ( Lenders indemnity to the Facility Agent ) shall include the cost of utilising the Facility Agents management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Facility Agent may notify to the Borrower and the other Finance Parties, and is in addition to any fee paid or payable to the Facility Agent under Clause 11 ( Fees ).
30.18 Deduction from amounts payable by the Facility Agent
If any Party owes an amount to the Facility Agent under the Finance Documents, the Facility Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Facility Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.
30.19 Reliance and engagement letters
Each Creditor Party confirms that the Facility Agent has authority to accept on its behalf (and ratifies the acceptance on its behalf of any letters or reports already accepted by the Facility Agent) the terms of any reliance letter or engagement letters or any reports or letters provided by accountants, auditors or providers of due diligence reports in connection with the Finance Documents or the transactions contemplated in the Finance Documents and to bind it in respect of those, reports or letters and to sign such letters on its behalf and further confirms that it accepts the terms and qualifications set out in such letters.
30.20 Full freedom to enter into transactions
Without prejudice to Clause 30.6 ( Business with the Group ) or any other provision of a Finance Document and notwithstanding any rule of law or equity to the contrary, the Facility Agent shall be absolutely entitled:
(a) to enter into and arrange banking, derivative, investment and/or other transactions of every kind with or affecting any Transaction Obligor or any person who is party to, or referred to in, a Finance Document (including, but not limited to, any interest or currency swap or other transaction, whether related to this Agreement or not, and acting as syndicate agent and/or security agent for, and/or participating in, other facilities to such Transaction Obligor or any person who is party to, or referred to in, a Finance Document);
(b) to deal in and enter into and arrange transactions relating to:
(i) any securities issued or to be issued by any Transaction Obligor or any other person; or
(ii) any options or other derivatives in connection with such securities; and
(c) to provide advice or other services to the Borrower or any person who is a party to, or referred to in, a Finance Document,
and, in particular, the Facility Agent shall be absolutely entitled, in proposing, evaluating, negotiating, entering into and arranging all such transactions and in connection with all other matters covered by paragraphs (a), (b) and (c) above, to use (subject only to insider dealing legislation) any information or opportunity, howsoever acquired by it, to pursue its own interests exclusively, to refrain from disclosing such dealings, transactions or other matters or any information acquired in connection with them and to retain for its sole benefit all profits and benefits derived from the dealings transactions or other matters.
31 THE SECURITY AGENT
31.1 Trust
(a) The Security Agent declares that it holds the Security Property on trust for the Creditor Parties on the terms contained in this Agreement and shall deal with the Security Property in accordance with this Clause 31 ( The Security Agent ) and the other provisions of the Finance Documents.
(b) Each other Finance Party authorises the Security Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Security Agent under, or in connection with, the Finance Documents together with any other incidental rights, powers, authorities and discretions.
31.2 Parallel Debt (Covenant to pay the Security Agent)
(a) Each Obligor irrevocably and unconditionally undertakes to pay to the Security Agent its Parallel Debt which shall be amounts equal to, and in the currency or currencies of, its Corresponding Debt.
(b) The Parallel Debt of an Obligor:
(i) shall become due and payable at the same time as its Corresponding Debt;
(ii) is independent and separate from, and without prejudice to, its Corresponding Debt.
(c) For purposes of this Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) , the Security Agent:
(i) is the independent and separate creditor of each Parallel Debt;
(ii) acts in its own name and not as agent, representative or trustee of the Finance Parties and its claims in respect of each Parallel Debt shall not be held on trust; and
(iii) shall have the independent and separate right to demand payment of each Parallel Debt in its own name (including, without limitation, through any suit, execution, enforcement of security, recovery of guarantees and applications for and voting in any kind of insolvency proceeding).
(d) The Parallel Debt of an Obligor shall be:
(i) decreased to the extent that its Corresponding Debt has been irrevocably and unconditionally paid or discharged; and
(ii) increased to the extent that its Corresponding Debt has increased,
and the Corresponding Debt of an Obligor shall be:
(A) decreased to the extent that its Parallel Debt has been irrevocably and unconditionally paid or discharged; and
(B) increased to the extent that its Parallel Debt has increased,
in each case provided that the Parallel Debt of an Obligor shall never exceed its Corresponding Debt.
(e) All amounts received or recovered by the Security Agent in connection with this Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) ) to the extent permitted by applicable law, shall be applied in accordance with Clause 34.5 ( Application of receipts; partial payments ).
(f) This Clause 31.2 ( Parallel Debt (Covenant to pay the Security Agent) ) shall apply, with any necessary modifications, to each Finance Document.
31.3 Enforcement through Security Agent only
The Creditor Parties shall not have any independent power to enforce, or have recourse to, any of the Transaction Security or to exercise any right, power, authority or discretion arising under the Security Documents except through the Security Agent.
31.4 Instructions
(a) The Security Agent shall:
(i) unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Security Agent in accordance with any instructions given to it by the Facility Agent acting on the instructions of:
(A) all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and
(B) in all other cases, the Majority Lenders; and
(ii) not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with sub-paragraph (i) above (or if this Agreement stipulates the matter is a decision for any other Finance Party or group of Finance Parties, from that Finance Party or group of Finance Parties).
(b) The Security Agent shall be entitled to request instructions, or clarification of any instruction, from the Facility Agent acting on the instructions of the Majority Lenders (or, if the relevant Finance Document stipulates the matter is a decision for any other Finance Party or group of Finance Parties, from that Finance Party or group of Finance Parties) as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or
discretion and the Security Agent may refrain from acting unless and until it receives any such instructions or clarification that it has requested.
(c) Save in the case of decisions stipulated to be a matter for any other Finance Party or group of Finance Parties under the relevant Finance Document and unless a contrary indication appears in a Finance Document, any instructions given to the Security Agent by the Facility Agent acting on the instructions of the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties.
(d) Paragraph (a) above shall not apply:
(i) where a contrary indication appears in a Finance Document;
(ii) where a Finance Document requires the Security Agent to act in a specified manner or to take a specified action;
(iii) in respect of any provision which protects the Security Agents own position in its personal capacity as opposed to its role of Security Agent for the relevant Creditor Parties.
(iv) in respect of the exercise of the Security Agents discretion to exercise a right, power or authority under any of:
(A) Clause 31.28 ( Deductions from receipts ); and
(B) Clause 31.29 ( Prospective liabilities ).
(e) If giving effect to instructions given by the Facility Agent acting on the instructions of the Majority Lenders would in the Security Agents opinion have an effect equivalent to an amendment or waiver referred to in Clause 43 ( Amendments and Waivers ), the Security Agent shall not act in accordance with those instructions unless consent to it so acting is obtained from each Party (other than the Security Agent) whose consent would have been required in respect of that amendment or waiver.
(f) In exercising any discretion to exercise a right, power or authority under the Finance Documents where either:
(i) it has not received any instructions as to the exercise of that discretion; or
(ii) the exercise of that discretion is subject to sub-paragraph (iv) of paragraph (d) above,
the Security Agent shall do so having regard to the interests of all the Creditor Parties.
(g) The Security Agent may refrain from acting in accordance with any instructions of the Facility Agent acting on the instructions of any Finance Party or group of Finance Parties until it has received any indemnification and/or security that it may in its discretion require (which may be greater in extent than that contained in the Finance Documents and which may include payment in advance) for any cost, loss or liability (together with any applicable Indirect Tax) which it may incur in complying with those instructions.
(h) Without prejudice to the remainder of this Clause 31.4 ( Instructions ), in the absence of instructions, the Security Agent may (but shall not be obliged to) take such action in the exercise of its powers and duties under the Finance Documents as it considers in its discretion to be appropriate.
(i) The Security Agent is not authorised to act on behalf of a Finance Party (without first obtaining that Finance Partys consent) in any legal or arbitration proceedings relating to any Finance Document. This paragraph (i) shall not apply to any legal or arbitration proceeding relating to
the perfection, preservation or protection of rights under the Security Documents or enforcement of the Transaction Security or Security Documents.
31.5 Duties of the Security Agent
(a) The Security Agents duties under the Finance Documents are solely mechanical and administrative in nature.
(b) The Security Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Security Agent for that Party by any other Party.
(c) Except where a Finance Document specifically provides otherwise, the Security Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
(d) If the Security Agent receives notice from a Party referring to any Finance Document, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.
(e) The Security Agent shall have only those duties, obligations and responsibilities expressly specified in the Finance Documents to which it is expressed to be a party (and no others shall be implied).
31.6 No fiduciary duties
(a) Nothing in any Finance Document constitutes the Security Agent as an agent, trustee or fiduciary of any Transaction Obligor.
(b) The Security Agent shall not be bound to account to any other Party for any sum or the profit element of any sum received by it for its own account.
31.7 Business with the Group
The Security Agent may accept deposits from, lend money to, and generally engage in any kind of banking or other business with, any member of the Group.
31.8 Rights and discretions
(a) The Security Agent may:
(i) rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised;
(ii) assume that:
(A) any instructions received by it from the Facility Agent acting on the instructions of the Majority Lenders, any Finance Parties or any group of Finance Parties are duly given in accordance with the terms of the Finance Documents; and
(B) unless it has received notice of revocation, that those instructions have not been revoked; and
(iii) rely on a certificate from any person:
(A) as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of that person; or
(B) to the effect that such person approves of any particular dealing, transaction, step, action or thing,
as sufficient evidence that that is the case and, in the case of paragraph (A) above, may assume the truth and accuracy of that certificate.
(b) The Security Agent may assume (unless it has received notice to the contrary in its capacity as security agent for the Creditor Parties) that:
(i) no Default has occurred;
(ii) any right, power, authority or discretion vested in any Party or any group of Finance Parties has not been exercised; and
(iii) any notice or request made by the Borrower (other than a Drawdown Request or a Selection Notice) is made on behalf of and with the consent and knowledge of all the Transaction Obligors.
(c) The Security Agent may engage and pay for the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts.
(d) Without prejudice to the generality of paragraph (c) above or paragraph (e) below, the Security Agent may at any time engage and pay for the services of any lawyers to act as independent counsel to the Security Agent (and so separate from any lawyers instructed by the Facility Agent or the Lenders) if the Security Agent in its reasonable opinion deems this to be desirable.
(e) The Security Agent may rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Security Agent or by any other Party) and shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying.
(f) The Security Agent may act in relation to the Finance Documents and the Security Property through its officers, employees and agents and shall not:
(i) be liable for any error of judgment made by any such person; or
(ii) be bound to supervise, or be in any way responsible for any loss incurred by reason of misconduct, omission or default on the part of any such person,
unless such error or such loss was directly caused by the Security Agents gross negligence or wilful misconduct.
(g) Unless a Finance Document expressly provides otherwise the Security Agent may disclose to any other Party any information it reasonably believes it has received as security agent under the Finance Documents.
(h) Notwithstanding any other provision of any Finance Document to the contrary, the Security Agent is not obliged to do or omit to do anything if it would or might, in its reasonable opinion, constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.
(i) Notwithstanding any provision of any Finance Document to the contrary, the Security Agent is not obliged to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties, obligations or responsibilities or the exercise of any right, power, authority or discretion if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not reasonably assured to it.
31.9 Responsibility for documentation
The Security Agent is not responsible or liable for:
(a) the adequacy, accuracy or completeness of any information (whether oral or written) supplied by the Facility Agent, the Security Agent, a Transaction Obligor or any other person in, or in connection with, any Transaction Document or the transactions contemplated in the Transaction Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document;
(b) the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document or the Security Property or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Transaction Document or the Security Property; or
(c) any determination as to whether any information provided or to be provided to any Creditor Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise.
31.10 No duty to monitor
The Security Agent shall not be bound to enquire:
(a) whether or not any Default has occurred;
(b) as to the performance, default or any breach by any Transaction Obligor of its obligations under any Transaction Document; or
(c) whether any other event specified in any Transaction Document has occurred.
31.11 Exclusion of liability
(a) Without limiting paragraph (b) below (and without prejudice to any other provision of any Finance Document excluding or limiting the liability of the Security Agent or any Receiver or Delegate), none of the Security Agent nor any Receiver or Delegate will be liable (unless directly caused by its gross negligence or wilful misconduct) for:
(i) any damages, costs or losses to any person, any diminution in value, or any liability whatsoever arising as a result of taking or not taking any action under or in connection with any Transaction Document or the Security Property;
(ii) exercising, or not exercising ,any right, power, authority or discretion given to it by, or in connection with, any Transaction Document, the Security Property or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Transaction Document or the Security Property; or
(iii) any shortfall which arises on the enforcement or realisation of the Security Property; or
(iv) without prejudice to the generality of paragraphs (i) to (iii) above, any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of:
(A) any act, event or circumstance not reasonably within its control; or
(B) the general risks of investment in, or the holding of assets in, any jurisdiction,
including (in each case and without limitation) such damages, costs, losses, diminution in value or liability arising as a result of nationalisation, expropriation or other governmental actions; any regulation, currency restriction, devaluation or fluctuation; market conditions affecting the execution or settlement of transactions or the value of assets (including any Disruption Event); breakdown, failure or malfunction of any third party transport, telecommunications, computer services or systems; natural disasters or acts of God; war, terrorism, insurrection or revolution; or strikes or industrial action.
(b) No Party other than the Security Agent, that Receiver or that Delegate (as applicable) may take any proceedings against any officer, employee or agent of the Security Agent, a Receiver or a Delegate in respect of any claim it might have against the Security Agent, a Receiver or a Delegate or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Transaction Document or any Security Property and any officer, employee or agent of the Security Agent, a Receiver or a Delegate may rely on this Clause subject to Clause 1.5 ( Third party rights ) and the provisions of the Third Parties Act.
(c) The Security Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Security Agent if the Security Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Security Agent for that purpose.
(d) Nothing in this Agreement shall oblige the Security Agent to carry out:
(i) any know your customer or other checks in relation to any person; or
(ii) any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Finance Party,
on behalf of any Finance Party and each Finance Party confirms to the Security Agent that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Security Agent.
(e) Without prejudice to any provision of any Finance Document excluding or limiting the liability of the Security Agent, any Receiver or Delegate, any liability of the Security Agent, any Receiver or Delegate arising under or in connection with any Transaction Document or the Security Property shall be limited to the amount of actual loss which has been finally judicially determined to have been suffered (as determined by reference to the date of default of the Security Agent, Receiver or Delegate or, if later, the date on which the loss arises as a result of such default) but without reference to any special conditions or circumstances known to the Security Agent, any Receiver or Delegate at any time which increase the amount of that loss. In no event shall the Security Agent, any Receiver or Delegate be liable for any loss of profits, goodwill, reputation, business opportunity or anticipated saving, or for special, punitive, indirect or consequential damages, whether or not the Security Agent, the Receiver or Delegate has been advised of the possibility of such loss or damages.
31.12 Lenders indemnity to the Security Agent
(a) Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Security Agent and every Receiver and every Delegate, within three Business Days of demand, against any cost, loss or liability incurred by any of them (otherwise than by reason of the Security Agents, Receivers or Delegates gross negligence or wilful misconduct) in acting as Security Agent, Receiver or Delegate under the Finance Documents (unless the Security Agent, Receiver or Delegate has been reimbursed by a Transaction Obligor pursuant to a Finance Document).
(b) Subject to paragraph (c) below, the Borrower shall immediately on demand reimburse any Lender for any payment that Lender makes to the Security Agent pursuant to paragraph (a) above.
(c) Paragraph (b) above shall not apply to the extent that the indemnity payment in respect of which the Lender claims reimbursement relates to a liability of the Security Agent to an Obligor.
31.13 Resignation of the Security Agent
(a) The Security Agent may resign and appoint one of its Affiliates as successor by giving notice to the other Finance Parties and the Borrower.
(b) Alternatively, the Security Agent may resign by giving 30 days notice to the other Finance Parties and the Borrower, in which case the Majority Lenders may appoint a successor Security Agent.
(c) If the Majority Lenders have not appointed a successor Security Agent in accordance with paragraph (b) above within 20 days after notice of resignation was given, the retiring Security Agent may appoint a successor Security Agent.
(d) The retiring Security Agent shall make available to the successor Security Agent such documents and records and provide such assistance as the successor Security Agent may reasonably request for the purposes of performing its functions as Security Agent under the Finance Documents. The Borrower shall, within three Business Days of demand, reimburse the retiring Security Agent for the amount of all costs and expenses (including legal fees) properly incurred by it in making available such documents and records and providing such assistance.
(e) The Security Agents resignation notice shall only take effect upon:
(i) the appointment of a successor; and
(ii) the transfer, by way of a document expressed as a deed, of all the Security Property to that successor.
(f) Upon the appointment of a successor, the retiring Security Agent shall be discharged, by way of a document executed as a deed, from any further obligation in respect of the Finance Documents (other than its obligations under paragraph (b) of Clause 31.24 ( Winding up of trust ) and paragraph (d) above) but shall remain entitled to the benefit Clause 14.5 ( Indemnity to the Security Agent ) and this Clause 31 ( The Security Agent ) and any other provisions of a Finance Document which are expressed to limit or exclude its liability (or to indemnify it) in acting as Security Agent. Any fees for the account of the retiring Security Agent shall cease to accrue from (and shall be payable on) that date). Any successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
(g) The Majority Lenders may, by notice to the Security Agent, require it to resign in accordance with paragraph (b) above. In this event, the Security Agent shall resign in accordance with paragraph (b) above but the cost referred to in paragraph (d) above shall be for the account of the Borrower.
(h) The consent of the Borrower (or any other Transaction Obligor) is not required for an assignment or transfer of rights and/or obligations by the Security Agent.
31.14 Confidentiality
(a) In acting as Security Agent for the Finance Parties, the Security Agent shall be regarded as acting through its trustee division which shall be treated as a separate entity from any other of its divisions or departments.
(b) If information is received by a division or department of the Security Agent other than the division or department responsible for complying with the obligations assumed by it under the Finance Documents, that information may be treated as confidential to that division or department, and the Security Agent shall not be deemed to have notice of it nor shall it be obliged to disclose such information to any Party.
31.15 Credit appraisal by the Finance Parties
Without affecting the responsibility of any Transaction Obligor for information supplied by it or on its behalf in connection with any Transaction Document, each Finance Party confirms to the Security Agent that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under, or in connection with, any Transaction Document including but not limited to:
(a) the financial condition, status and nature of each member of the Group;
(b) the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document, the Security Property and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document or the Security Property;
(c) whether that Finance Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under, or in connection with, any Transaction Document, the Security Property, the transactions contemplated by the Transaction Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document or the Security Property;
(d) the adequacy, accuracy or completeness of any information provided by the Security Agent, any Party or by any other person under, or in connection with, any Transaction Document, the transactions contemplated by any Transaction Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document; and
(e) the right or title of any person in or to or the value or sufficiency of any part of the Security Assets, the priority of any of the Transaction Security or the existence of any Security affecting the Security Assets.
31.16 Security Agents management time
(a) Any amount payable to the Security Agent under Clause 14.5 ( Indemnity to the Security Agent ), Clause 16 ( Costs and Expenses ) and Clause 31.12 ( Lenders indemnity to the Security Agent ) shall include the cost of utilising the Security Agents management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Security Agent may notify to the Borrower and the other Finance Parties, and is in addition to any fee paid or payable to the Security Agent under Clause 11 ( Fees ).
(b) Without prejudice to paragraph (a) above, in the event of:
(i) a Default;
(ii) the Security Agent being requested by a Transaction Obligor or the Facility Agent acting on the instructions of the Majority Lenders to undertake duties which the Security Agent and the Borrower agree to be of an exceptional nature or outside the scope of the normal duties of the Security Agent under the Finance Documents; or
(iii) the Security Agent and the Borrower agreeing that it is otherwise appropriate in the circumstances,
the Borrower shall pay to the Security Agent any additional remuneration (together with any applicable Indirect Tax) that may be agreed between them or determined pursuant to paragraph (c) below.
(c) If the Security Agent and the Borrower fail to agree upon the nature of the duties, or upon the additional remuneration referred to in paragraph (b) above or whether additional remuneration is appropriate in the circumstances, any dispute shall be determined by an investment bank (acting as an expert and not as an arbitrator) selected by the Security Agent and approved by the Borrower or, failing approval, nominated (on the application of the Security Agent) by the President for the time being of the Law Society of England and Wales (the costs of the nomination and of the investment bank being payable by the Borrower) and the determination of any investment bank shall be final and binding upon the Parties.
31.17 Reliance and engagement letters
Each Creditor Party confirms that the Security Agent has authority to accept on its behalf (and ratifies the acceptance on its behalf of any letters or reports already accepted by the Security Agent) the terms of any reliance letter or engagement letters or any reports or letters provided by accountants, auditors or providers of due diligence reports in connection with the Finance Documents or the transactions contemplated in the Finance Documents and to bind it in respect of those, reports or letters and to sign such letters on its behalf and further confirms that it accepts the terms and qualifications set out in such letters.
31.18 No responsibility to perfect Transaction Security
The Security Agent shall not be liable for any failure to:
(a) require the deposit with it of any deed or document certifying, representing or constituting the title of any Transaction Obligor to any of the Security Assets;
(b) obtain any licence, consent or other authority for the execution, delivery, legality, validity, enforceability or admissibility in evidence of any Finance Document or the Transaction Security;
(c) register, file or record or otherwise protect any of the Transaction Security (or the priority of any of the Transaction Security) under any law or regulation or to give notice to any person of the execution of any Finance Document or of the Transaction Security;
(d) take, or to require any Transaction Obligor to take, any step to perfect its title to any of the Security Assets or to render the Transaction Security effective or to secure the creation of any ancillary Security under any law or regulation; or
(e) require any further assurance in relation to any Security Document.
31.19 Insurance by Security Agent
(a) The Security Agent shall not be obliged:
(i) to insure any of the Security Assets;
(ii) to require any other person to maintain any insurance; or
(iii) to verify any obligation to arrange or maintain insurance contained in any Finance Document,
and the Security Agent shall not be liable for any damages, costs or losses to any person as a result of the lack of, or inadequacy of, any such insurance.
(b) Where the Security Agent is named on any insurance policy as an insured party, it shall not be liable for any damages, costs or losses to any person as a result of its failure to notify the insurers of any material fact relating to the risk assumed by such insurers or any other information of any kind, unless the Facility Agent acting on the instructions of the Majority Lenders request it to do so in writing and the Security Agent fails to do so within 14 days after receipt of that request.
31.20 Custodians and nominees
The Security Agent may appoint and pay any person to act as a custodian or nominee on any terms in relation to any asset of the trust as the Security Agent may determine, including for the purpose of depositing with a custodian this Agreement or any document relating to the trust created under this Agreement and the Security Agent shall not be responsible for any loss, liability, expense, demand, cost, claim or proceedings incurred by reason of the misconduct, omission or default on the part of any person appointed by it under this Agreement or be bound to supervise the proceedings or acts of any person.
31.21 Delegation by the Security Agent
(a) Each of the Security Agent, any Receiver and any Delegate may, at any time, delegate by power of attorney or otherwise to any person for any period, all or any right, power, authority or discretion vested in it in its capacity as such.
(b) That delegation may be made upon any terms and conditions (including the power to sub delegate) and subject to any restrictions that the Security Agent, that Receiver or that Delegate (as the case may be) may, in its discretion, think fit in the interests of the Creditor Parties.
(c) No Security Agent, Receiver or Delegate shall be bound to supervise, or be in any way responsible for any damages, costs or losses incurred by reason of any misconduct, omission or default on the part of any such delegate or sub delegate.
31.22 Additional Security Agents
(a) The Security Agent may at any time appoint (and subsequently remove) any person to act as a separate trustee or as a co-trustee jointly with it:
(i) if it considers that appointment to be in the interests of the Creditor Parties; or
(ii) for the purposes of conforming to any legal requirement, restriction or condition which the Security Agent deems to be relevant; or
(iii) for obtaining or enforcing any judgment in any jurisdiction,
and the Security Agent shall give prior notice to the Borrower and the Finance Parties of that appointment.
(b) Any person so appointed shall have the rights, powers, authorities and discretions (not exceeding those given to the Security Agent under or in connection with the Finance Documents) and the duties, obligations and responsibilities that are given or imposed by the instrument of appointment.
(c) The remuneration that the Security Agent may pay to that person, and any costs and expenses (together with any applicable Indirect Tax) incurred by that person in performing its functions pursuant to that appointment shall, for the purposes of this Agreement, be treated as costs and expenses incurred by the Security Agent.
31.23 Acceptance of title
The Security Agent shall be entitled to accept without enquiry, and shall not be obliged to investigate, any right and title that any Transaction Obligor may have to any of the Security Assets and shall not be liable for or bound to require any Transaction Obligor to remedy any defect in its right or title.
31.24 Winding up of trust
If the Security Agent, with the approval of the Facility Agent determines that:
(a) all of the Secured Liabilities and all other obligations secured by the Security Documents have been fully and finally discharged; and
(b) no Creditor Party is under any commitment, obligation or liability (actual or contingent) to make advances or provide other financial accommodation to any Transaction Obligor pursuant to the Finance Documents,
then
(i) the trusts set out in this Agreement shall be wound up and the Security Agent shall release, without recourse or warranty, all of the Transaction Security and the rights of the Security Agent under each of the Security Documents; and
(ii) any Security Agent which has resigned pursuant to Clause 31.13 ( Resignation of the Security Agent ) shall release, without recourse or warranty, all of its rights under each Security Document.
31.25 Powers supplemental to Trustee Acts
The rights, powers, authorities and discretions given to the Security Agent under or in connection with the Finance Documents shall be supplemental to the Trustee Act 1925 and the Trustee Act 2000 and in addition to any which may be vested in the Security Agent by law or regulation or otherwise.
31.26 Disapplication of Trustee Acts
Section 1 of the Trustee Act 2000 shall not apply to the duties of the Security Agent in relation to the trusts constituted by this Agreement and the other Finance Documents. Where there are any inconsistencies between (i) the Trustee Acts 1925 and 2000 and (ii) the provisions of this Agreement and any other Finance Document, the provisions of this Agreement and any other Finance Document shall, to the extent permitted by law and regulation, prevail and, in the case of any inconsistency with the Trustee Act 2000, the provisions of this Agreement and any other Finance Document shall constitute a restriction or exclusion for the purposes of the Trustee Act 2000.
31.27 Application of receipts
(a) Except as expressly stated to the contrary in any Finance Document, any moneys which the Security Agent receives or recovers and which are, or are attributable to, Security Property (for the purposes of this Clause 31 ( The Security Agent ), the Recoveries ) shall be transferred to the Facility Agent for application in accordance with Clause 34.5 ( Application of receipts; partial payments ).
(b) Paragraph (a) above is without prejudice to the rights of the Security Agent, each Receiver and each Delegate:
(i) under Clause 14.5 ( Indemnity to the Security Agent ) or any other indemnity in favour of the Security Agent under the Finance Documents to be indemnified out of the Security Assets; and
(ii) under any Finance Document to credit any moneys received or recovered by it to any suspense account.
(c) Any transfer by the Security Agent to the Facility Agent in accordance with paragraph (a) above shall be a good discharge, to the extent of that payment, by the Security Agent.
(d) The Security Agent is under no obligation to make the payments to the Facility Agent under paragraph (a) of this Clause 31.27 ( Application of receipts ) in the same currency as that in which the obligations and liabilities owing to the relevant Finance Party are denominated.
31.28 Deductions from receipts
(a) Before transferring any moneys to the Facility Agent under Clause 31.27 ( Application of receipts ), the Security Agent may, in its discretion:
(i) deduct any sum then due and payable under this Agreement or any other Finance Documents to the Security Agent or any Receiver or Delegate and retain that sum for itself or, as the case may require, pay it to another person to whom it is then due and payable;
(ii) set aside by way of reserve amounts required to meet, and to make and pay, any deductions and withholdings (on account of Taxes or otherwise) which it is or may be required by any applicable law to make from any distribution or payment made by it under this Agreement; and
(iii) pay all Taxes which may be assessed against it in respect of any of the Security Property, or as a consequence of performing its duties, or by virtue of its capacity as Security Agent under any of the Finance Documents or otherwise (other than in connection with its remuneration for performing its duties under this Agreement).
(b) For the purposes of sub-paragraph (i) of paragraph (a) above, if the Security Agent has become entitled to require a sum to be paid to it on demand, that sum shall be treated as due and payable, even if no demand has yet been served.
31.29 Prospective liabilities
Following acceleration or enforcement of any of the Transaction Security, the Security Agent may, in its discretion, or at the request of the Facility Agent, hold any Recoveries in an interest bearing suspense or impersonal account(s) in the name of the Security Agent with such financial institution (including itself) and for so long as the Security Agent shall think fit (the interest being credited to the relevant account) for later payment to the Facility Agent for application in accordance with Clause 34.5 ( Application of receipts; partial payments ) in respect of:
(a) any sum to the Security Agent, any Receiver or any Delegate; and
(b) any part of the Secured Liabilities,
that the Security Agent or, in the case of paragraph (b) only, the Facility Agent, reasonably considers, in each case, might become due or owing at any time in the future.
31.30 Investment of proceeds
Prior to the payment of the proceeds of the Recoveries to the Facility Agent for application in accordance with Clause 34.5 ( Application of receipts; partial payments ) the Security Agent
may, in its discretion, hold all or part of those proceeds in an interest bearing suspense or impersonal account(s) in the name of the Security Agent with such financial institution (including itself) and for so long as the Security Agent shall think fit (the interest being credited to the relevant account) pending the payment from time to time of those moneys in the Security Agents discretion in accordance with the provisions of this Clause 31.30 ( Investment of proceeds ).
31.31 Currency conversion
(a) For the purpose of, or pending the discharge of, any of the Secured Liabilities the Security Agent may convert any moneys received or recovered by the Security Agent from one currency to another, at a market rate of exchange.
(b) The obligations of any Transaction Obligor to pay in the due currency shall only be satisfied to the extent of the amount of the due currency purchased after deducting the costs of conversion.
31.32 Good discharge
Any payment to be made in respect of the Secured Liabilities by the Security Agent may be made to the Facility Agent on behalf of the Creditor Parties and any payment made in that way shall be a good discharge, to the extent of that payment, by the Security Agent.
31.33 Full freedom to enter into transactions
Without prejudice to Clause 31.7 ( Business with the Group ) or any other provision of a Finance Document and notwithstanding any rule of law or equity to the contrary, the Security Agent shall be absolutely entitled:
(a) to enter into and arrange banking, derivative, investment and/or other transactions of every kind with or affecting any Transaction Obligor or any person who is party to, or referred to in, a Finance Document (including, but not limited to, any interest or currency swap or other transaction, whether related to this Agreement or not, and acting as syndicate agent and/or security agent for, and/or participating in, other facilities to such Transaction Obligor or any person who is party to, or referred to in, a Finance Document);
(b) to deal in and enter into and arrange transactions relating to:
(i) any securities issued or to be issued by any Transaction Obligor or any other person; or
(ii) any options or other derivatives in connection with such securities; and
(c) to provide advice or other services to the Borrower or any person who is a party to, or referred to in, a Finance Document,
and, in particular, the Security Agent shall be absolutely entitled, in proposing, evaluating, negotiating, entering into and arranging all such transactions and in connection with all other matters covered by paragraphs (a), (b) and (c) above, to use (subject only to insider dealing legislation) any information or opportunity, howsoever acquired by it, to pursue its own interests exclusively, to refrain from disclosing such dealings, transactions or other matters or any information acquired in connection with them and to retain for its sole benefit all profits and benefits derived from the dealings transactions or other matters.
32 CONDUCT OF BUSINESS BY THE FINANCE PARTIES
No provision of this Agreement will:
(a) interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;
(b) oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or
(c) oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.
33 SHARING AMONG THE FINANCE PARTIES
33.1 Payments to Finance Parties
If a Finance Party (a Recovering Finance Party ) receives or recovers any amount from a Transaction Obligor other than in accordance with Clause 34 ( Payment Mechanics ) (a Recovered Amount ) and applies that amount to a payment due to it under the Finance Documents then:
(a) the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery, to the Facility Agent;
(b) the Facility Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Facility Agent and distributed in accordance with Clause 34 ( Payment Mechanics ), without taking account of any Tax which would be imposed on the Facility Agent in relation to the receipt, recovery or distribution; and
(c) the Recovering Finance Party shall, within three Business Days of demand by the Facility Agent, pay to the Facility Agent an amount (the Sharing Payment ) equal to such receipt or recovery less any amount which the Facility Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 34.5 ( Application of receipts; partial payments ).
33.2 Redistribution of payments
The Facility Agent shall treat the Sharing Payment as if it had been paid by the relevant Transaction Obligor and distribute it among the Finance Parties (other than the Recovering Finance Party) (the Sharing Finance Parties ) in accordance with Clause 34.5 ( Application of receipts; partial payments ) towards the obligations of that Transaction Obligor to the Sharing Finance Parties.
33.3 Recovering Finance Party s rights
On a distribution by the Facility Agent under Clause 33.2 ( Redistribution of payments ) of a payment received by a Recovering Finance Party from a Transaction Obligor, as between the relevant Transaction Obligor and the Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated as not having been paid by that Transaction Obligor.
33.4 Reversal of redistribution
If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
(a) each Sharing Finance Party shall, upon request of the Facility Agent, pay to the Facility Agent for the account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay) (the Redistributed Amount ); and
(b) as between the relevant Transaction Obligor and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by that Transaction Obligor.
33.5 Exceptions
(a) This Clause 33 ( Sharing among the Finance Parties ) shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against the relevant Transaction Obligor.
(b) A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:
(i) it notified that other Finance Party of the legal or arbitration proceedings; and
(ii) that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.
SECTION 11
ADMINISTRATION
34 PAYMENT MECHANICS
34.1 Payments to the Facility Agent
(a) On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor or Lender shall make an amount equal to such payment available to the Facility Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Facility Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.
(b) Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to euro, in a principal financial centre in such Participating Member State or London, as specified by the Facility Agent) and with such bank as the Facility Agent, in each case, specifies.
34.2 Distributions by the Facility Agent
Each payment received by the Facility Agent under the Finance Documents for another Party shall, subject to Clause 34.3 ( Distributions to an Obligor ) and Clause 34.4 ( Clawback and pre-funding ) be made available by the Facility Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Facility Agent by not less than five Business Days notice with a bank specified by that Party in the principal financial centre of the country of that currency (or, in relation to euro, in the principal financial centre of a Participating Member State or London), as specified by that Party or, in the case of the Advance, to such account of such person as may be specified by the Borrower in the Drawdown Request.
34.3 Distribu t ions to an Obligor
The Facility Agent may (with the consent of the Obligor or in accordance with Clause 35 ( Set-Off )) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.
34.4 Clawback and pre-funding
(a) Where a sum is to be paid to the Facility Agent under the Finance Documents for another Party, the Facility Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.
(b) Unless paragraph (c) below applies, if the Facility Agent pays an amount to another Party and it proves to be the case that the Facility Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Facility Agent shall on demand refund the same to the Facility Agent together with interest on that amount from the date of payment to the date of receipt by the Facility Agent, calculated by the Facility Agent to reflect its cost of funds.
(c) If the Facility Agent is willing to make available amounts for the account of the Borrower before receiving funds from the Lenders then if and to the extent that the Facility Agent does so but it proves to be the case that it does not then receive funds from a Lender in respect of a sum which it paid to the Borrower:
(i) the Borrower shall on demand refund it to the Facility Agent; and
(ii) the Lender by whom those funds should have been made available or, if that Lender fails to do so, the Borrower shall on demand pay to the Facility Agent the amount (as certified by the Facility Agent) which will indemnify the Facility Agent against any funding cost incurred by it as a result of paying out that sum before receiving those funds from that Lender.
34.5 Application of receipts; partial payments
(a) Subject to paragraph (b) below and except as any Finance Document may otherwise provide, any payment that is received or recovered by any Finance Party under, in connection with, or pursuant to any Finance Document shall be paid to the Facility Agent which shall apply the same in the following order:
(i) first , in or towards payment of any amounts then due and payable under any of the Finance Documents;
(ii) secondly , in retention by the Security Agent of an amount equal to any amount not then payable under any Finance Document but which the Facility Agent, by notice to the Borrower and the other Finance Parties, states in its opinion will or may become payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction of them; and
(iii) thirdly , any surplus shall be paid to the Borrower or to any other person who appears to be entitled to it.
(b) If the Facility Agent receives a payment that is insufficient to discharge all the amounts then due and payable by a Transaction Obligor under the Finance Documents, the Facility Agent shall apply that payment towards the obligations of that Transaction Obligor under the Finance Documents in the following order:
(i) first , in or towards payment pro rata of any unpaid fees, costs and expenses of, and any other amounts owing to, the Facility Agent, the Security Agent, any Receiver and any Delegate under the Finance Documents;
(ii) secondly , in or towards payment pro rata of any accrued interest or commission due to any Finance Party but unpaid under this Agreement;
(iii) thirdly , in or towards payment pro rata of any principal due but unpaid under this Agreement; and
(iv) fourthly , in or towards payment pro rata of any other sum due to any Finance Party but unpaid under the Finance Documents.
(c) The Facility Agent shall, if so directed by the Majority Lenders, vary the order set out in sub-paragraphs (ii) to (iv) of paragraph (b) above.
(d) Paragraphs (a), (b) and (c) above will override any appropriation made by a Transaction Obligor.
34.6 No set-off by Transaction Obligors
All payments to be made by a Transaction Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.
34.7 Business Days
(a) Any payment under the Finance Documents which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
(b) During any extension of the due date for payment of any principal or an Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.
34.8 Currency of account
(a) Subject to paragraphs (b) and (c) below, dollars is the currency of account and payment for any sum due from a Transaction Obligor under any Finance Document.
(b) Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.
(c) Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.
34.9 Change of currency
(a) Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:
(i) any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Facility Agent (after consultation with the Borrower); and
(ii) any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Facility Agent (acting reasonably).
(b) If a change in any currency of a country occurs, this Agreement will, to the extent the Facility Agent (acting reasonably and after consultation with the Borrower) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.
34.10 Currency Conversion
(a) For the purpose of, or pending any payment to be made by any Servicing Party under any Finance Document, such Servicing Party may convert any moneys received or recovered by it from one currency to another, at a market rate of exchange.
(b) The obligations of any Transaction Obligor to pay in the due currency shall only be satisfied to the extent of the amount of the due currency purchased after deducting the costs of conversion.
34.11 Disruption to Payment Systems etc.
If either the Facility Agent determines (in its discretion) that a Disruption Event has occurred or the Facility Agent is notified by the Borrower that a Disruption Event has occurred:
(a) the Facility Agent may, and shall if requested to do so by the Borrower, consult with the Borrower with a view to agreeing with the Borrower such changes to the operation or administration of the Facility as the Facility Agent may deem necessary in the circumstances;
(b) the Facility Agent shall not be obliged to consult with the Borrower in relation to any changes mentioned in paragraph (a) above if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes;
(c) the Facility Agent may consult with the Finance Parties in relation to any changes mentioned in paragraph (a) above but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;
(d) any such changes agreed upon by the Facility Agent and the Borrower shall (whether or not it is finally determined that a Disruption Event has occurred) be binding upon the Parties and any Transaction Obligors as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents notwithstanding the provisions of Clause 43 ( Amendments and Waivers );
(e) the Facility Agent shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever (including, without limitation for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Facility Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 34.11 ( Disruption to Payment Systems etc. ); and
(f) the Facility Agent shall notify the Finance Parties of all changes agreed pursuant to paragraph (d) above.
35 SET-OFF
A Finance Party may set off any matured obligation due from a Transaction Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Transaction Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
36 BAIL-IN
Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the parties to a Finance Document, each Party acknowledges and accepts that any liability of any party to a Finance Document under or in connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:
(a) any Bail-In Action in relation to any such liability, including (without limitation):
(i) a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;
(ii) a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and
(iii) a cancellation of any such liability; and
(b) a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.
37 NOTICES
37.1 Communications in writing
Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.
37.2 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 for any communication or document to be made or delivered under or in connection with the Finance Documents are:
(a) in the case of the Borrower, that specified in Schedule 1 ( The Parties );
(b) in the case of each Lender or any other Obligor, that specified in Schedule 1 ( The Parties ) or, if it becomes a Party after the date of this Agreement, that notified in writing to the Facility Agent on or before the date on which it becomes a Party;
(c) in the case of the Facility Agent, that specified in Schedule 1 ( The Parties ); and
(d) in the case of the Security Agent, that specified in Schedule 1 ( The Parties ),
or any substitute address, fax number or department or officer as the Party may notify to the Facility Agent (or the Facility Agent may notify to the other Parties, if a change is made by the Facility Agent) by not less than five Business Days notice.
37.3 Delivery
(a) Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:
(i) if by way of fax, when received in legible form; or
(ii) if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,
and, if a particular department or officer is specified as part of its address details provided under Clause 37.2 ( Addresses ), if addressed to that department or officer.
(b) Any communication or document to be made or delivered to a Servicing Party will be effective only when actually received by that Servicing Party and then only if it is expressly marked for the attention of the department or officer of that Servicing Party specified in Schedule 1 ( The Parties ) (or any substitute department or officer as that Servicing Party shall specify for this purpose).
(c) All notices from or to an Obligor shall be sent through the Facility Agent unless otherwise specified in any Finance Document.
(d) Any communication or document made or delivered to the Borrower in accordance with this Clause will be deemed to have been made or delivered to each of the Obligors.
(e) Any communication or document which becomes effective, in accordance with paragraphs (a) to (d) above, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.
37.4 Notification of address and fax number
Promptly upon receipt of notification of an address and fax number or change of address or fax number pursuant to Clause 37.2 ( Addresses ) or changing its own address or fax number, the Facility Agent shall notify the other Parties.
37.5 Electronic communication
(a) Any communication to be made between any two Parties under or in connection with the Finance Documents may be made by electronic mail or other electronic means, to the extent that those two Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication and if those two Parties:
(i) notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and
(ii) notify each other of any change to their address or any other such information supplied by them by not less than five Business Days notice.
(b) Any electronic communication made between those two Parties will be effective only when actually received in readable form and in the case of any electronic communication made by a Party to the Facility Agent only if it is addressed in such a manner as the Facility Agent shall specify for this purpose.
(c) Any electronic communication which becomes effective, in accordance with paragraph (b) above, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.
37.6 English language
(a) Any notice given under or in connection with any Finance Document must be in English.
(b) All other documents provided under or in connection with any Finance Document must be:
(i) in English; or
(ii) if not in English, and if so required by the Facility Agent, accompanied by a certified English translation prepared by a translator approved by the Facility Agent and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
38 CALCULATIONS AND CERTIFICATES
38.1 Accounts
In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.
38.2 Certificates and determinations
Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.
38.3 Day count convention
Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.
39 PARTIAL INVALIDITY
If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions under the law of that jurisdiction nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
40 REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of any Creditor Party, any right or remedy under a Finance Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any Finance Document. No election to affirm any Finance Document on the part of a Creditor Party shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law.
41 SETTLEMENT OR DISCHARGE CONDITIONAL
Any settlement or discharge under any Finance Document between any Finance Party and any Transaction Obligor shall be conditional upon no security or payment to any Finance Party by any Transaction Obligor or any other person being set aside, adjusted or ordered to be repaid, whether under any insolvency law or otherwise.
42 IRREVOCABLE PAYMENT
If the Facility Agent considers that an amount paid or discharged by, or on behalf of, a Transaction Obligor or by any other person in purported payment or discharge of an obligation of that Transaction Obligor to a Finance Party under the Finance Documents is capable of being avoided or otherwise set aside on the liquidation or administration of that Transaction Obligor or otherwise, then that amount shall not be considered to have been unconditionally and irrevocably paid or discharged for the purposes of the Finance Documents.
43 AMENDMENTS AND WAIVERS
43.1 Required consents
(a) Subject to Clause 43.2 ( All Lender matters ) and Clause 43.3 ( Other exceptions ) any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and, in the case of an amendment, the Obligors and any such amendment or waiver will be binding on all Parties.
(b) The Facility Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 43 ( Amendments and Waivers ).
(c) Without prejudice to the generality of Clause 30.7 ( Rights and discretions ), the Facility Agent may engage, pay for and rely on the services of lawyers in determining the consent level required for and effecting any amendment, waiver or consent under this Agreement.
43.2 All Lender matters
An amendment of or waiver or consent in relation to any term of any Finance Document that has the effect of changing or which relates to:
(a) the definition of Majority Lenders in Clause 1.1 ( Definitions );
(b) a postponement to or extension of the date of payment of any amount under the Finance Documents (other than in relation to Clause 7.3 ( Voluntary prepayment of Loan ) in respect of a prepayment made pursuant to Clause 25.2 ( Provision of additional security ; prepayment) or Clause 7.4 ( Mandatory prepayment on sale or Total Loss );
(c) a reduction in the Margin or the amount of any payment of principal, interest, fees or commission payable;
(d) a change in currency of payment of any amount under the Finance Documents;
(e) an increase in any Commitment or the Total Commitments, an extension of any Availability Period or any requirement that a cancellation of Commitments reduces the Commitments rateably under the Facility;
(f) a change to any Transaction Obligor or the Time Charterer;
(g) any provision which expressly requires the consent of all the Lenders;
(h) this Clause 43 ( Amendments and Waivers );
(i) any change to Clause 2 ( The Facility ), Clause 3 ( Purpose ), Clause 5 ( Drawdown ), Clause 8 ( Interest ), paragraph (a) of Clause 25.7 ( Provision of valuations ), Clause 26 ( Accounts and Application of Earnings), Clause 28 ( Changes to the Lenders ), Clause 46 ( Governing Law ) or Clause 47 ( Enforcement );
(j) any release of, or material variation to, any Transaction Security, guarantee, indemnity or subordination arrangement set out in a Finance Document (except in the case of a release of Transaction Security as it relates to the disposal of an asset which is the subject of the Transaction Security and where such disposal is expressly permitted by the Majority Lenders or otherwise under a Finance Document);
(k) (other than as expressly permitted by the provisions of any Finance Document) the nature or scope of:
(i) the guarantee and indemnity granted under Clause 17 ( Guarantee and Indemnity );
(ii) the Security Assets; or
(iii) the manner in which the proceeds of enforcement of the Transaction Security are distributed,
(except in the case of sub-paragraphs (ii) and (iii) above, insofar as it relates to a sale or disposal of an asset which is the subject of the Transaction Security where such sale or disposal is expressly permitted under this Agreement or any other Finance Document); or
(l) the release of the guarantee and indemnity granted under Clause 17 ( Guarantee and Indemnity ) or of any Transaction Security unless permitted under this Agreement or any other Finance Document or relating to a sale or disposal of an asset which is the subject of the Transaction Security where such sale or disposal is expressly permitted under this Agreement or any other Finance Document
shall not be made, or given, without the prior consent of all the Lenders.
43.3 Other exceptions
(a) An amendment or waiver which relates to the rights or obligations of a Servicing Party (each in their capacity as such) may not be effected without the consent of that Servicing Party.
(b) The Borrower and the Facility Agent or the Security Agent, as applicable, may amend or waive a term of a Fee Letter to which they are party.
44 CONFIDENTIALITY
44.1 Confidential Information
Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 44.2 ( Disclosure of Confidential Information ) and Clause 44.3 ( Disclosure to numbering service providers ) and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.
44.2 Disclosure of Confidential Information
Any Finance Party may disclose:
(a) to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this paragraph (a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;
(b) to any person:
(i) to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents or which succeeds (or which may potentially succeed) it as Facility Agent or Security Agent and, in each case, to any of that persons Affiliates, Related Funds, Representatives and professional advisers;
(ii) with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction including a securitisation under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Transaction Obligors and to any of that persons Affiliates, Related Funds, Representatives and professional advisers;
(iii) appointed by any Finance Party or by a person to whom sub-paragraph (i) or (ii) of paragraph (b) above applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including, without limitation, any person appointed under paragraph (b) of Clause 30.14 ( Relationship with the other Finance Parties );
(iv) who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in sub-paragraph (i) or (ii) of paragraph (b) above;
(v) to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory
authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation including any applicable data protection laws;
(vi) to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitrations, administrative or other investigations, proceedings or disputes;
(vii) to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 28.8 ( Security over Lenders rights );
(viii) who is a Party, a member of the Group or any related entity of a Transaction Obligor;
(ix) as a result of the registration of any Finance Document as contemplated by any Finance Document or any legal opinion obtained in connection with any Finance Document; or
(x) with the consent of the Borrower;
in each case, such Confidential Information as that Finance Party shall consider appropriate if:
(A) in relation to sub-paragraphs (i), (ii) and (iii) of paragraph (b) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;
(B) in relation to sub-paragraph (iv) of paragraph (b) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;
(C) in relation to sub-paragraphs (v), (vi) and (vii) of paragraph (b) above, the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances;
(c) to any person appointed by that Finance Party or by a person to whom sub-paragraph (i) or (ii) of paragraph (b) above applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this paragraph (c) if the service provider to whom the Confidential Information is to be given has entered in to a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Borrower and the relevant Finance Party; and
(d) to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents and/or the Transaction Obligors.
44.3 Disclosure to numbering service providers
(a) Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Facility and/or one or more Obligors the following information:
(i) names of Obligors;
(ii) country of domicile of Obligors;
(iii) place of incorporation of Obligors;
(iv) date of this Agreement;
(v) Clause 46 ( Governing Law );
(vi) the names of the Facility Agent;
(vii) date of each amendment and restatement of this Agreement;
(viii) amount of Total Commitments;
(ix) currency of the Facility;
(x) type of Facility;
(xi) ranking of Facility;
(xii) Maturity Date for Facility;
(xiii) changes to any of the information previously supplied pursuant to sub-paragraphs (i) to (xii) above; and
(xiv) such other information agreed between such Finance Party and the Borrower,
to enable such numbering service provider to provide its usual syndicated loan numbering identification services.
(b) The Parties acknowledge and agree that each identification number assigned to this Agreement, the Facility and/or one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider.
(c) Each Obligor represents that none of the information set out in sub-paragraphs (i) to (xiv) of paragraph (a) above is, nor will at any time be, unpublished price-sensitive information.
44.4 Entire agreement
This Clause 44 ( Confidentiality ) constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.
44.5 Inside information
Each of the Finance Parties acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.
44.6 Notification of disclosure
Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Borrower:
(a) of the circumstances of any disclosure of Confidential Information made pursuant to sub-paragraph (v) of paragraph (b) of Clause 44.2 ( Disclosure of Confidential Information ) except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and
(b) upon becoming aware that Confidential Information has been disclosed in breach of this Clause 44 ( Confidentiality ).
44.7 Continuing obligations
The obligations in this Clause 44 ( Confidentiality ) are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of 12 months from the earlier of:
(a) the date on which all amounts payable by the Obligors under or in connection with this Agreement have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and
(b) the date on which such Finance Party otherwise ceases to be a Finance Party.
45 COUNTERPARTS
Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.
SECTION 12
GOVERNING LAW AND ENFORCEMENT
46 GOVERNING LAW
This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.
47 ENFORCEMENT
47.1 Jurisdiction
(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement) (a Dispute ).
(b) The Obligors accept that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Obligor will argue to the contrary.
(c) This Clause 47 ( Enforcement ) is for the benefit of the Creditor Parties only. As a result, no Creditor Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Creditor Parties may take concurrent proceedings in any number of jurisdictions.
47.2 Service of process
(a) Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in England and Wales):
(i) irrevocably appoints Grindrod Shipping Services UK Ltd as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and
(ii) agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned.
(b) If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, the Borrower (on behalf of all the Obligors) must immediately (and in any event within 3 days of such event taking place) appoint another agent on terms acceptable to the Facility Agent. Failing this, the Facility Agent may appoint another agent for this purpose.
This Agreement has been entered into on the date stated at the beginning of this Agreement.
SCHEDULE 1
THE PARTIES
PART A
THE OBLIGORS
Name of Borrower |
Place of Incorporation |
Registration number
|
Address for
|
|
|
|
|
Grindrod Maritime LLC |
Marshall Islands |
962401 |
200 Cantonment Road
Fax: +65 6323 0046
|
Name of Guarantor |
Place of
|
Registration number
|
Address for
|
|
|
|
|
Grindrod Shipping Pte. Ltd. |
Singapore |
200407212K |
200 Cantonment Road
Fax: +65 6323 0046
|
|
|
|
|
|
|
|
|
Grindrod Limited |
South Africa |
1966/009846/06 |
Quadrant House, 115 Margaret Mncadi Avenue, Durban 4001 South Africa
Fax: +27 31 305 2848 Email: grindrod@grindrod.co.za Attn: Chief Financial Officer |
PART B
THE ORIGINAL LENDERS
Name of Original Lender |
Commitment |
Address for Communication |
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DVB Bank SE Singapore Branch |
US$27,000,000 |
77 Robinson Road, #30-02 068896
Fax no.: +65 6536 3066
tls.singapore@dvbbank.com and TM.Singapore@dvbbank.com
Attention: Transaction and Loan Services
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PART C
THE SERVICING PARTIES
Name of Facility Agent |
Address for Communication |
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DVB Bank SE Singapore Branch |
77 Robinson Road, #30-02 068896
Fax no.: +65 6536 3066
tls.singapore@dvbbank.com and TM.Singapore@dvbbank.com
Attention: Transaction and Loan Services |
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Name of Security Agent |
Address for Communication |
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DVB Bank SE Singapore Branch |
77 Robinson Road, #30-02 068896
Fax no.: +65 6536 3066
tls.singapore@dvbbank.com and TM.Singapore@dvbbank.com
Attention: Transaction and Loan Services |
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Name of Account Bank |
Address for Communication |
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DVB Bank SE |
Platz der Republik 6, 60325, Frankfurt/Main, Germany
Fax no.: +49 69 9750 4927
GC.OT@dvbbank.com and treasury@dvbbank.com
Attention: Treasury |
SCHEDULE 2
CONDITIONS PRECEDENT AND SUBSEQUENT
PART A
CONDITIONS PRECEDENT TO DRAWDOWN REQUEST
1 Obligors
1.1 A copy of the constitutional documents of each Transaction Obligor.
1.2 Except for the Second Bareboat Charterer, a copy of a resolution of the board of directors and (if necessary or advisable according to the relevant legal advisors of the Facility Agent) the shareholders of each Transaction Obligor:
(a) approving the terms of, and the transactions contemplated by, the Finance Documents and Bareboat Charters to which it is a party and resolving that it execute the Finance Documents, and ratifying the execution of the Bareboat Charters, to which it is a party;
(b) authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and
(c) in relation to the Obligors, authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, the Drawdown Request and each Selection Notice) to be signed and/or despatched by it under, or in connection with, the Finance Documents to which it is a party.
1.3 An original of the power of attorney of any Transaction Obligor authorising a specified person or persons to execute the Finance Documents to which it is a party.
1.4 A specimen of the signature of each person authorised by the resolution referred to in paragraph 1.2 above.
1.5 A certificate of each Obligor (signed by a director and in the case of the Borrower, the manager) confirming that borrowing or guaranteeing, as appropriate, the Total Commitments would not cause any borrowing, guaranteeing or similar limit binding on that Obligor to be exceeded.
1.6 A certificate of each Obligor that is incorporated outside the UK (signed by a director and in the case of the Borrower, the manager) certifying either that (i) it has not delivered particulars of any UK Establishment to the Registrar of Companies as required under the Overseas Regulations or (ii) it has a UK Establishment and specifying the name and registered number under which it is registered with the Registrar of Companies.
1.7 A certificate of the Second Bareboat Charterer (signed by a director) which certifies, inter alia , the resolution of the board of directors of the Second Bareboat Charterer (i) approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party, and ratifying the execution of the Second Bareboat Charter, (ii) authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf and (iii) authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under, or in connection with, the Finance Documents to which it is a party.
1.8 A certificate of an authorised signatory of the relevant Transaction Obligor certifying that each copy document relating to it specified in this Part A of Schedule 2 ( Conditions Precedent and Subsequent ) is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
1.9 Evidence of satisfactory capital/shareholding structure of the Obligors.
2 Bareboat Charters and other Documents
2.1 Copies of each Bareboat Charter and of all documents signed in connection with them.
2.2 Such documentary evidence as the Facility Agent and its legal advisers may require in relation to the due authorisation and execution of each Bareboat Charter by each of the parties thereto.
2.3 If applicable, chartering description to include detailed speed and consumption figures.
3 Finance Documents
3.1 A duly executed original of this Agreement, each Fee Letter, the Subordination Deed and copies of each Subordinated Finance Document.
3.2 A duly executed original of any Finance Document not otherwise referred to in this Schedule 2 ( Conditions Precedent and Subsequent ).
3.3 A duly executed original of any other document required to be delivered by each Finance Document if not otherwise referred to in this Schedule 2 ( Conditions Precedent and Subsequent ).
4 Security Documents
A duly executed original of the Account Security, the Subordination and Assignment Agreement and the Membership Interests Security (and of each document to be delivered under each of them) including confirmation of the appointment of any process agent under the Account Security.
5 Legal opinions
5.1 Draft agreed form legal opinion of Watson Farley & Williams LLP, legal advisers to the Facility Agent and the Security Agent in England, substantially in the form distributed to and agreed by the Original Lenders before signing this Agreement.
5.2 Draft agreed form legal opinion of Allen & Gledhill LLP, legal advisers to the Facility Agent and the Security Agent in Singapore, substantially in the form distributed to and agreed by the Original Lenders before signing this Agreement.
5.3 Draft agreed form legal opinion of Webber Wentzel, legal advisers to the Facility Agent and the Security Agent in South Africa, substantially in the form distributed to and agreed by the Original Lenders before signing this Agreement.
5.4 Draft agreed form legal opinion of Minter Ellison Rudd Watts, legal advisers to the Facility Agent and the Security Agent in New Zealand, substantially in the form distributed to and agreed by the Original Lenders before signing this Agreement.
5.5 Draft agreed form legal opinion of Watson Farley & Williams LLP (New York), legal advisers to the Facility Agent and the Security Agent as to Marshall Islands law, substantially in the form distributed to and agreed by the Original Lenders before signing this Agreement.
5.6 Draft agreed form legal opinion of AKD N.V., legal advisers to the Facility Agent and the Security Agent as to Dutch law, substantially in the form distributed to and agreed by the Original Lenders before signing this Agreement
5.7 If a Transaction Obligor is incorporated in a jurisdiction other than England and Wales, a draft legal opinion of the legal advisers to the Facility Agent and the Security Agent in the relevant jurisdiction in agreed form.
6 Other documents and evidence
6.1 Evidence that any process agent referred to in Clause 47.2 ( Service of process ) has accepted its appointment.
6.2 A copy of any other Authorisation or other document, opinion or assurance which the Facility Agent 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 Transaction Document or for the validity and enforceability of any Transaction Document.
6.3 The Original Financial Statements of the Guarantors.
6.4 The original of any mandates or other documents required in connection with the opening or operation of the Accounts.
6.5 Evidence that the fees, costs and expenses then due from the Borrowers pursuant to Clause 11 ( Fees ) and Clause 16 ( Costs and Expenses ) have been paid or will be paid by the Drawdown Date.
6.6 Such evidence as the Facility Agent may require for the Finance Parties to be able to satisfy each of their know your customer or similar identification procedures in relation to the transactions contemplated by the Finance Documents.
PART B
CONDITIONS PRECEDENT TO DISBURSEMENT
1 Obligors
A certificate of an authorised signatory of the relevant Transaction Obligor certifying that each corporate and copy document provided by it under Part A and Part B of Schedule 2 ( Conditions Precedent and Subsequent ) remains correct, complete and in full force and effect as at the Delivery Date.
2 Borrower
A certificate of the manager of the Borrower certifying that each copy document which it is required to provide under this Part B of Schedule 2 ( Conditions Precedent and Subsequent ) is correct, complete and in full force and effect as at the Delivery Date.
3 Vessel and other security
3.1 A duly executed original of the General Assignment, the Mortgage, the Deed of Covenant, the New Zealand Security Deed, the Bareboat Charterers Assignment and Direct Agreement and of each document to be delivered under or pursuant to each of them.
3.2 Documentary evidence that the Mortgage has been duly registered as a valid first priority ship mortgage in accordance with the laws of the jurisdiction of the Approved Flag.
3.3 Documentary evidence that the Vessel:
(a) is definitively registered in the name of the Borrower under the Approved Flag;
(b) is in the absolute and unencumbered ownership of the Borrower save as contemplated by the Finance Documents;
(c) maintains the Approved Classification with the Approved Classification Society free of all overdue recommendations and conditions of the Approved Classification Society; and
(d) is insured in accordance with the provisions of this Agreement and all requirements in this Agreement in respect of insurances have been complied with.
3.4 Copies of the Vessels Safety Management Certificate (together with any other details of the applicable safety management system which the Facility Agent requires) and of any other documents required under the ISM Code and the ISPS Code in relation to the Vessel including without limitation an ISSC.
3.5 A valuation of the Vessel addressed to the Facility Agent on behalf of the Finance Parties, stated to be for the purposes of this Agreement and dated not earlier than 15 days before the Drawdown Date from an Approved Valuer which shows a value for the Vessel evidencing that the Advance meets the requirements of paragraph (b) of Clause 5.3 ( Currency and amount ) (after the Advance has been made).
3.6 An opinion from an independent insurance consultant acceptable to the Facility Agent on such matters relating to the Insurances as the Facility Agent may require.
3.7 If applicable, last two Port State Control Certificates and Port State Control history.
3.8 If applicable, work list from the last Dry Dock completed.
3.9 Q88 for tankers or similar for the Vessel.
3.10 Certificate that the Vessel are free from asbestos, nuclear products and glass wool.
3.11 Copy of trim and stability booklet for the Vessel.
PART C
CONDITIONS SUBSEQUENT
Legal opinions
Within 14 days of the Drawdown Date, or such longer period as may be agreed by the Facility Agent, executed originals of the legal opinions required under Schedule 2 Part A of this Agreement.
2 Vessel and other security
2.1 Within 30 days of the Drawdown Date evidence that the Security Documents have been duly registered or recorded in such jurisdictions as the Facility Agent may require and that all notices of assignment required under or in connection with the relevant Security Documents have been served.
2.2 Within 30 days of the Drawdown Date a duly executed original of a Letter of Undertaking from the Approved Brokers in a form acceptable to the Facility Agent.
2.3 Within 30 days of the Drawdown Date a duly executed original of a Letter of Undertaking from any protection and indemnity club or war risks association through or with whom any obligatory insurances are placed or effected in a form acceptable to the Facility Agent.
2.4 Within 30 days of the Drawdown Date a duly executed original of a Letter of Undertaking from the Approved Classification Society in a form acceptable to the Facility Agent.
3 Miscellaneous
Evidence that all legal fees have been paid within 30 days of the Drawdown Date.
SCHEDULE 3
REQUESTS
PART A
DRAWDOWN REQUEST
From: Grindrod Maritime LLC
To: DVB Bank SE Singapore Branch
Dated: [ · ] 2016
Dear Sirs
Grindrod Maritime LLC Facility Agreement dated [ · ] 2016 (the Agreement)
1 We refer to the Agreement. This is a Drawdown Request. Terms defined in the Agreement have the same meaning in this Drawdown Request unless given a different meaning in this Drawdown Request.
2 We wish to borrow the Advance on the following terms:
Proposed Drawdown Date: |
[ · ] (or, if that is not a Business Day, the next Business Day) |
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Amount: |
[ · ] or, if less, the Available Facility |
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Interest Period: |
[ · ] |
3 We confirm that each condition specified in Clause 4.1 ( Conditions precedent ) is satisfied on the date of this Drawdown Request.
4 The proceeds of this Advance should be credited to:
account number: [ · ]
name and SWIFT of account bank: [ · ]
name and SWIFT of US correspondent bank: [ · ]
5 This Drawdown Request is irrevocable.
Yours faithfully
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Grindrod Maritime LLC
authorised signatory for
PART B
SELECTION NOTICE
From: Grindrod Maritime LLC
To: DVB Bank SE Singapore Branch
Dated: [ · ] 2016
Dear Sirs
Grindrod Maritime LLC - Facility Agreement dated [ · ] 2016 (the Agreement)
6 We refer to the Agreement. This is a Selection Notice. Terms defined in the Agreement have the same meaning in this Selection Notice unless given a different meaning in this Selection Notice.
7 We request that, subject to paragraph (g) of Clause 9.1 ( Selection of Interest Periods ) of the Agreement, the next Interest Period for the Loan be [ · ].
8 This Selection Notice is irrevocable.
Yours faithfully
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Grindrod Maritime LLC
authorised signatory for
SCHEDULE 4
FORM OF TRANSFER CERTIFICATE
To: DVB Bank SE Singapore Branch as Facility Agent and as Security Agent
From: [The Existing Lender] (the Existing Lender ) and [The New Lender] (the New Lender )
Dated: [ · ]
Dear Sirs
Grindrod Maritime LLC Facility Agreement dated [ · ] 2016 (the Agreement)
1 We refer to the Agreement. This is a Transfer Certificate. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.
2 We refer to Clause 28.5 ( Procedure for transfer ) of the Agreement:
(a) The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation all of the Existing Lenders rights and obligations under the Agreement and the other Finance Documents which relate to that portion of the Existing Lenders Commitment and participation in the Loan under the Agreement as specified in the Schedule in accordance with Clause 28.5 ( Procedure for transfer ) of the Agreement.
(b) The proposed Transfer Date is [ · ].
(c) The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 37.2 ( Addresses ) of the Agreement are set out in the Schedule.
3 The New Lender expressly acknowledges the limitations on the Existing Lenders obligations set out in paragraph (c) of Clause 28.4 ( Limitation of responsibility of Existing Lenders ) of the Agreement.
4 The New Lender hereby confirms that it has received a copy of each of the Security Documents which are governed by German law and which are account pledges, is aware of the contents of such account pledges and expressly consents to the declarations of the Security Agent made on behalf of the New Lender (as future pledgee) in such account pledges.
5 This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate.
6 This Transfer Certificate and any non-contractual obligations arising out of or in connection with it are governed by English law.
7 This Transfer Certificate has been entered into on the date stated at the beginning of this Transfer Certificate.
Note: The execution of this Transfer Certificate may not transfer a proportionate share of the Existing Lenders interest in the Transaction Security in all jurisdictions. It is the responsibility of the New Lender to ascertain whether any other documents or other formalities are required to perfect a transfer of such a share in the Existing Lenders Transaction Security in any jurisdiction and, if so, to arrange for execution of those documents and completion of those formalities.
THE SCHEDULE
Commitment/rights and obligations to be transferred
[insert relevant details]
[Facility Office address, fax number and attention details
for notices and account details for payments.]
[Existing Lender] |
[New Lender] |
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By: [ · ] |
By: [ · ] |
This Transfer Certificate is accepted by the Facility Agent and the Security Agent and the Transfer Date is confirmed as [ · ].
[Facility Agent]
By: [ · ]
[Security Agent]
By: [ · ]
SCHEDULE 5
FORM OF ASSIGNMENT AGREEMENT
To: DVB Bank SE Singapore Branch as Facility Agent and as Security Agent and Grindrod Maritime LLC as Borrower, for and on behalf of each Transaction Obligor
From: [the Existing Lender] (the Existing Lender ) and [the New Lender] (the New Lender )
Dated: [ · ]
Dear Sirs
Grindrod Maritime LLC - Facility Agreement dated [ · ] 2016 (the Agreement)
1 We refer to the Agreement. This is an Assignment Agreement. Terms defined in the Agreement have the same meaning in this Assignment Agreement unless given a different meaning in this Assignment Agreement.
2 We refer to Clause 28.6 ( Procedure for assignment ):
(a) The Existing Lender assigns absolutely to the New Lender all the rights of the Existing Lender under the Agreement, the other Finance Documents and in respect of the Transaction Security which correspond to that portion of the Existing Lenders Commitment and participations in the Loan under the Agreement as specified in the Schedule.
(b) The Existing Lender is released from all the obligations of the Existing Lender which correspond to that portion of the Existing Lenders Commitments and participations in the Loan under the Agreement specified in the Schedule.
(c) The New Lender becomes a Party as a Lender and is bound by obligations equivalent to those from which the Existing Lender is released under paragraph (b) above.
3 The proposed Transfer Date is [ · ].
4 On the Transfer Date the New Lender becomes Party to the Finance Documents as a Lender.
5 The Facility Office and address, fax, number and attention details for notices of the New Lender for the purposes of Clause 37.2 ( Addresses ) are set out in the Schedule.
6 The New Lender expressly acknowledges the limitations on the Existing Lenders obligations set out in paragraph (c) of Clause 28.4 ( Limitation of responsibility of Existing Lenders ).
7 The New Lender hereby confirms that it has received a copy of each of the Security Documents which are governed by German law and which are account pledges, is aware of the contents of such account pledges and expressly consents to the declarations of the Security Agent made on behalf of the New Lender (as future pledgee) in such account pledges.
8 This Assignment Agreement acts as notice to the Facility Agent (on behalf of each Finance Party) and, upon delivery in accordance with Clause 28.7 ( Copy of Transfer Certificate or Assignment Agreement to Borrower ), to the Borrower (on behalf of each Transaction Obligor) of the assignment referred to in this Assignment Agreement.
9 This Assignment Agreement may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Assignment Agreement.
10 This Assignment Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.
11 This Assignment Agreement has been entered into on the date stated at the beginning of this Assignment Agreement.
Note: The execution of this Assignment Agreement may not transfer a proportionate share of the Existing Lenders interest in the Transaction Security in all jurisdictions. It is the responsibility of the New Lender to ascertain whether any other documents or other formalities are required to perfect a transfer of such a share in the Existing Lenders Transaction Security in any jurisdiction and, if so, to arrange for execution of those documents and completion of those formalities.
THE SCHEDULE
Commitment rights and obligations to be transferred by assignment, release and accession
[insert relevant details]
[Facility office address, fax number and attention details for notices
and account details for payments]
[Existing Lender] |
[New Lender] |
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By: |
By: |
This Assignment Agreement is accepted by the Facility Agent and the Security Agent and the Transfer Date is confirmed as [ · ].
Signature of this Assignment Agreement by the Facility Agent constitutes confirmation by the Facility Agent of receipt of notice of the assignment referred to herein, which notice the Facility Agent receives on behalf of each Finance Party.
[Facility Agent]
By: [ · ]
[Security Agent]
By: [ · ]
SCHEDULE 6
FORM OF COMPLIANCE CERTIFICATE
To: DVB Bank SE Singapore Branch as Facility Agent
From: Grindrod Shipping Pte. Ltd.
Dated: [ · ]
Dear Sirs
Grindrod Maritime LLC Facility Agreement dated [ · ] 2016 (the Agreement)
1 We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2 We confirm, in accordance with clause 20.1 ( Financial covenants ) and 20.2 ( Financial covenant definitions ) of the Facility Agreement:
(a) a Book Value Net Worth of not less than US$275,000,000 in 2016 and not less than US$250,000,000 in 2017;
(b) Cash and Cash Equivalents of not less than US$30,000,000; and
(c) the ratio of Debt to Market Adjusted Tangible Fixed Assets shall be not more than 75 per cent.
3 [We confirm that no Default is continuing.] 1
Signed: |
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Director |
Director |
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GRINDROD SHIPPING PTE. LTD. |
GRINDROD SHIPPING PTE. LTD. |
[insert applicable certification language agreed by auditors]
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for and on behalf of
[ name of Auditors of GSPL ]
1 If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.
SCHEDULE 7
TIMETABLES
Delivery of a duly completed Drawdown Request (Clause 5.1 ( Delivery of a Drawdown Request )) or a Selection Notice (Clause 9.1 ( Selection of Interest Periods )) |
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Five Business Days before the intended Drawdown Date (Clause 5.1 ( Delivery of a Drawdown Request )) or the expiry of the preceding Interest Period (Clause 9.1 ( Selection of Interest Periods )) |
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Facility Agent notifies the Lenders of the Advance in accordance with Clause 5.4 ( Lenders participation ) |
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Three Business Days before the intended Drawdown Date. |
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LIBOR is fixed |
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Quotation Day as of 11:00 am London time |
SCHEDULE 8
CLASSIFICATION SOCIETY UNDERTAKING
PART A
LETTER TO APPROVED CLASSIFICATION SOCIETY
To: DNV GL
Date: [ · ]
Dear Sirs
Name of vessel: m.t. MATUKU (the Vessel)
Classification Society: DNV GL
DNV or GL Reg No: 33817
Flag: New Zealand
Name of Owner: Grindrod Maritime LLC (the Owner)
Name of mortgagee: DVB Bank SE Singapore Branch (the Mortgagee)
We refer to the Vessel, which is registered in our ownership with you.
The Mortgagee has agreed to provide mortgage secured finance to the Owner upon condition that, among other things, the Owner provides the Mortgagee electronic access to classification records with a user name and password.
We as registered owner of the Vessel irrevocably and unconditionally authorise DNV GL to disclose all and any confidential classification data in relation to the Vessel by providing electronic access to classification records for DNV or GL Reg. No. 33817 with a user name and password to the Mortgagee (sub for Singapore, e-mail address: techcom@dvbbank.com ). We acknowledge that such access may only be granted if the Mortgagee accepts the DNV GL terms of use for the respective online tools.
We confirm that the above mentioned authorisation shall remain in full force and effect until we and the Mortgagee together give you notice in writing revoking such authorisation or until the Vessel changes ownership, whichever comes first.
We undertake to reimburse the Classification Society in full for any costs or expenses it may incur in complying with the instructions and authorisations referred to in this letter should there be any.
This letter and any non-contractual obligations arising out of or in connection with it are governed by English law.
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For and on behalf of
Grindrod Maritime LLC
PART B
UNDERTAKING FROM APPROVED CLASSIFICATION SOCIETY
To: Grindrod Maritime LLC
and
DVB Bank SE Singapore Branch
Dated: [ · ]
Dear Sirs
Name of vessel: m.t. MATUKU (the Vessel)
Name of Owner: Grindrod Maritime LLC (the Owner)
We DNV GL, acknowledge receipt of a letter dated [ · ] sent to us by the Owner regarding the Vessel and consent to the instructions contained in such letter.
Yours faithfully
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For and on behalf of
DNV GL
EXECUTION PAGES
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GRINDROD MARITIME LLC |
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GRINDROD SHIPPING PTE. LTD. |
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GRINDROD LIMITED |
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LENDERS |
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DVB BANK SE SINGAPORE BRANCH |
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DVB BANK SE SINGAPORE BRANCH |
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) Meryl Montefiori |
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) Watson Farley & Williams LLP |
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6 Battery Road, #28-00, |
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Singapore 049909 |
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ACCOUNT BANK |
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SIGNED by |
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duly authorised |
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for and on behalf of |
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DVB BANK SE |
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) Simon Petch |
in the presence of: |
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) Attorney-in-Fact |
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) /s/ Meryl Montefiori |
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) Meryl Montefiori |
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) Watson Farley & Williams LLP |
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6 Battery Road, #28-00, |
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Singapore 049909 |
Registration No: 201731497H
Registered Address: 10 Anson Road,
#32-15, International Plaza
Singapore 079903
[Date]
Dear [ · ]
Form of Appointment as Non-Executive Director Agreement
We are pleased to confirm in writing the terms of your appointment as a non-executive director of Grindrod Shipping Holdings Pte. Ltd, effective [ · ] to be converted to Grindrod Shipping Holdings Ltd. in due course, ( Your Appointment ). On acceptance of this appointment, this letter will constitute a contract for services and not a contract of employment.
1. Term and Termination
1.1 Your Appointment and re-appointment are subject to the Constitution and Board Charter of the Company. Nothing in this letter may be taken to exclude or vary the terms of the Constitution or the Board Charter as they apply to you as a director of the Company.
1.2 Your Appointment shall be subject to any retirement and re-election provisions applicable to directors of the Company as set out in the Constitution of the Company for the time being in force.
1.3 The maximum length of time that you will serve as non-executive director will be nine years from the date of Your Appointment, subject to the Boards review of Your Appointment, and any retirement and re-election provisions applicable to directors of the Company as set out in the Constitution of the Company for the time being in force.
1.4 You may be requested to serve on one or more of the Board Committees. You will be provided with the relevant committee charters on your appointment to any such committee.
1.5 Should you no longer be able to continue in your appointment for any reason, please give the Company three months period of notice.
1.6 Your Appointment may be terminated at any time in accordance with the Constitution of the Company or the provisions of any law. Upon such termination (or if you resign for any reason), your directors fees will be payable only up to and including the date of termination. You will not be entitled to any damages for loss of office. On the occurrence of any of the following events, you acknowledge and agree that (a) Your Appointment shall immediately end and you shall be deemed to resign as a director of the Company, and (b) you shall, at the request of the Company, forthwith take all necessary steps (including, without limitation, obtaining any necessary approvals) to resign your position as a director of the Company or as a director of any related corporation of the Company within the meaning of sections 5 and 6 of the Companies Act, Cap. 50 of Singapore and any other company designated by the Company as such for the purpose of this letter ( Group Company ) in writing under seal without compensation for loss of office as such director and shall resign any other position in or office of the Company or any other Group Company:
1.6.1 you commit a material breach of your obligations in terms of Your Appointment;
1.6.2 you commit any serious or repeated breach or non-observance of your obligations to the Company;
1.6.3 you are guilty of any fraud or dishonesty or acted in a manner which, in the opinion of the Company acting reasonably, brings, or is likely to bring you or the Company in disrepute or is materially adverse to the interests of the Company;
1.6.4 you are convicted of any criminal offence;
1.6.5 you are declared bankrupt or have made arrangements with or for the benefit of your creditors; or
1.6.6 you are disqualified from acting as a director.
2. Time Commitments
2.1. You are expected to dedicate such time as may be necessary for the proper performance of your duties, which could be approximately up to 20 days per year allocated to the business of the Company after the induction phase. Due to the nature of the role, this is
only an indicative number of days, which could be more or less, depending on the strategy, activities and requirements of the Company, which could require special Board and or Board Committee meetings being convened. Such performance includes, but is not limited to:
2.1.1. four scheduled Board meetings per year to be held in venues as the Board may determine, alternatively by teleconference, videoconference or similar communications equipment by which all persons participating in the meeting are able to hear and be heard by all other participants without the need for a director to be in the physical presence of another director(s). In this regard, you may be required to travel;
2.1.2. between two to four meetings per Board Committee per year to be held in venues as the Board may determine;
2.1.3. periodic Board strategy sessions;
2.1.4. meetings with non-executive directors without management present; and
2.1.5. meetings with shareholders as may be required.
3. Duties and Responsibilities
3.1. As a director you are required to perform your duties, whether statutory, fiduciary, common law or otherwise, honestly, ethically, faithfully, efficiently and diligently as a reasonable director would do in your position, in the best interests of the Company and within the ambit of the Companys Constitution and Board Charter, policies, procedures, limits of authority as well as relevant legislative, regulatory and governance provisions as may be applicable to the Company from time to time.
3.2. You are prohibited from making improper use of any information acquired by virtue of your position as an officer of the Company to gain, directly or indirectly, an advantage for yourself or for any other person to the detriment of the shareholders or other key stakeholders of the Company.
3.3. You are required to keep confidential and not use, divulge, disclose or deliver to any person (except as authorized or required by your duties or by law) any information
acquired by you in the course of your role as director of the Company and which is a trade secret or know-how of the Company, or is otherwise the confidential property of the Company or any of its related corporations; or was acquired by you under a duty of confidentiality. Directors are also required to use their best endeavours to prevent the publication or disclosure of any trade secret or know-how, or confidential information concerning the business or the finance of the Company or any of its related companies, or of any person or company with whom the Company or any of its related companies deals. The above confidentiality requirements shall continue to apply after the termination of the directors appointment without limit in time, but shall cease to apply to information or knowledge which may come into the public domain other than by breach of these provisions.
3.4. You are required to disclose any direct or indirect interest which you may have in any matter being considered in a Board or Board Committee meeting and, save as may be permitted in terms of the Constitution or the respective Board and Board Committee Charters, you are not permitted to vote on any resolution of the Board or Board Committee, as may be applicable, and shall recuse yourself from such discussions, on any matter where you have a direct or indirect interest.
3.5. You shall enter into any legal or other commitment or contract on behalf of the Company only on prior authorisation duly provided by the Board or a Board Committee.
3.6. The performance of the Board, its Committees and of individual directors are evaluated on an annual basis.
3.7. It will be expected of you to participate in your initial director induction, as well as continual training and development as may be required and as determined by the Board from time to time to ensure directors are well informed and skilled to perform their duties in the best interest of the Company.
4. Director Fees and Expenses
4.1 The annual directors fee and the annual committee member fee as at the date of this letter is US$ 65 000 and US$10 000 per annum respectively, paid quarterly in arrears to a bank account notified by you to us in writing. For the avoidance of doubt there will be no additional fees paid for attending Board meetings. The fee will be subject to such tax or deductions as may be required to make by law. Your total directors fee in accordance with your appointment as member or chairman of a /or both Board Committees, as the case may be, will be communicated to you.
4.2 The Company will reimburse you for all reasonable and properly documented expenses you incur in the performance of your duties.
4.3 On termination of your appointment, you shall only be entitled to such fees and reasonable and properly documented expenses as may have accrued to the date of termination.
5 Insurance and Indemnity
5.1 The Company has secured adequate directors and officers liability insurance and intends to maintain such cover for the full term of your appointment. Further details are available from the company secretary.
6 Independence and Outside Interests
6.1 Your declaration of interests, including outside commitments, has been duly filed at the Companys registered office. Please advise the Chairman should your interests or commitments change. In certain circumstances the consent of the Board may be required prior to accepting further commitments and/or interests.
7 Your Personal Information and Confidentiality
7.1 The information collected from you is for the purposes of processing your appointment as director of the Company. The information provided by you, and any further information that you may subsequently provide, may be disclosed (where necessary) to any Group Company and/or any service provider of the Company, and you hereby consent to such disclosure.
7.2 All information acquired during your appointment is confidential to the Company and should not be released, communicated or disposed of either during your appointment or following termination, to third parties without prior written consent of the Company.
8 Return of Property
8.1 Upon termination of your appointment with the Company, you shall be obliged to deliver to the Company all documents, records, papers or other Company property which may be in your possession or under your control, and which relate in any way to the business affairs of the Company, and you shall not be permitted to retain any copies thereof.
9 Applicable law
9.1 Your appointment with the Company is governed by and interpreted in accordance with the laws of the Republic of Singapore, and will be subject to the non-exclusive jurisdiction of the courts of Singapore.
10 Acceptance
10.1 This letter constitutes the terms and conditions of Your Appointment and no waiver or modification hereof shall be valid, unless reduced to writing and signed by both parties.
10.2 Please acknowledge your agreement of the terms of Your Appointment set out in this letter by signing and returning as soon as possible the attached duplicate letter.
Yours sincerely |
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Cato Brahde |
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Chairman |
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For and on behalf of |
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Board of Directors of Grindrod Shipping Holdings Pte. Ltd. |
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Acceptance
I, [ · ]
have read the letter above and hereby accept the term and conditions set out in the letter in relation to my appointment as non-executive director of the Company.
Signature: |
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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form 20-F of our report dated January 9, 2018, relating to the financial statement of Grindrod Shipping Holdings Pte. Ltd. appearing in such Registration Statement.
We also consent to the reference to use under the heading Statement by Experts in such Registration Statement.
/s/ Deloitte & Touche LLP
Singapore
April 6, 2018
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form 20-F of our report dated March 23, 2018, relating to the combined financial statements of Grindrod Shipping Pte. Ltd. and subsidiaries and Grindrod Shipping (South Africa) Pty. Ltd. and subsidiaries appearing in such Registration Statement.
We also consent to the reference to use under the heading Statement by Experts in such Registration Statement.
/s/ Deloitte & Touche LLP
Singapore
April 6, 2018